The stock market swoon of the past few months has been tough on the nerves, but it has led to lower valuations for some good, solid companies. You can find some really good deals on stocks under $20 per share. Investors might want to consider these two stocks that have dropped below $20 per share over the past few months, because both are built for the long-term.
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1. Ford Motor Company
Ford Motor Company (F 6.10%) has been in turnaround mode for the past couple of years after its stock price dipped below $5 per share at the start of the COVID-19 pandemic in 2020. The automaker's shares topped out at over $25 back in January and have since come back to about $15.
Ford has had its share of problems this year, but they are not unique in an automobile industry dealing with high inflation, interest rate hikes, an ongoing chip shortage, and overall supply constraints. Is the worst of it over? It's hard to say, as there is so much uncertainty in the economy and geopolitical situation, but analysts expect the stock price to climb back to more than $20 during the next 12 months.
While supply constraints have proven to be a challenge throughout the industry, the good news for Ford is that demand is high. Ford had a record 88,000 orders for vehicles in March, up 33% year over year. The F-Series trucks had most of them, a record 50,000 orders last month. Truck sales and SUV sales were both up significantly in March compared to April as supply improved.
But set aside short-term volatility and trends: Ford is a long-term winner, mainly because of its strength and leadership in electric vehicles (EVs). In 2021, Ford was second only to Tesla in EV sales. That momentum continues as EV sales were up 16.9% in March year over year. In April, Ford's highly anticipated Ford Lightning truck, an electric version of its best-selling F-150, will come out. That should provide a big sales boost. More than 200,000 Lightning trucks were pre-ordered, and Ford had to increase production to meet the demand. By 2030, Ford expects about 40% of its sales to be EVs. Its share price, market share, and earnings should rise along with it.
2. KeyCorp
Another stock that has dipped into the $20 per share range is KeyCorp (KEY 0.07%), which is the holding company for KeyBank, a Cleveland-based regional bank. Key Bank has some $184 billion in assets and is the 18th largest bank in the U.S.
This is a good sturdy regional bank that posted record revenue in the fourth quarter and all of 2021, largely due to a surge in noninterest income, specifically investment banking, mortgage-servicing fees, and debt-placement fees.
While interest income was down because of low interest rates, loan originations were up sharply, mainly due to the acquisition of Laurel Road in 2019. This student-loan financing platform has boosted loan activity for Key overall, but last year it created Laurel Road for Doctors. This is essentially a digital bank targeted at doctors and healthcare professionals where they can refinance their debt and use other banking services. This is a niche that KeyBank expects to grow nationally.
This diversity of revenue and lending niches allowed it to outperform most of its regional banking peers last year. And with interest rates set to rise, the bank projects a $150 million increase in net interest income in 2022. Analysts project a consensus return of about 26% for KeyCorpʻs stock over the next 12 months.
But what really makes this a good, solid, long-term holding is its dividend. KeyCorp declared a $0.19 dividend in the first quarter, at a market-beating yield of 3.8%, where it has been for the last few years, other than a spike in early 2020 when the stock price dropped. This is one of the most consistent dividends in its category, as it has raised the annual payout for 11 straight years. At a time when markets and the economy are so uncertain, a steady income you can count on becomes even more important. Plus, the tailwinds of higher interest rates and loan growth should provide steady returns, barring a recession.
