The market is full of hidden gems, stocks with values waiting to be recognized. A skill that an investor should focus on is how to look for deeply undervalued stocks with great fundamentals, the combination of which could result in what everyone who invests aims to achieve, which is to make money.
There are some stocks that have been battered throughout these past months primarily because of the current interest rates, which makes bonds more attractive alongside market sentiment being unfavorable to the stock market as a whole.
This is where analysis comes in, to figure out whether the decline of these stocks is warranted or not.
Property turning a corner
Property-related stocks, which are most affected by the high interest rate environment, have been heavily sold off since interest rates started rising two years ago, and we believe that this makes them all the more attractive given the higher potential upside when the rate cut cycle begins.
A larger allocation of capital towards companies focused on the premium segment would be ideal, as not only do they remain resilient amidst high interest rates, but they are expected to outperform even more when the Bangko Sentral ng Pilipinas starts easing.
Watch the Bee
Another sector wherein we see several stocks hovering near their 52-week lows is the consumer sector, which again would be a beneficiary on the pick-up in consumer demand in the near future.
This is supported by the International Monetary Fund’s forecast for Philippine growth to reach 6 percent in 2024, coupled with inflation dropping to 3.4 percent for the year.
A stock that has caught our eye is one that is continuing to expand its international reach, aiming to reach a 50-50 revenue split by 2028. The company is already a household name in the Philippines and has recently acquired a coffee company in South Korea.
Avoid losers
On the other side of the spectrum are stocks that, frankly speaking, deserve to be trading near their 52-week lows.
These are companies that have consistently underperformed their peers in terms of key metrics such as inventory turnover, asset quality, or return on equity. Others have outsized exposure to foreign exchange (i.e., a lot of dollar-denominated debt, but little dollar-denominated revenues) or to volatile commodity prices.
Despite the massive price decline of these stocks, we don’t foresee their downtrends to reverse for as long as the company does not address the issues that have caused them to underperform. As such, a buy would not be warranted and could just result in the investor’s capital being stuck as the continued decline in price would just lead to mounting paper losses.
To sum it all up, the importance of knowing which stocks not to buy is just as important as knowing which stocks to buy. Investors should not just buy blindly. A study of fundamentals to know why a stock is rising or dropping is an important concept that will help investors make the right choices that could hopefully bloom into, again, what we aim to achieve in the market, the skill to make money.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
