It's the holiday season, and that means bargains abound at every store out there. It's also a good time to find great stocks on the cheap. We asked three of our regular contributors to discuss a stock that looks to be on sale right now, and they gave us Chipotle Mexican Grill (NYSE:CMG), Raptor Pharmaceutical Corp. (NASDAQ:RPTP), and Nucor Corporation (NYSE:NUE). Here's a look at what they had to say.
With shares of Chipotle Mexican Grill down more than 25% since peaking in October, it's evident that many investors are disgusted by the fast-casual restaurateur. And it's hard to blame them, given a recent E. coli scare implicating 11 Chipotle restaurants across Washington and Oregon.
But Chipotle also moved aggressively in early November to tackle the issue, immediately implementing an enhanced food safety program and closing 43 Northwest locations -- even though the number of restaurants drawing scrutiny was much smaller. At the same time, this was hardly surprising given Chipotle's longstanding "Food With Integrity" mantra. Putting aside the fact it's impossible for any restaurant operator to completely eliminate the risk of such scares from recurring, this prompt action should serve to build rapport and rebuild consumers' perception of Chipotle as a chain at which they can feel good about dining.
That doesn't mean Chipotle will be immune to the fallout of this incident over the short term. However, for opportunist investors willing to take advantage of this pullback as Chipotle marches toward its goal of nearly doubling its number of U.S. locations to 3,000, the long-term potential of holding Chipotle stock is absolutely mouthwatering.
There aren't a lot of healthcare stocks trading near their 52-week lows right now that are worth a deeper dive by investors. However, Raptor Pharmaceutical looks like one of the few exceptions.
Raptor's shares have had a rough year, stemming from the midstage failure of the company's pediatric nonalcoholic steatohepatitis (NASH) candidate, RP103, in September. The market took RP103's failure rather hard, sending Raptor's shares down by more than 45% year to date:
Despite this clinical setback, Raptor still has the nephropathic cystinosis treatment Procysbi to drive growth going forward. Wall Street thinks that Procysbi's sales can grow by 37% this year and another 27% next year, driven, in part, by the drug's recent label expansion to include patients ages 2 to 6 years old. While Procysbi won't turn Raptor into a cash flow positive operation anytime soon, it's expected to cut the company's net loss per share by a healthy 16% in 2016.
Raptor is presently trading at a mere four times its projected 2016 revenue, and about 2.5 times its cash position at the end of the third quarter. That's remarkably cheap for a drug manufacturer, implying that the stock's hefty downturn is probably overdone at this point.
The steelmaking industry around the world is struggling from a major excess of capacity, and it's not clear when supply and demand will reach balance. And while that may seem like a terrible time to invest in this cyclical industry, it could be an ideal time -- if you can find the right company to buy. To me, Nucor is definitely worth a hard look:
Nucor isn't exactly near its 52-week low, reached back in September, but shares are down 25% during the past 12 months. At the same time, Nucor's business has held up incredibly well in an increasingly difficult environment.
Steel prices have fallen steadily for more than a year as global overcapacity has flooded the market with product, and a lot of that product has entered the U.S., with much of the imports being illegally subsidized by the countries where they were made. And while tariffs are in place, they have been slow to counteract this so far.
However, Nucor has held up relatively well. Sales have fallen 15% in the past year, but profits are only down about 11% over that period, as the steelmaker does an excellent job keeping its costs low, as well as making timely acquisitions to strengthen itself even in the midst of a challenging market.
As you can see in the chart above, the company's price-to-earnings ratio has fallen by 20% during the past year, and the stock now trades at a trailing P/E of around 20, which is a relatively good value for this high-quality business.
Here's what matters the most: U.S. economic conditions are relatively good, and eventually, the import issue will be put to rest. Oil and gas customers are suffering, but automakers and commercial construction is strong. In other words, this downturn is less about economic weakness and more about the import issue.
Nucor will weather that just fine, and is positioned for big profits on the other side. In the meantime, the 3.6% dividend will help bridge the gap.