Buy low, sell high. Those four words have served as the core of many investors' strategies for years. The trick, of course, is to find stocks with low prices that are practical slam dunks to be priced much higher in the future.
That's actually not a difficult challenge in today's market. Even with the overall stock market off to a good start in 2023, there are plenty of great bargains to be found. Here are three stocks down 48% or more that are screaming buys right now.
1. Amazon
Once upon a time, Amazon (AMZN 2.85%) ranked as a high-flying stock that could seem to do no wrong. Those days are over. Shares of the e-commerce and cloud-hosting giant are now down close to 47% from the previous high set in 2021.
The primary culprits behind Amazon's big slump at first glance are that the company's growth is slowing and its free cash flow has turned negative. But if you peel the onion a little further, you'll find that there are actually two other root causes for the stock's decline. First, macroeconomic uncertainty, including concerns about high inflation, is the main issue behind Amazon's sluggish growth. Second, the company's massive capital spending since 2020 has caused profits and free cash flow to sink.
Now for the good news: Both of these should be only temporary headwinds. Inflation appears to be moderating, albeit not as much (so far) as anyone would like. The economy could hold up better than expected as well, based on some indicators. Meanwhile, Amazon is cutting its spending. These moves should bolster profitability and drive higher free cash flow.
Amazon's future continues to look promising. In particular, the company's AWS cloud hosting business has a massive growth opportunity ahead. Amazon also has solid prospects in e-commerce plus newer markets including healthcare and advertising.
2. Medical Properties Trust
Medical Properties Trust (MPW 0.88%) (MPT) isn't the household name that Amazon is. It doesn't have the impressive growth prospects that Amazon does, either. However, MPT is a dirt cheap bargain stock that many investors will no doubt find very attractive.
Shares of the real estate investment trust (REIT) have plunged roughly 50% below the previous peak. Rising interest rates make it more expensive for REITs to borrow money for expansion. The bigger problem for MPT, though, is the dismal environment for many of its tenants, which are hospital operators.
One of the worst things that can happen to a REIT is for a major tenant to be unable to pay its rent. When Pipeline Health filed for bankruptcy, it caused investors to worry about the impact on MPT. However, those worries now appear to have been overblown. MPT announced in January that it will be able to collect 100% of all rents owed during Pipeline's bankruptcy.
MPT stock now trades at a little over 7 times expected earnings. Its earnings outlook is becoming more assured as higher reimbursements help hospital operators cope better with higher costs. The REIT also offers a juicy dividend yield close to 9.6%. When interest rates begin to come down sooner or later, MPT stock should move much higher.
3. The Trade Desk
Shares of The Trade Desk (TTD 1.94%) have plummeted 56% below the previous high. The overall sell-off in growth stocks hurt. So did a slowdown in the digital advertising market.
However, The Trade Desk's business remains strong. The advertising technology leader's revenue continues to grow. It's still profitable. Perhaps most importantly for the long run, The Trade Desk's customer retention remains at 95% or higher -- just as it's been for the past eight consecutive years.
The company's Unified ID 2.0 (UID2), an upgrade to third-party cookies used in browsers, continues to gain traction. The more widely used UID2 is, the stronger the position The Trade Desk is in. Increased adoption of connected TV, though, is by far the biggest growth driver for The Trade Desk.
Look for the company's revenue and earnings growth to accelerate again once advertisers' concerns about the economy wane. In the meantime, The Trade Desk stock looks like a screaming buy for patient investors.
