The 2020 lockdown created a turbulent economy and even more volatile stock markets, which means there are plenty of opportunities for those who know where to look.
Stocks that are absurdly cheap now will not be that way forever, but where should you invest to find golden opportunities?
Not every company will survive to the end of the year. In fact, dozens of companies have already filed for bankruptcy protections in the first half of the year. From J Crew to JC Penney, the long list of Chapter 7 and Chapter 11 bankruptcies has been shocking. This market it not for the faint of heart.
If you do have the courage to take the plunge, you’ll want to find value, so we put together this list of ridiculously cheap stocks that you can pick up for a song.
Tapestry (TPR) Earnings Hit Means Upside Aplenty
Luxury brands got hit hard by global retail shut downs, and Tapestry was no exception.
The company, which owns brands like Coach and Kate Spade, experienced a huge hit in earnings and share values as its stores were shuttered.
It made some hard cost cutting decisions, including job cuts, that made many investors start to shy away from the company. The pandemic’s effects only amplified what was already an underperforming stock heading into it.
Tapestry’s shares lost over half their value during the global coronavirus pandemic.
While other sectors found ways to recover quickly, retail is still struggling, and Tapestry has been experiencing a lot of highs and lows, though none anywhere close to its January 2020 opening.
In fact, its value has steadily declined year-over-year since 2017. This may sound like a lot of bad news, but it also means the company has room for plenty of upside if it can find the right strategy for a successful 2020 holiday season.
Hanesbrands (HBI) Pivoted To Produce Face Masks
Clothing sales took a hit across the board in 2020, and Hanesbrands – whose brands include Hanes, Champion, and Playtex – felt it.
Even basics like socks and bras were slowing, so the company pivoted into something more useful. It started making face masks and protective personal equipment (PPE) for medical usage, producing over 320 million cloth face masks and over 20 million medical gowns for the United States government alone.
That lucrative government contract is expected to generate $300 million in revenue for 2020, and it’s improving its financial position every day.
This includes reducing costs and inventory, along with seeking new business opportunities to improve its revenue stability as consumers continue to change buying habits.
If the company can successfully pivot its revenue models in the aftermath of COVID-19, it could create huge returns for its investors.
Alcoa (AA) Suffered From The Tariff War
Alcoa is one of the largest producers of aluminum in the world, and it got hit hard by the global lockdowns.
In fact, it was already feeling the squeeze from Trump’s trade war with China when an aluminum smelting plant near Ferndale was closed, leaving 700 workers without jobs.
Trump imposed a 10% tariff on foreign aluminum and 25% on steel. The closed site had been active since 1966, and local citizens were devastated by the loss.
From March through May 2020, Alcoa’s stock price has been far below 50% of its 2019 valuations, and that was already 33% of its 2018 high. This value is the lowest the company experienced since the 1970s.
Overall, the company was hit harder by the crisis than the general market. Should the U.S.-China trade war heat up, Alcoa can quickly find itself feeling the burn. However, investors will experience huge gains if the market heads upward.
Foot Locker (FL) + Nike Offers Cushion Room
Like other retailers, Foot Locker took a nosedive from the global lockdowns, but its strong partnerships with brands like Nike look to make recovery easier.
By the end of 2019, the brand was trading for over $60, and it quickly dropped below $30 as the coronavirus ravaged municipalities around the world.
This was caused by the decreased consumer demand, fewer stores open, and supply chain shutdowns that are making it harder to source the raw supplies necessary to make shoes. It’s also feeling pressure from competitors, like Dick’s Sporting Goods and Finish Line.
But that doesn’t mean the company is taking it laying down. Nike’s increased marketing drive is likely to drive customers to stores, and Foot Locker’s partnership with the brand will surely help it siphon a portion of those revenues.
However, its unclear whether this holiday season will be enough to keep stores like Foot Locker in business. Still, Czech billionaire Daniel Kretinsky bought a 6% stake in the company, inspiring some confidence.
Macy’s (M) May Be A Bargain After Stock Plummet
Macy’s faced eye-watering $1.1 billion in losses during the first quarter of 2020 as the clothing retailer was deemed “non-essential” by the government.
Total retail spending plunged a record-setting 16.4% in April, and Macy’s CEO Jeff Gennette outlined a leaner business strategy to get through the rest of the year.
This includes eyeing bankrupt stores like Neiman Marcus, Stage Stores, and J.C. Penney for buyout to increase its brick-and-mortar foothold.
Stores won’t be the same though – dressing rooms, makeup counters, and other sampling procedures are among the traditional retailer processes that were erased with social distancing.
Of course, the stock was already losing value long before the coronavirus pandemic. In 2016, it was worth over $60 per share, and it headed into 2020 below $20 before dropping into single digits during the pandemic.
This gives the stock plenty of room to grow as it drives revenues through its stores. The company’s digital performance held it above water, and the way the team reacts will guide its recovery.
These five stocks aren’t guaranteed to perform. They’re simply investments that are trading at much lower values than they used to. It’s a sign of the times, and we know it’s possible to return to those pre-lockdown numbers. Invest at your own risk.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.