In some ways, it might look and feel like the world is putting the coronavirus in the rearview mirror. But the fact is COVID-19 remains a lingering problem for a slew of corporations that don’t have an easy way to work around the challenges linked to the pandemic. Not even all of the blue-chip powerhouses that make up the Dow Jones Industrial Average (DJINDICES: ^DJI) are immune to certain headaches. Their stocks have suffered as a result.
Still, beaten-down stocks can be bargains if they have a good chance of recovering in the foreseeable future.
With that as the backdrop, here’s a rundown of the three biggest DJIA losers from last month. Bargain-hunting investors will find at least one of the three merits a closer look while at its depressed price.
Worst of the worst
There’s no need to dance around the issue. August’s biggest losers among the Dow’s stocks are Visa (NYSE: V) and Amgen (NASDAQ: AMGN) — both with 7% setbacks — and Boeing (NYSE: BA) with a loss of nearly 5% last month versus the Dow’s overall gain of 1.2%.
For Boeing, the weakness extends a five-month stock price pullback that ultimately stems from a failure to eradicate COVID-19 before the delta variant reaccelerated its spread. The air travel business is not quite back to its full stride, but it’s moving in that direction. Boeing is even securing new orders for its once-marred 737 MAX as airlines anticipate a full rebound in the foreseeable future.
Investors aren’t so sure, though, that more virus-related shutdowns are possible and are shedding their Boeing shares just in case travel demand contracts rather than continues to improve. The aircraft maker is simply too vulnerable to even the slightest and most temporary of disruptions.
Visa’s pullback is rooted in similar concerns, although it was made all the more vulnerable by the stock’s huge price run-up through late July.
All told, Visa stock gained 76% between its March 2020 low and this July’s high, leaving it primed for profit-taking, which most investors did following the release of fiscal third-quarter results. Quarterly revenue of $6.1 billion was up 27% year over year, easily topping estimates. CFO Vasant Prabhu also made a point of saying during the company’s third-quarter conference call that the spread of COVID-19’s delta variant wasn’t crimping consumer spending. But, as was the case with Boeing, investors aren’t quite buying it — at least not like they were just a month before.
Even Amgen’s setback is linked to the rekindled spread of the coronavirus, although not due to its direct impact on consumer spending. Rather, the company dialed back its full-year earnings guidance, citing logistical difficulties in getting prospective patients in front of doctors. The knee-jerk response to the report was a 6% stock price rout that’s worsened in the meantime.
Perception versus perspective
None of the three companies are doomed. Indeed, two years from now, shareholders of all three will likely be struggling to recall the details of their current challenges. If you own or decided to buy any or all of these stocks following their August dips, it wouldn’t be the end of the world.
Still, there’s nothing inherently wrong with holding off a bit on a purchase, either.
Boeing will be fine in the long run. Despite the woes of its 737 MAX program, the company still has more than 5,000 unfilled orders for its various aircraft. Also keep in mind that before the delta variant of COVID-19, some airlines were moving back to pre-pandemic levels, promising a return to profitability sometime this year. But the stock itself remains overly sensitive to even hints of prospective problems. There’s no clarity as to when the market will start seeing Boeing’s glass as half full rather than half empty. Until then, the risk outweighs the reward.
Visa’s in a similar (although not identical) boat, subject to perceptions as much as to its fiscal reality. Despite last month’s pullback, the stock remains overbought, tempting more shareholders to lock in gains while its price remains firm.
The only name among the three that’s a truly compelling buy here and now is Amgen.
Yes, the pandemic remains a stumbling block, but last month’s selling has pulled the stock back to its late-2019 prices; the market is pricing in bigger problems than it actually has. This is the same company behind blockbuster drugs like Otezla, Enbrel, and cholesterol-fighting Repatha, just to name a few. It then has about 17 other drugs in its portfolio to round its list of revenue creators and dozens more in its pipeline.
There’s certainly no lack of opportunity here, and newcomers will be stepping into Amgen’s deep R&D bench while its dividend yield (based on a payout that isn’t exactly threatened at this time) is a healthy 3.2%.
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