In this article, we will take a look at the 12 best beaten down stocks to buy now. If you want to see more stocks in this selection, go to the 5 Best Beaten Down Stocks to Buy Now.
The US equity market has been very volatile since the start of 2022. The three leading indices of the US stock markets are deep in the red year-to-date (YTD). The Dow Jones Industrial Average (DJIA), the S&P 500 Index, and the tech-heavy NASDAQ Composite Index have lost 6%, 16%, and 28% of their values since the start of 2022. This will be the first yearly decline for the leading market indices since 2018 and the biggest in terms of percentage since the financial crisis of 2008. However, the overall sentiment is expected to see a turnaround as the Consumer Price Index (CPI) data reflected the increase in prices was lower than expected for November 2022. The CPI increased by only ten basis points (bps) on a month-over-month (MoM) basis and by 7.1% YoY. Meanwhile, the analysts’ forecasts stood at 0.3% and 7.3%, respectively.
The US Federal Reserve has increased interest rates on seven occasions in 2022. At the latest meeting of the policymakers on December 14, the benchmark interest rate was increased by 50 bps to 4.25% – 4.5%. The Federal Reserve also revealed that it intends to increase the benchmark interest rate by 0.75% next year to surpass the level of 5%. This means that any possibility of an interest rate cut should not be expected till 2024. In such circumstances, numerous companies with solid growth prospects, such as Tesla, Inc. (NASDAQ:TSLA), Lyft, Inc. (NASDAQ:LYFT), and Warner Bros. Discovery, Inc. (NASDAQ:WBD), have seen their stock prices dip. The macroeconomic challenges provide investors an attractive opportunity to go long on some of the best beaten-down stocks now.
Photo by Ruben Sukatendel on Unsplash Our Methodology
The stocks shortlisted have lost significant value in the equity market due to macroeconomic uncertainty. The list includes small to large-cap companies belonging to various sectors. These companies are considered to have strong business models that would help them bounce back once the market gains momentum. We have also taken a look at the growth catalysts offered by each of these companies and the analysts’ ratings. The stocks have been ranked according to the level of hedge fund ownership as of Q3 2022.
Number of Hedge Fund Holders: 6
YTD Stock Price Performance: -74%
Zhihu Inc. (NYSE:ZH) is a Beijing, China-based online platform where queries are posted, replied to, amended, and organized by the members of the group. The platform, founded in 2010, has the distinction of being one of the five biggest online content communities and the biggest online community based on the question-and-answer (Q&A) model.
In a research note issued on December 14, Leo You at CLSA initiated coverage on Zhihu Inc. (NYSE:ZH) stock with an Outperform rating and target price of $1.50. The analyst highlighted that the company is in a strong position due to its industry leadership position in the Q&A content community. The platform has a user base of 100 million young Chinese people, well-educated and eager to share ideas. The analyst sees Zhihu Inc. (NYSE:ZH) as offering high growth prospects with the potential for greater monetization in the near future.
Citadel Investment Group raised its stake in Zhihu Inc. (NYSE:ZH) by over 1000% during the third quarter of the year.
Number of Hedge Fund Holders: 9
YTD Stock Price Performance: -55%
Rent the Runway, Inc. (NASDAQ:RENT) is a Brooklyn, New York-based e-commerce platform founded in 2009 that allows users the ability to rent, subscribe or buy apparel and accessories put together by leading designers.
In a research note issued to investors on December 8, Ross Sandler at Barclays assigned Rent the Runway, Inc. (NASDAQ:RENT) stock an Overweight rating. The analyst highlighted that Rent the Runway, Inc. (NASDAQ:RENT) reported revenue and adjusted EBITDA that were $4 million and $5 million higher than the consensus forecast, respectively. Furthermore, the management presented a positive picture of the company’s growth prospects at the earnings call. Rent the Runway, Inc. (NASDAQ:RENT) is making significant efforts to lower its costs and develop a self-funding business structure. This has also raised the confidence of the investment community regarding the entity’s expansion plans.
As of Q3 2022, Rent the Runway, Inc. (NASDAQ:RENT) was held by 9 hedge funds.
Number of Hedge Fund Holders: 10
YTD Stock Price Performance: -75%
Sorrento Therapeutics, Inc. (NASDAQ:SRNE) is a San Diego, California-based clinical stage and commercial biotech company founded in 1989. The company has a diverse pipeline that intends to improve the lives of people suffering from cancer, COVID-19, and intractable pain.
On November 2, Brandon Folkes at Cantor Fitzgerald commenced coverage on Sorrento Therapeutics, Inc. (NASDAQ:SRNE) stock with a target price of $5 and an Overweight rating. The analyst believes that the company can develop best-in-class therapeutics in the field of infectious disease, pain, and oncology. The analyst recognized that the width of the product pipeline has resulted in a valuation discount for the company. On December 6, Sorrento Therapeutics, Inc. (NASDAQ:SRNE) received a go-ahead from the US Food and Drug Administration (FDA) to commence clinical trials for its mRNA COVID-19 vaccine candidate against the Omicron variant.
As of Q3 2022, Sorrento Therapeutics, Inc. (NASDAQ:SRNE) was held by 10 hedge funds.
Number of Hedge Fund Holders: 11
YTD Stock Price Performance: -81%
Riot Blockchain, Inc. (NASDAQ:RIOT) is a Colorado-based Bitcoin mining company that is aggressively growing its mining operations in the US.
