Six Beaten-Down Stocks With Nowhere to Go but UP

We haven’t seen anything like the coronavirus pandemic in the last century. It’s a global health crisis that has crippled several industries and caused financial markets to tank. But even in the darkest of times, there are silver linings.

The stock market is chaotic. Some of the biggest companies in the world have been brought to their knees by the coronavirus crash. But chaos is opportunity, and the market, the economy and the world will recover from this.

Dozens of great stocks have been knocked down to discounts we haven’t seen in decades. I’m talking about fundamentally strong companies that have had their share prices pushed artificially low.

This has created an environment of low buy-in cost and high potential upside for the savvy investor.

The six companies in this report aren’t going anywhere, but their shares can be picked up for pennies on the dollar. When the recovery comes (whether it’s natural or fueled by massive stimulus), these companies are going to bounce right back to where they were and will keep on growing.

Every once in a while, the market gives you the opportunity to not only buy low, but also buy at the lowest and rake in bigger profits than ever.

South by Southwest

The global lockdown has done a number on airlines. There’s no getting around it. Less travel means less money for companies like Delta and Ryanair. But in all the doom and gloom, we seem to have forgotten that this pandemic will pass. We will travel again.

And when we do, you’ll be glad you bought Southwest Airlines (NYSE: LUV) at a historic low. The company was recently below $40 per share, a place it hasn’t been since 2016. But counting out this titan of the skies would be a mistake made at your portfolio’s peril. Here’s why…

Simply put, much like banks in 2008, big airlines like Southwest seem to have been deemed “too big to fail.” Regardless of whether you or I agree with it, the government is throwing billions at airlines to help them limp through the pandemic.

Southwest employs more than 60,000 people and has become a vital element of American domestic air infrastructure. The government has devoted more than $85 billion to helping airlines since the start of the lockdown, and I foresee that continuing until this is over.

With support like that, Southwest and other airlines aren’t likely going anywhere. Further, while Southwest has taken a significant hit as of its latest quarterly report, its losses can be attributed to one thing and one thing only – the pandemic.

The company is still fundamentally strong. In fact, 2019 was another record year for Southwest. Not only did it achieve its 47th consecutive year of profitability, but revenue was up 2.1% to a record-breaking $22.4 billion. Diluted earnings per share exceeded expectations and came in at $4.27, up $0.03 over 2018. Full-year operating cash flow was up $600 million to $4 billion. Further, Southwest has a $9.3 billion war chest of cash it can dip into if it has to.

That’s strong.

Things are rough these days, but I expect the company to continue its usual pattern of slow and steady growth from here. Once shares return to their 2019 levels, they could very easily double soon after. Buy now while shares are cheap… too cheap.

Somewhere Beyond the Sea

News of the death of petroleum has been greatly exaggerated. With all the news of electric cars, solar power and wind farms, you’d be forgiven for thinking an economic asteroid was on the way for our dinosaur-powered infrastructure.

As you can see from this chart, oil and natural gas use isn’t declining. In fact, consumption of both is set to increase steadily through 2050. For better or worse, we’re tied to fossil fuels for the foreseeable future.

And if you buy Transocean (NYSE: RIG), it will be much better for your portfolio.

The upside on this one is too big to pass up. While shale oil has been the darling of the fossil fuel industry for the past several years, Transocean is set to capitalize on a return to offshore drilling.

The company has divested itself from old, stationary offshore oil drills. To replace them, Transocean has built a fleet of mobile drilling platforms. These ships are capable of adapting to and taking advantage of new opportunities as they present themselves.

Transocean expects 86 new opportunities for its fleet in the next 18 months alone. And given that its fleet is now the largest and most capable among its industry peers, it should have no problem capitalizing on all of its opportunities.

Before the coronavirus crash, Transocean had great fundamentals. Its revenue was on a steady growth streak, rising 6.4% on average each year since 2017. Its losses were shrinking steadily over the same period. Further, the company has a backlog of contracted projects worth $10 billion – more than any of its industry peers. So the work will keep coming. And the money will keep rolling in for several years to come – $352.9 million of that is from contracts Transocean secured in January of this year.

Finally, the upside on Transocean can’t be beat. Before the pandemic, it was trading for nearly $7. If you buy in now while it’s trading for around $1, all the stock would have to do is return to its previous high and you could make about seven times your money. At the stock’s current price, you don’t have much to lose and could reap a massive reward.

So buy Transocean now and fuel your portfolio for years to come.

Facing Headwinds

With airlines like Southwest facing serious headwinds, it only follows that airplane manufacturers are feeling the squeeze of the coronavirus crash as well. With airlines struggling, nobody is buying commercial jets right now. But one small Brazilian manufacturer called Embraer (NYSE: ERJ) has clearer skies in sight, especially after an upgrade from Goldman Sachs earlier this year.

