We're all hungry for bargains, but sometimes, stocks with fast-food combo meal price tags give your portfolio a bout of indigestion. Stocks don't usually trade at single-digit price points by accident. They've fallen out of favor, and most of them aren't likely to bounce back.
Sirius XM Holdings (SIRI 4.97%), Tanger Factory Outlet Centers (SKT 0.02%), Annaly Capital Management (NLY 1.11%), Zix (ZIXI), Lumber Liquidators (LL 3.33%), and SmileDirectClub (SDC -15.38%) are top stocks to consider buying.
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Sirius XM Holdings
One of the last legal monopolies that antitrust regulators let happen through acquisition was the 2008 combination of Sirius and XM to form the only game in town when it comes to satellite radio. It was easy to see why the deal was allowed to go through, given the growing number of audio alternatives out there, and both companies were in pretty sorry financial shape at the time.
The combined company has been a beast. Sirius XM has been consistently profitable for years, and the recent acquisition of Pandora gave it some well-needed skin in the streaming-music market. The stock has also delivered positive returns for 11 consecutive years. The streak is in danger with Sirius XM currently trading 25% lower this year. However, the company is armed with nearly 35 million subscribers, so it's hard to bet against the popular platform.
Tanger Factory Outlet Centers
Running a shopping mall is a drag these days, and the same can be said about Tanger Factory Outlet Centers as a real estate investment trust (REIT) that owns a portfolio of 39 upscale outlet shopping centers. It started the year in fine fashion with a 97% occupancy rate at its outlets and most of its tenants current on their payments. Things are naturally very different today, with real-world retail shuttered during this shelter-in-place coronavirus pandemic.
We can't trust the stock's ridiculously high trailing yield. Despite boosting its payouts every year since 1993, Tanger Factory Outlet's distributions will prove mortal this year as losses mount during the interruption. When business does resume, it will likely be with a lot fewer tenants. Thankfully, there's a market for clearance stores in a recession, and the stock has fallen so hard this year that any potential success seems to be fully discounted.
Annaly Capital Management
Real estate is a dicey proposition for a manager these days, given the growing number of deadbeat property dwellers, and that's something weighing on Annaly as an investor in residential and commercial assets. The mortgage REIT proactively moved to reduce the size of its portfolio earlier this year, a prudent move to eat away at its leverage profile.
Wall Street sold mortgage REITs in a major way last month, and Annaly felt the sting. In a financial update earlier this month, Annaly pegged its book value per share at the end of March to be somewhere between $7.40 and $7.60. There's no guarantee that its positions won't continue to diminish in value, but for now, it's comforting to know that you can pick up a company at a discount that's been at this through the ups and downs of more than 20 years.
Zix
Investors have decided to nix Zix lately, but that's not entirely fair. The email security specialist took off in mid-February after posting better-than-expected financial results, but that came just a couple of days before the market would begin its sharp coronavirus-fueled sell-off.
Revenue rose 72% in the well-received report, though it was actually the handiwork of a couple of acquisitions that closed in the springtime of last year. However, Zix pointed out that organic revenue grew at a 15% clip in its latest quarter, and it's targeting 14% to 16% organic top-line gains for 2020. After five consecutive years of steady single-digit revenue growth, the acquisition-fed Zix is starting to pick up the pace.
Lumber Liquidators
There doesn't seem to be much of an appetite for hardwood flooring these days. On Monday, Lumber Liquidators had a sobering financial update for its recently concluded quarter. Comps that were clocking in at a healthy 4% gain through March 21 collapsed into negative territory -- down 1% for the entire quarter -- just 10 days later.
Lumber Liquidators has been volatile over the years, and this isn't the first time that it has experienced the area rug of positive momentum pulled out from under its feet. A silver lining here is that folks spending more time at home now will likely generate demand down the line, given the additional wear and tear on a home's flooring.
SmileDirectClub
One of last year's biggest IPO flops was SmileDirectClub, but the high-tech provider of clear dental aligners at a discount deserves better than where it's at now. SmileDirectClub went public at $23, and it's gone on to shed more than three quarters of its value.
It's easy to be down on SmileDirectClub. It was losing money before the pandemic temporarily shuttered its SmileShops that take dental imprints before leaning on teledentistry to provide corrective aligners at a fraction of what orthodontists charge. There are also legal challenges by dentists and orthodontists who don't appreciate the price-slashing business model.
However, growth was a on tear before the coronavirus crisis, with revenue soaring 53% in its latest quarter. The model works, even if it's out of favor.