Mike Grondahl at Northland assigned Riot Blockchain, Inc. (NASDAQ:RIOT) stock a target price of $10, along with an Outperform rating on December 15. The analyst made this determination after the company organized a call to share the details of its current operations and the way forward into next year. Grondahl believes that Riot Blockchain, Inc. (NASDAQ:RIOT) is in a stellar position to experience growth that can be fueled by the strong cash in hand and Bitcoin reserves. The company is already considered one of the biggest vertically integrated Bitcoin miners globally. Experts believe that Riot Blockchain, Inc.’s (NASDAQ:RIOT) market share could grow to more than 4% by the end of 2023.
Number of Hedge Fund Holders: 24
YTD Stock Price Performance: -80%
Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is a Boston, Massachusetts-based biotech company. The firm leverages the power of genetic engineering in the form of strain improvement and enzyme discovery to develop new bacteria or improve the ones in existence for a wide variety of industrial applications.
Gaurav Goparaju at Berenberg initiated coverage on Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) with a $6 target price and a Buy rating. In an update issued on November 28, the analyst highlighted that the company is leveraging its platform to scale the application of synthetic biology across a wide variety of end markets. The analyst distinguished Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) as the only horizontal platform in the segment. Goparaju concluded that the company is in a stellar position to disrupt cell programming across numerous industries.
Of the 920 hedge funds in Insider Monkey’s database, Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) was held by 24 hedge funds as of Q3 2022.
Number of Hedge Fund Holders: 28
YTD Stock Price Performance: -84%
Coinbase Global, Inc. (NASDAQ:COIN) is a developer and operator of one of the leading cryptocurrency exchange platforms globally. The company, founded in 2012, allows the buying and selling of cryptocurrencies along with other leading digital currencies as well.
Experts believe that Coinbase Global, Inc. (NASDAQ:COIN) can survive and benefit from the downturn in the cryptocurrency universe in the long term. The industry has been recently shocked by the surprising downfall of FTX and its founder Sam Bankman-Fried. This is expected to dent the confidence of investors in cryptocurrencies. However, once the downturn overturns, Coinbase Global, Inc. (NASDAQ:COIN) is expected to emerge as one of the biggest beneficiaries due to its strong cash position and its focus on streamlining its operations.
Here’s what Hayden Capital said about Coinbase Global, Inc. (NASDAQ:COIN) in its Q2 2022 investor letter:
“Coinbase (NASDAQ:COIN): The crypto ecosystem moves extremely quickly, and there’s been many new developments since we first invested in Coinbase, a year ago. Most notably, crypto market cap has declined from a peak of ~$3 Trillion last fall, to ~$1.1 Trillion today (a -63% decline, and -72% peak-to-trough; LINK). Crypto is a volatile asset class, and has experienced many draw-downs of similar magnitude in the past. For example, Bitcoin was down -93% during 2011, -85% from 2013-15, and -84% from 2017-18. In this context, the latest draw-down is a pretty normal outcome for this emerging asset class.
A large reason for this volatility, is simply because there aren’t any major “real-world use cases” for the asset just yet. In our letter outlining the investment last year, we wrote that crypto is still “in the middle of ‘crossing the chasm’ into mainstream adoption & use cases, which will result in millions of mainstream users needing to transact crypto in some form”…” (Click here to see the full text)
Number of Hedge Fund Holders: 30
YTD Stock Price Performance: -62%
Rivian Automotive, Inc. (NASDAQ:RIVN) is an Irvine, California-based manufacturer of electric vehicles (EVs). The company founded in 2009 is one of our two picks from the EV sector that have been heavily beaten down and should be bought at the current levels.
George Gianarikas at Canaccord reiterated a Buy rating on Rivian Automotive, Inc. (NASDAQ:RIVN) with a target price of $55. The analyst shared that the company has enough cash on hand to fund its operations till 2025. Furthermore, it was revealed that Rivian Automotive, Inc. (NASDAQ:RIVN) has decided to hold its plan of manufacturing EVs in Europe following a partnership with Mercedes-Benz. Gianarikas highlighted this development as a positive, as the company is focused on capital preservation during an economic downturn. Rivian Automotive, Inc. (NASDAQ:RIVN) is expected to experience production downtime in Q1 2023 because of the company’s execution of the internal motor platform.
Here’s what Meridian Funds said about Rivian Automotive, Inc. (NASDAQ:RIVN) in its Q3 2022 investor letter:
“Rivian Automotive, Inc. (NASDAQ:RIVN) manufactures electric vehicles (EVs) for the consumer and commercial markets. We initially invested in the company when it was privately owned. Among the many things that differentiate this startup is its substantial cash balance and relationship with Amazon, which is both an investor in the company and the first customer for Rivian’s commercial van. Several positive developments contributed to share strength in the quarter, including the company’s announcement that production of its R1 pickup trucks and EV delivery vans increased nearly 70% over the previous quarter. Management also reaffirmed its production target of 25,000 vehicles for 2022. Despite raising the price of its R1 truck earlier this year, Rivian continued to see strong demand for its vehicles, demonstrated by 98,000 pre-orders for its R1 truck and SUV. Although we are pleased with the company’s progress, we liquidated our position as Rivian approached the high end of our market cap threshold and its relative valuation became less attractive.”
In addition to Rivian Automotive, Inc. (NASDAQ:RIVN), companies like Tesla, Inc. (NASDAQ:TSLA), Lyft, Inc. (NASDAQ:LYFT), and Warner Bros. Discovery, Inc. (NASDAQ:WBD) are also some of the best beaten down stocks to buy now.
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Disclosure. None. 12 Best Beaten Down Stocks to Buy Now is originally published on Insider Monkey.
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