Embraer has been delivering planes in the face of the coronavirus pandemic. It delivered 14 jets in total – five commercial and nine executive in the first quarter of 2020. In the second quarter it delivered another 17 aircraft – four commercial jets and 13 executive jets. And, even better, the company has many more jets in its backlog – $15 billion worth. So the work isn’t going anywhere for Embraer. Its planes are just as in demand as they were before the pandemic.

Further, Embraer has the means to not only continue making planes but also update and upgrade its existing models. The new Phenom 300E, the bestselling light jet in the world for eight consecutive years, was approved by numerous national aviation bodies at the end of March 2020.

Embraer also has access to a plane market few other manufacturers do – propeller-driven military planes. Most developed militaries have shifted over entirely to jets for their combat aircraft.

However, many smaller countries and developing economies don’t have the money to spend on state-of-the-art jets. Even secondhand ones are out of reach for many countries, at least in large quantities. So they buy propeller planes, like Embraer’s A-29 Super Tucano.

The A-29 is used by the air services of Afghanistan, Lebanon, Columbia and Ecuador among others. Most recently, Nigeria agreed to a contract for a full fleet of them to be produced next year. The A-29 and planes like it are in high demand among militaries that get overlooked by many plane manufacturers.

All of that brings me to Embraer’s bottom line. The company was on the up and up before the COVID-19 outbreak. 2019 revenue came in at $5.4 billion, right on target with the company’s guidance. Embraer brought in a record cash flow of $739.4 million and currently has more than $2 billion in its war chest.

Even better for us, Embraer can be picked up at an even deeper discount because a deep-pocketed deal with Boeing fell through. Boeing is dealing with some serious financial issues and was forced to back out of a $4.2 billion deal to take over a big chunk of Embraer’s manufacturing efforts.

With the deal off the books, Embraer took a hit to its share price, but it keeps one if its most valuable assets on its books. It’s great news for prospective investors looking to buy at the lowest possible price to maximize potential gains.

Between Embraer’s cash reserves, solid revenue and  contractually guaranteed work, I foresee Embraer coming out of this pandemic stronger than ever and ready to profit in the post-pandemic plane market.

Good Medicine

As you might expect, healthcare is one of the industries that has flourished during the pandemic. However, it has stretched America’s healthcare personnel rather thin.

That’s where Dallas, Texas-based AMN Healthcare Services (NYSE: AMN) comes in. It’s not a medical supply company, nor is it a pharmaceutical manufacturer. It’s a staffing company. AMN Healthcare provides short-term and long-term staffing services, particularly of nurses and hospital support staff to hospitals, pharmacies and clinics. It also offers travel nurse staffing.

New York had to let medical students graduate early to fight the coronavirus. If subsequent outbreaks occur in the future, you can bet on limited manpower being a problem. Companies like AMN Healthcare will become critical as America’s medical human resources need to be shuffled around to where the virus is the worst.

The medical industry will be changing for several years to come as we recover from this pandemic. I expect that employee shuffling will become a trend. And AMN Healthcare is one of the strongest companies in the space. Even better, AMN Healthcare is partnering with fellow healthcare staffing leader Randstad Healthcare to help the industry better respond to the COVID-19 pandemic.

Its revenue clocked in at $2.222 billion last year, up 4% over 2018. Revenue has gone up by 11.49% on average each year since 2015. This one is growing quickly and pocketing solid income along the way, $113 million last year in fact. Further, the company has just $1.1 billion in debt but $1.9 billion in assets.

AMN Healthcare isn’t going anywhere, and Wall Street’s estimates are that it could have a potential upside of as much as 70%. This is one you can’t afford to ignore. Institutional investors certainly aren’t. Millennium Management bought more than 100,000 shares in the first quarter of 2020, so it’s anticipating a strong future for AMN Healthcare.

Make It Here, Make It Anywhere

Madison Square Garden Sports Corp. (NYSE: MSGS) is a name synonymous with American sports entertainment. Since 1879, crowds of New Yorkers have piled into America’s most famous arena for concerts, political party conventions and, most of all, sporting events. The 1970 Knicks NBA championship game happened there, and Madison Square Gardens is where Muhammad Ali fought Joe Frazier in 1971. The arena has also hosted three WWE WrestleManias.

Until recently, the venue and the teams that play in it were owned by the same company. But in April 2019, Madison Square split into an entertainment division, which owns the building, and a sports division, which owns the teams and franchises. I recommend you buy Madison Square Garden Sports Corp. because it’s not the buildings themselves but the teams that play in them that are the real draw for revenue.

For the time being, Madison Square Garden Sports’ share price is low and will allow you to buy into three sports franchises at a fantastic discount. The opportunity to buy a part of a sports franchise at a bargain price doesn’t come along every day. And the teams Madison Square owns, both young and old, are popular and growing quickly.

