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2021 was an exceptional year for investors - the ASX200 gained 12%, excluding dividends, and the S&P500 gained over 25%, including an almost unprecedented 70 all-time-highs. Yet not all stocks have soared; many are actually at or near their 52 week lows, having stayed flat or even fallen dramatically over the last twelve months. Many long term investors will be familiar with the Dogs of the Dow strategy, which involves buying the poorest performers of the previous year on the Dow Jones Index, expecting them to outperform their peers. This strategy is far from foolproof, but many nabtrade investors are keen to buy high quality stocks at a discount. For those in that category, here are some of the most popular stocks that are currently trading at or near their lowest price over twelve months, by sector.
Many stocks in the healthcare sector have suffered during Covid19, as they’ve been unable to treat patients or otherwise access their key markets. Two of Australia’s most successful healthcare companies, both leaders in their field, are currently trading close to their 52 week lows, with CSL (CSL) trading a little over $250 at the time of writing, well off its 12 month high of nearly $320, and even further from its pre Covid high of $350. CSL has been frustrated in its efforts to collect blood plasma in the US and Europe due to Covid19 distancing restrictions, and has undertaken the high value acquisition of Vifor Pharma which was both debt and equity financed, putting the share price under pressure. Broadly, however, CSL’s long term fundamentals do not appear to have changed. Cochlear Ltd (COH) shares are trading below $195; above their 52 week low of $178 but well off 52 week highs of $257. Both CSL and Cochlear have typically traded on high multiples due to their consistently high growth rates and relative strength in their target markets.
In financials, three of the big four banks have rebounded very strongly from their Covid lows, however Westpac (WBC) has struggled to win market share and control costs, with its annual results in November disappointing shareholders and sparking a 10% sell off. The share price hasn’t really recovered; at $21.50 it is a little off its lows of $20, but well off its 52 week high of around $27. Westpac remains the most bought of the big four banks on nabtrade. Down 2% year on year, Westpac is having a dream run compared to Magellan Financial Group (MFG), which has suffered a series of blows over the last twelve months, including the resignation of its CEO, the loss of its largest institutional mandate and now the leave of absence taken by its Chief Investment Officer and key man, Hamish Douglass. Magellan is down over 60% year on year. Former blue chip AMP (AMP) has bounced nearly 10% from its low of 85c, but is still down nearly 40% over twelve months and has lost more than 90% of its value since the Global Financial Crisis.
Retailers, particularly online retailers, were one of the biggest winners from Covid19 as consumers were forced to change their spending habits. Harvey Norman (HVN) was also the beneficiary of a significant boost from JobKeeper payments, but some view the reopening as a negative for Harvey Norman, as consumers are more likely to spend on travel and experiences rather than goods. At the time of writing, HVN shares were off their 52 week lows but still 20% off their recent highs and down over 7% over twelve months, significantly underperforming the ASX. Well known online retailer Kogan (KGN) has had a wild ride; it is down nearly 30% in 2022 alone, and down over 60% over twelve months. Rising inventory and costs have worried shareholders and analysts.
The sector most at risk of rising interest rates, the key concern rattling US markets, is tech, as the valuations for many high growth tech stocks has been predicated on an extremely low cost of capital. Australia’s most popular ‘tech’ sector remains buy now, pay later, which has seen extraordinary growth. The leader in the sector, Afterpay (formerly APT) has been bought by US payments giant Block (formerly Square, SQ.US); the combined entity now trades under the code SQ2 on the ASX. SQ2 has lost 17% of its value since listing; Afterpay had lost nearly 50% of its peak value prior to the transition. Zip Co (Z1P), one of nabtrade’s most popular stocks in recent years, has lost over 60% of its value over 12 months, and is now at close to its 2020 trade price. Competitors in the BNPL space Open Pay (OPY) and Sezzle (SZL) are down over 80% and 75% respectively, and are at or near their lows.
Also in the tech sector, accounting software provider Xero (XRO) is currently trading around $110 after peaking at $156 in 2021. It’s worth noting that Xero is still up 500% over five years and trades at a significant premium to the market. Another of the WAAAX stocks, Appen (APX) suffered a hit with Meta’s recent disappointing results, and while off its lows is still down nearly 60% over one year. ELMO Software (ELO), which provides payroll solutions, has fallen 40% over twelve months, and is now at 2018 prices. Data centre operator Next DC (NXT) is down 15% over a year, and while it has bounced from its sub $10 52 week low, is substantially off its 2021 high of over $14. Former rocket Nearmap (NEA), which traded above $4 in 2018, is now near its lows at $1.39, while online marketplace provider Redbubble (RBL) is off over 70% over twelve months.
For those willing to look beyond the ASX, the Nasdaq has a multitude of stocks trading substantially off their highs, with two of the FAANG stocks, Meta (formerly Facebook, FB.US) and Netflix (NFLX.US) down 11% and 25% respectively over twelve months. While Apple (APPL.US) and Microsoft (MSFT.US) are up over 25%, Paypal (PYPL.US) has halved, Zoom (ZM.US) has fallen more than 60% and the US-listed Block (SQ.US) is down 55% over a full year. Beyond the big players, there are many more tech names whose investors have suffered huge (paper) losses over 2021 and into the harsh January of 2022.
So are these weak stocks a great buying opportunity, or a value trap for the unwary? It very much depends upon the company. For the large cap names with consistent earnings whose circumstances have been affected by Covid, it’s more than possible that the only way is up. AMP, however, is a great example of a blue chip company that has caused nothing but grief to its investors for more than a decade, and the oft-promised turnaround may never materialise. For the more speculative end of the market, the days of heady valuations that made sense when cash rates were close to zero are probably over.
Analysis as at 7 February 2022. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. This article does not reflect the views of WealthHub Securities Limited.