We recently compiled a list of the 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers. In this article, we are going to take a look at where BP p.l.c. (NYSE:BP) stands against the other 52-week low stocks.
Buying low and selling high is a popular investment strategy that value investors inspired by Warren Buffett have perfected over the years. The legendary investor has consistently emphasized the importance of identifying stocks of undervalued companies with significant growth prospects and holding onto these investments for an extended period.
Some of the most undervalued stocks to buy are those trading near their 52-week lows, backed by solid underlying fundamentals. A lot of these companies have durable competitive advantages but have fallen due to an overreaction by pessimists to short-term headwinds. The companies should boost strong brands in their respective fields with high barriers to entry.
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Value investing means paying attention to more than just the stock price but by focusing on valuation. A pullback often creates buying opportunities where quality companies become available at low price-to-earnings multiples or low price-to-sales ratios relative to their industries.
Over the past 20 years, 95% of investment firms have failed to beat the S&P 500. In contrast, Buffett has averaged an annual return of 20%, nearly double the S&P 500 over the same period.
With the S&P 500 up by about 20% for the year, most stocks are trading at premium valuations above their 52-week highs. The impressive gains have come amid unfavorable market conditions, with interest rates near all-time highs of between 5.25% and 5.50%.
On the other hand, some stocks have pulled back significantly and are currently trading close to the 52-week lows, their core business hurt by the high interest rate environment. Additionally, some of the stocks have underperformed due to deteriorating macroeconomics. Concerns that the U.S. economy could plunge into recession have always hurt some of the stock’s sentiments. The U.S. Federal Reserve is expected to cut interest rates in September and these stocks might not be near their lows for long.
According to Stuart Keiser, Citi head of equity trading strategy, the high interest rate environment has left the market in a very unstable situation amid a “ tricky environment.” Likewise many investors are on edge as to whether there will be a soft or hard landing. Keiser said, in an interview on CNBC’s Fast Money:
“Basically you had a 12 to 18 month period of positive economic surprise of what I would call higher for longer growth strong rate cuts getting pushed out. Markets were able to deal with that because growth was really positive. Since late June economic data surprised negative, economic data momentum negative. The market is now trading instead of higher for longer trading, a bit of growth slowdown. That’s why you are getting this schizophrenia because as growth decelerates you get into a borderline at which the risk becomes really big that you could go hard landing instead of soft landing. So our view is that the risk reward is not what it was a couple of months back”
Amid the market outlook uncertainty, focusing on stocks near the 52-week lows is a sure way of balancing the risk reward amid the premium valuation in play. While the focus has been on artificial intelligence investment plays, stocks in various sectors are trading at discounted valuations and are sure to offer significant returns.
Our Methodology
To compile the list of the best 52-week low stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week lows (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order of their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A large turbine generating power from natural gas, smoke rising in the background.
BP p.l.c. (NYSE:BP)
52 Week Range: $32.51.38 – $40.84
Current Share Price: $34.38
Number of Hedge Fund Holders: 38
Short interest rate: 0.23%
BP p.l.c. (NYSE:BP) is an oil and integrated company and one of the best 52-week low stocks to buy now according to short sellers for exposure in the energy sector. It produces natural and integrated gas and power, trades gas, and operates onshore and offshore wind power.
The stock is trading close to its 52-week lows, an underperformance that comes as a surprise to solid underlying fundamentals. The company benefits from high oil prices that have found support above $75 a barrel.
BP p.l.c. (NYSE:BP) shares are trading near two-year lows, hurt by the company’s shift from the oil and gas business. Even as the company tries to move away from the fossil fuel business, a good chunk of its profits comes from the lucrative business. Nevertheless, the company is still investing in the fossil fuel business as it looks to safeguard earnings.
It remains one of the best stocks to buy at 52-week lows on maintaining the pace of its share buybacks as it continues to return value to shareholders. BP p.l.c. (NYSE:BP) has already announced a new $1.75 billion buyback program, much bigger than the $1.5 billion it executed late last year. The company plans to return nearly $14 billion by the end of 2025.
B.P.’s new chief executive, Murray Auchincloss, said: “Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. And as we look ahead, our destination remains unchanged, focused on growing the value of B.P.”
Late last year, BP p.l.c. (NYSE:BP) hiked its dividend by 10% to 7.27 cents as it continues to return optimum value to shareholders; its dividend yield currently stands at 5.63%.
On the other hand, the short interest rate on the stock as of the end of July stood at 0.23% of the outstanding shares of the stock.
According to Insider Monkey’s database, there are 38 hedge funds that are bullish on BP p.l.c. (NYSE:BP) as of the end of June, down from 40 in the preceding quarter. With over 21.81 million shares, Fisher Asset Management was the company’s leading stakeholder in the second quarter.
Overall BP ranks 2nd on our list of the 52-week low stocks to buy now according to short sellers. While we acknowledge the potential of BP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BP, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.