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3 battered S&P 500 stocks poised to rebound | Personal finance

(James Brumley)

The last few weeks have not been good for the market. the S&P500 (SNP INDEX: ^GSPC) is currently more than 8% below the January high and looks capable of sinking further. For some constituents of the S&P 500, of course, the recent setbacks are even more significant.

However, as veteran long-term investors can attest, these declines are ultimately buying opportunities. The key is finding the courage to do it, even though you know we may or may not have seen the final bottom put together. Sometimes holding out for that last discount can cost more than it saves.

To that end, here’s a closer look at three excellent but battered S&P 500 stocks poised to rebound sooner rather than later. They may not have seen their ultimate low yet, but they are too expensive to pass up here.

Image source: Getty Images.

1.Ford Motor Company

It’s not a name that needs a big introduction. While Ford Motor Company (NYSE:F) may no longer be the biggest name in the industry, it is arguably the most recognized brand in the automotive sector, selling nearly 2 million cars last year in the United States alone. Granted, that’s less than the company somehow sold in a turbulent 2020, and besides, neither Ford nor any of its internal combustion vehicle manufacturing rivals have never seemed to have pulled back from the top of the industry’s “automotive peak” sales. in 2016. Thanks to Ford stock’s 38% drop from January’s high, shares of the automaker are now where they were then.

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The thing is, the buyers who took Ford shares from their early 2020 lows to this January’s highs had the right idea, even if their interest was overzealous. Ford Motor Company is make waves as a new era of automotive manufacturing takes shape.

They are electric vehicles, of course. While it’s still early days for Ford’s EV chapter, know that its new all-electric Mustang Mach-E has replaced the You’re here Model 3 as Consumer Reports’ top pick of electric vehicles for 2022, while demand for Ford’s battery-powered F-150 Lightning pickup truck has been so strong the company has had to stop taking orders for them altogether . Given that Mordor Intelligence expects the electric vehicle market to grow at an annualized rate of more than 23% through 2027, Ford is well positioned for long term growth. The current stock price, less than eight times projected earnings per share this year, only reinforces the bullish argument.

2. MarketAxess Holdings

Although Ford is a household name, MarketAxess Holdings (NASDAQ: MKTX) is not. Chances are, however, that you or someone in your household is benefiting from its services without even knowing it.

Simply put, MarketAxess provides access to market-related information and tools, namely bonds. You don’t see his platform directly. Instead, MarketAxess provides brokerage firms with a powerful interface to access a wealth of bond market information that they can then pass on to you or an institution managing money on your behalf.

It matters more now because the bond market has exploded in recent years, which explains how MarketAxess was able to grow revenue by 17% in 2020 despite the lousy environment we were in at the time. This left no room for real sales growth in 2021, although analysts are expecting sales growth of 9% this year and then revenue growth accelerating to over 12% next year. .

Earnings are rising at a similar pace, turning the stock’s 56% drop from its late-2020 peak into a buying opportunity.

3. Citigroup

Finally, add Citigroup (NYSE:C) to your hit list S&P500 stocks ready to rebound. Shares of the megabank have fallen more than 30% since the middle of last year, hitting new 52-week lows just at the start of the month.

It’s not hard to see why investors are fleeing the holdings of big banks, including Citigroup. The world is struggling to escape the COVID-19 pandemic, and runaway inflation forcing the Federal Reserve to raise interest rates is also making borrowing money a less compelling prospect. Add to that the fact that the specter of a recession is stifling interest in capital markets and the foreseeable future does not look too hot for the banking sector.

Arguably, however, these sellers exceeded their target without realizing the benefit of the rate hike.

Yes, the interest for loans is drying up. The Mortgage Bankers Association reports that March mortgage applications fell 5% year over year, extending several weeks of growing disinterest. At the same time, payment defaults are starting to increase. Loan market researcher Black Knight notes that for the first time in months, February mortgage delinquencies rose slightly. The news sparks flashbacks to the subprime mortgage meltdown of 2008.

What isn’t fully explained, however, are the incredible circumstances seen in 2021 that make current comparisons a little misleading. Last year saw a record $1.6 trillion in mortgages, according to data from the Mortgage Bankers Association, leaving little need for new loans this year. And while defaults are about to increase, keep in mind that moratoriums on foreclosures and evictions have been in place for most of the past two years.

The thing is, everything looks and sounds relatively bad, but higher interest rates should do the bank more good than harm by making new loans more profitable than loans already made at lower rates.

The current annualized dividend of $2.02 (and a subsequent dividend yield of 4.1%) isn’t really in danger either. The company earned $10.14 per share in the prior year, giving it plenty of leeway if needed.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in the stocks mentioned. The Motley Fool owns and recommends MarketAxess Holdings and Tesla. The Motley Fool has a disclosure policy.