Madison Square owns the New York Knicks basketball team and the New York Rangers hockey team, as well as Counter Logic Gaming, an esports franchise.

The Knicks brought in $132 million in ticket sales alone last year. So without factoring in the advertisements and TV deals, the team is already a major revenue stream. The Rangers brought in more than $103 million just from ticket sales.

Shareholders will be buying into two of America’s most popular sports leagues and the fast-growing world of esports…

In fact, at the rate it’s growing, Counter Logic may be a serious competitor to traditional franchises before you know it…

Esports teams like Counter Logic could bring in more than $1.6 billion in revenue by 2023 at a compound annual growth rate (CAGR) of nearly 30%. There aren’t many securities out there that allow you to buy into legacy brands like the Knicks and the Rangers and fast-growing modern brands like Counter Logic at the same time.

Further, when Madison Square Garden Sports’ venue counterpart finishes construction of its new Sphere at The Venetian in Las Vegas in 2021, Counter Logic Gaming should be able to take full advantage of its state-of-the-art digital entertainment capabilities.

Between those franchises and one-off events, Madison Square Garden Sports, prior to the COVID-19 pandemic, had been on a tear, with average revenue growth of 11% every year since 2015. It also paid down nearly half of its long-term debt in 2019. It currently holds only $54 million in debt compared with 2018’s $105.7 million.

Madison Square is a powerhouse that has been temporarily derailed by the banning of fans at sports games due to COVID-19. This is giving you an opportunity to get in on this well-kept secret at a fantastic discount. If you’ve ever wanted to own a sports team, or three, this is your chance.

The Pride of Detroit 

Ford Motor Company (NYSE: F) is an American business standard. Over the 117 years since it was founded by Henry Ford in Detroit, Michigan, the company has weathered two world wars, the Great Depression and the 1918 Spanish flu pandemic.

Its brands are iconic. Names like Mustang and F-Series are synonymous with American industry and culture. People might not be buying cars now, but as with Southwest, we can’t forget that this pandemic will end. And Ford is setting itself up for a serious bull run in a post-coronavirus world.

Ford is entering the electric vehicle (EV) market with a great contender aimed right at Tesla. It’s building partnerships to expand its EV market share and autonomous car technology, and it’s earning itself loads of public goodwill with its actions during the pandemic. Even better, you can pick this one up at a fantastic discount.

First, Ford’s electrification. Detroit’s oldest son is well ahead of the game when it comes to the future of powertrains. Tesla changed the game and transformed electric cars from ugly little oddball vehicles to sexy and desirable cars. Legacy manufacturers have been slow to adapt to this change, but Ford is among the first.

Its premier EV is the Mach-E, a crossover SUV with styling drawn from Ford’s venerable Mustang. Once it releases next year, it will be a serious competitor to Tesla’s Model 3, Model X and Model Y.

Ford claims the Mach-E will be capable of a 300-mile range and going from zero to 60 mph in the mid-3-second range. But the biggest game changer with Ford’s electric racehorse is its fast charging. With high output charging cables, it can recharge nearly 50 miles of range in as little as 10 minutes.

Second, Ford isn’t stopping with the Mach-E. The company has forged a relationship with electric truck startup Rivian. While a planned Rivian-powered Lincoln SUV had to be postponed due to the pandemic, the relationship between Ford and Rivian remains, and I expect some interesting vehicles to come from it.

Ford has also built up a partnership and invested millions in autonomous driving startup Argo AI. Ford is shooting for leadership on the autonomous car market.

Finally, while Ford has taken a significant financial loss in 2020, it has more than made up for it by cultivating good press during the pandemic. In March, the company shifted production in its Detroit-area plants to making ventilators, masks and other vital equipment for the coronavirus pandemic. It got loads of positive news coverage that very likely tipped the scales in favor of Ford for people looking to buy new cars when this is all over.

It’s a bad idea to bet against Ford. When the Great Recession came in 2008, Ford was the sole American car company that didn’t take bailout money. And it worked out for it. Investors who bought Ford at the lowest point of its fortunes in November 2008 enjoyed a 1,778% gain over the next two years. Ford bounced back strongly once before, and I think it can do it again.

A Portfolio for the Recovery

It’s easy to panic in the face of a pandemic. But the ultra-cheap stock prices it’s created won’t last forever – not with this much free money being tossed around. The six companies in this report are down… but not out..

They’ve all been beaten down by the pandemic, but they’re primed to bounce right back. All six are fundamentally strong companies that can be had at a fantastic discount.

As we get further away from this pandemic, investors will likely look at it as one of the best buying opportunities in decades. And you’ll be glad you took advantage of it.