Bargains can be hard to find these days as the bull market continues to chug along and many stocks are trading near their highs for the year. Opportunities to buy good stocks on a dip in price can be rare in such frothy markets, but if you can find one, it will pay off over the long term. That's why investors should pay close attention when they see a solid investment that's underperforming.
Three stocks that are down in recent weeks and that investors may want to consider buying are AstraZeneca (AZN -0.41%), Best Buy (BBY -0.76%), and Barrick Gold (GOLD -2.50%). Let's take a closer look at why they have fallen in value and why they could be great stocks to add to your portfolio today.
Down 10% in the past month, shares of AstraZeneca are underperforming the S&P 500, with the index climbing 3% during the same time frame. Although the U.K.-based healthcare company is right in the thick of the COVID-19 vaccine race and its candidate, AZD1222, demonstrates up to 90% effectiveness in preventing the illness, investors are bearish on the stock due to a recent acquisition.
On Dec. 12, AstraZeneca announced it is planning to acquire Alexion Pharmaceuticals in a $39 billion deal that could close by the third quarter of next year. AstraZeneca's CEO Pascal Soriot believes the move will enhance AstraZeneca's immunology portfolio and points to Alexion's work with rare diseases as a way the transaction can add value. But news of a deal often sends the share price of the acquirer down, especially if shareholders aren't excited about the price tag. Although the move could help lead to long-term growth for AstraZeneca, in the short term, it's having the opposite effect.
This isn't a huge drop in price for AstraZeneca, but investors also shouldn't expect to get much of a bargain for it, either. If its COVID-19 vaccine obtains approval from the Food and Drug Administration, it could send the company's shares soaring and make it look like a steal, despite the company pledging not to profit on the vaccine during the pandemic. With this recent drop in price, the healthcare stock is up just 4% this year, underperforming the S&P 500 and its 15% gains.
2. Best Buy
Another stock that's been falling in recent weeks is big-box retailer Best Buy. It's down around 9% despite coming off a decent quarterly performance. On Nov. 24, the company released its third-quarter results for the period ending Oct. 31 where its same-store sales grew at an impressive 23% year over year, smashing analyst expectations of just 13.6%. The strong performance was driven by online sales, where in the U.S. market they grew at a rate of 174% from the same period last year.
However investors became bearish after the earnings report as the company warned that in the fourth quarter things may not looks as great, especially with shipping costs on the rise and low-margin items like video game consoles likely driving much of the sales growth. CFO Matt Bilunas stated that for the next quarter, "we don't expect sales trends to remain at the levels we experienced during Q3." During the past quarter, Best Buy reported an adjusted per-share profit of $2.06, which was also higher than the $1.70 analysts were looking for from the company.
Shares of Best Buy are still up around 18% this year even with the recent decline in price. And with the Minnesota-based company showing excellent resiliency amid the pandemic and the business doing well online, this could be another great stock to pick up on the dip, especially if further lockdowns force consumers to continue to spend more money online.
3. Barrick Gold
With investors expecting an economic recovery to manifest, gold is not as popular as it was earlier in the year when the outlook was grim. The price of gold is no longer trading at more than $2,000 per ounce, but even at around $1,850 per ounce, it's still much higher than a year ago when investors were paying around $1,500 per ounce.
Barrick stock has fallen the furthest of the stocks listed here in the past month, down 12%. But the company is still doing well. On Nov. 5, it reported that it generated free cash flow of $1.3 billion for the third quarter ended Sept. 30, a record for Barrick. The company also said it is on track to meet its guidance for the year, and it expects gold production to come in between 4.6 million and 5 million ounces.
The Ontario-based business looks to be in great shape but the stock is struggling, and that creates an opportunity for investors to buy it at a reduced price. Today, it's trading at around $23 a share. The last time the stock was much lower than this was back in early April when it was below $20. Whether you're looking to hedge in the case of another market crash or just looking for a solid business to invest in, Barrick could be a great option for your portfolio. Year to date, the stock is still up 23%.