The stock market has been showing signs of life over the past few days, but there are still many stocks trading near their 52-week lows. For investors, it's important to discern whether a stock at its low is a bargain or if it's due for an even bigger collapse around the corner. It's especially important to deploy your cash on the sidelines in a smart way when stocks are as volatile as they are now.
Let's take a look at three stocks near their lows today and assess whether investors should consider buying them:
1. CVS
CVS Health (CVS -0.65%) has bounced back in recent days after hitting a new 52-week low of $51.72 earlier this month. It's down a total of 23% since the beginning of the year, slightly worse than the S&P 500, which has tumbled by 22%.
The coronavirus pandemic will likely result in significant demand for the company's products, and with the pharmacy retailer offering delivery for its customers, it's in a good position to meet those growing needs. In some cases, it even offers same-day delivery using Shipt. The company has in-store healthcare clinics called HealthHubs, which could see traffic tailwinds from the pandemic. And lastly, the pharmacy giant owns health insurer Aetna, which brought a large network of insured people under its umbrella.
The stock is trading at around 11 times its earnings over the past four quarters. Typically, value investors look for a price-to-earnings (P/E) multiple of around 15 or less to be a good buy. CVS is also trading right around its book value, at a price-to-book multiple of just 1.2. The company has recorded a profit in each of the past four quarters. For value investors, it ticks off a lot of checkmarks.
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Another advantage of buying the stock today is that CVS' quarterly dividend of $0.50 is now yielding 3.6% annually, which is well above the average 2% investors can get with a typical S&P 500 stock. Although there are concerns about rising competition from online retailers, with a good dividend, a great price, and likely a bump up in demand this year, CVS is an attractive buy.
2. Colgate-Palmolive
Colgate-Palmolive (CL 0.47%) hit a 52-week low of $58.49 earlier this month, but its shares are down a more modest 6% in 2020. The stock's been fairly volatile over the years. In five years, Colgate's shares are also down by 5%, far below the S&P 500, which is still up 23% during that period. The stock's currently trading at a trailing P/E of 26, which is about par for the course for Colgate-Palmolive, further corroborating that this may not be that special of a buying opportunity for investors.
The company offers consumers a wide array of household and personal care products that are necessities. In the midst of the coronavirus pandemic, they're likely to be in high demand. But investors need to remember that's not likely going to translate into a longer-term trend for the company.
Unfortunately, with minimal sales growth in 2019 and 2018, there's little reason to get excited about buying shares of Colgate-Palmolive. It does offer a dividend which pays $0.44 every quarter, for an annual yield of 2.8%. The Dividend King has increased its payouts for 57 straight years and could be an attractive buy for dividend investors. However, there's no extra incentive in buying the stock today. If you were going to buy Colgate-Palmolive, you probably would have by now. The stock trading close to its 52-week low isn't going to make it any more of a buy than it was a couple of months ago. With its limited growth, this is mainly going to appeal to dividend investors.
3. Verizon
Verizon Communications (VZ -0.68%) is another stock that reached a new 52-week low in March. It's up from its low of $48.84, but the stock is still down 15% year to date. The telecom giant is in the midst of rolling out 5G across the country, but the coronavirus will likely throw a wrench into those plans, at least in the short term. However, the stock could still be an attractive investment for those who are big believers in the new 5G internet technology. It will undoubtedly lead to some considerable growth for Verizon when it's up and running, and that's why buying shares of the stock today could be a great opportunity.
Currently, shares of Verizon are only trading at a P/E of 11. Although revenue growth was flat in 2019, sales are up 5% over two years. And with 5G, customers are going to be looking to upgrade their plans and phones to tap into the newest networks.
Investors who buy now also have the opportunity to lock in a great dividend. Currently, Verizon pays investors a quarterly dividend of $0.615, which on an annual basis yields 4.7%. The company's also increased its dividend for 13 straight years.
Which stock is the best buy today?
Verizon is the best stock of the three listed here. It offers a healthy dividend, trades at a modest valuation, and has some attractive growth opportunities ahead with the rollout of 5G. CVS is a good buy as well, but with a lower dividend and arguably more intense competition, especially from online retailers, it's not as good a buy as Verizon. And Colgate-Palmolive is purely a dividend play. While shares of Colgate-Palmolive are trading near their low, it's unlikely the stock is going to soar anytime soon.
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That's why overall, Verizon gives investors the best mix of value, growth, and dividends, making it the best of the three stocks listed here.
