We recently compiled a list of the 10 Blue-Chip Stocks to Buy at 52-Week Lows. In this article, we are going to take a look at where ConocoPhillips (NYSE:COP) stands against the other Blue-Chip Stocks to Buy.
Despite the stock market indices hitting record highs this year, some stocks edged lower and are currently languishing near their 52-week lows. While it’s common practice to stay clear of stocks under pressure, it could sometimes be a costly error. When the shares of solid companies become unpopular due to macroeconomic factors and concerns, it presents a buying chance that value investors seize.
Deteriorating macroeconomics was the catalyst behind some blue chip stocks imploding in a year when the overall market traded higher. As the high interest rate environment helped push inflation close to the recommended 2%, some companies felt the blunt even as the S&P 500 rallied up to 17%.
READ ALSO: 8 Best Warren Buffett Stocks to Buy According to Analysts and 8 Best Value Stocks to Invest In According To Warren Buffett.
Companies whose core business depend on consumer purchasing power were the hardest hit as consumers became cautious amid the high inflation and liquidity pressures. Likewise, as the U.S. economy came under pressure amid the high interest rates depicted by a struggling U.S. labor market and manufacturing sector, investors shunned stocks in the consumer cyclical and energy sectors susceptible to deteriorating economic conditions.
Fast forward, the Fed swinging into action and initiating a 50 basis points interest rate cut to try and prevent the U.S. economy from plunging into recession has presented a new lease of life in the markets. According to market bull and head of research at Fundstrat Global Advisors Tom Lee, the Federal Reserve cutting cycle has the potential to set up the market for a strong rally heading into year-end.
Large-cap stocks, hard-hit by high interest, increasingly present undiscovered investment opportunities in a volatile market. Even though a stock that is at or close to a recent low may seem like a risky investment, large-cap stocks frequently reflect market sentiment rather than underlying problems.
With the overall market remaining bullish as interest rates around the globe drop, professional investors are increasingly taking note of the best blue-chip stocks to buy at 52-week lows. Astute investors know these large-cap stocks’ current valuations might not accurately represent their long-term potential, as most appear to be trading at a discount.
According to Canaccord Genuity analyst Michael Welch, the fourth quarter presents one of the best opportunities to buy undervalued stocks, as it is usually the strongest quarter for stocks. The fact that the quarter often ends positively in three of every four years underscores why investors should be bullish about blue-chip stocks that have pulled back significantly and are showing signs of bouncing back.
According to Welch, now is not the time to fight the Fed or the tape as the market shows signs of edging higher. The analyst believes now is the time to position one’s portfolio for a potential fourth-quarter rally. Investors have a unique opportunity to secure higher dividend yields and long-term capital gains when the market recovers and high-quality stocks bottom out after the recent slump.
Nevertheless, Lee of Fundstrat Global Advisors believes investors should be cautious as the uncertainty around the U.S. presidential election could turn out to be a significant headwind. The uncertainty around former president Donald Trump and Kamala Harris’s economic platforms should make the markets weary and curtail significant gains.
Source: unsplash
Our Methodology
To make our list of blue chip stocks at 52-week lows, we ranked large-cap firms trading on the NYSE and NASDAQ whose shares are trading at new 52-week lows or are at most 0-10% higher. The blue-chip stocks at 52-week lows with the highest market capitalization were selected, and their share prices are also mentioned. Finally, we ranked the stocks in descending order based on market cap.
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).
ConocoPhillips (NYSE:COP)
52 Week Range: $101.30 – $135.18
Current Share Price: $104.72
Number of Hedge Fund Holders: 72
Market Capitalization as of September 30: $121.82 Billion
ConocoPhillips (NYSE:COP) is one of the best blue chip stocks to buy at 52-week lows. A lower interest rate environment spurs capital investment, lowers unemployment, and helps fuel economic growth, which should trigger higher demand for the oil and gas it deals in.
Even with oil prices plunging to lows of $70 a barrel, ConocoPhillips (NYSE:COP) remains well positioned to achieve annualized free cash flow of between $120 million and $130 million in 2024 as long as oil prices average between $60 and $90 a barrel.
Similarly, ConocoPhillips (NYSE:COP) has set out to strengthen its competitive edge and prospects in the oil and gas business with a deal to acquire Marathon Oil. The combined company should produce much free cash flow so that it will be able to increase dividends, buy back stock, and accelerate growth.
The acquisition promises significant synergies with ConocoPhillips (NYSE:COP)’s current asset portfolio. The management has stated that they are optimistic that the deal will be closed by the end of 2024 and that synergies will be achieved by the end of 2025. The $500 million synergy target may have benefits the market hasn’t yet fully acknowledged.
ConocoPhillips (NYSE:COP) would become a stronger company with no impact on its balance sheet or dilution to shareholders in the event of success. Although it’s a big ask, ConocoPhillips recently gave its shareholders a huge capital return. ConocoPhillips intends to pay out at least $9 billion in dividends and buybacks to shareholders in 2024 alone.
ConocoPhillips (NYSE:COP)’s capital allocation strategy demonstrates the company’s dedication to generating shareholder value. Because of its strong balance sheet, the company has a competitive edge that allows it to increase shareholder returns during different cycles in commodity prices. While trading at a P/E of 10, the stock yields 2.98% on dividends.
As of the end of June, Insider Monkey’s database shows that 72 hedge funds are optimistic about ConocoPhillips (NYSE:COP), an increase from 62 in the previous quarter. Eagle Capital Management emerged as the top stakeholder in the second quarter, holding over 14.52 million shares.
Here is what Invesco Growth and Income Fund said about ConocoPhillips (NYSE:COP) in its Q2 2024 investor letter:
“Stock selection in the industrials and health care sectors detracted from relative performance during the quarter. Selection and an underweight in consumer staples also hurt relative return as the sector was one of just two index sectors with a positive return for the quarter. ConocoPhillips (NYSE: C.O.P.): The company announced its acquisition of Marathon Oil in May. The deal is expected to increase earnings and will increase the scale of Conoco’s production assets. However, the stock traded lower on the news.”
Overall COP ranks 8th on our list of 10 Blue-Chip Stocks to Buy at 52-Week Lows. While we acknowledge the potential of COP 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 COP, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.