It's easy to get discouraged when, despite last week's bounce, stocks are still seemingly struggling. The conflict in Ukraine isn't cooling off, and several interest rate hikes are clearly in our future. It's not exactly a bullish backdrop, and plenty of tickers continue to tumble.
The thing is, some of those sell-offs have moved to extreme levels for all the wrong reasons. Investors who are able to look more than a few weeks down the road should be eyeing a handful of stocks as potential additions to their portfolio before the majority of investors recognize their mistake. Here are three of the best bets to start your search.
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1. Clorox
Bleach and disinfectant wipes may have been in high demand in 2020, when the world was constantly worried about contracting COVID-19. Shares of Clorox (CLX 1.41%) soared accordingly.
As could have been expected though, that year's sales surge was a near-impossible act to follow. Sales for the final six months of 2021 fell 7% compared to the same six-month stretch of 2020, taking a 30% bite out of gross profits. Net earnings fell from $678 million to $215 million for the same span in question. Unsurprisingly, shell-shocked shareholders have allowed Clorox stock to fall more than 20% just since the end of last year -- and more than 40% from its August 2020 peak. Perhaps investors knew then what would be coming a year later.
It's not a stretch to say, however, that the selling trend has gone way too far for too long. Yes, sales are expected to slump for the year now underway, as are earnings. Once we're past the midpoint of 2022, however, the comps get easier again.
More importantly, the growth-driving work that Clorox was doing before the pandemic rattled the world will be rekindled. That includes Clorox's so-called IGNITE reinvention strategy that will (among other things) focus on the innovation of new, relevant products and cull unnecessary expenses. We've yet to see the company work on its IGNITE plans in a normal environment.
In the meantime, newcomers will be arriving to the stock at a point when its dividend yield is a healthy, well-protected 3.4%.
2. Synchrony Financial
Most credit card-using consumers know outfits like Visa and Mastercard are the companies actually handling the payment and financing logistics of a card issued by a bank. Have you ever wondered, however, who's behind a store-issued credit card without the Mastercard or Visa logo on it?
A great deal of the time, it's a company called Synchrony Financial (SYF 1.68%), which supports consumer credit cards from the likes of Amazon, JCPenney, Lowe's, and lots of other familiar retailers.
Owning a piece of any company in the lending business can be a bit unnerving, particularly when it feels like a spate of rising interest rates could be coupled with (or perhaps even cause) a recession. Memories of the sub-prime mortgage meltdown in 2007 are still fresh in many investors' minds, and with the New York Federal Reserve Bank reporting U.S. household debt at yet another record high of $15.6 trillion as of the end of last year, it certainly fees like something similar could happen again.
Yet, there are some hopeful signs too. Consumer creditworthiness actually continues to improve. The number of Synchrony's credit accounts that are 30 or more days past due came in at a modest 2.6% at the end of 2021, down from nearly 3.1% a year earlier. In a similar vein, the New York Fed's report on the matter acknowledges this trend, adding that credit card delinquencies in excess of 90 days have fallen from more than 5% of accounts as of early 2020 to just over 3% of accounts as of the end of last year.
While shareholders would clearly prefer the domestic and global economies be more robust than they currently are, Synchrony Financial shares' 30% slide from their October level is rooted in unmerited fear.
3. Crocs
Finally, add Crocs (CROX 0.84%) to your list of stocks to buy before they pop back into bullish mode. They've peeled back more than 50% over the course of the past four months, but you'll be hard-pressed to find anyone who can explain exactly why.
Yes, this is the same company that made the funky foam clogs that were all the rage back in 2006 and 2007 but then fell off the face of the Earth by 2008. They were easing their way back into the pop-culture/fashion scene back in 2019, but when the world was largely locked down at home due to the pandemic, comfortable footwear became a must-have.
Only this time, it doesn't look like the fad is going to fade. Assuming the world's supply chains remain intact enough to get its products to (or from) where they need to be, analysts believe the company will see top-line growth of nearly 50% this year and another 19% next year. That should pump per-share profits up from last year's $8.32 to $10.01 this year to $12.33 per share in 2023, translating into a forward-looking P/E ratio of 6.5. That's pretty much unheard of for a company growing as quickly as this one is.
If you want to know what's different this time around that can keep consumers interested in these goofy foam shoes, a lot of it has to do with high-profile collaborations. Crocs has co-created products with luxury fashion brand Balenciaga, Walt Disney, and -- for some reason -- ranch dressing company Hidden Valley, just to name a few. The products' low cost also plugs into an anti-fashion-label movement that's still gaining traction among young people.
