The S&P 500 index is a prestigious club comprising 500 of essentially the most outstanding American firms. An organization that joins the S&P 500 only does so after careful consideration by a committee that goals to make sure the index includes only the cream of the crop.
But even stocks within the S&P 500 aren’t proof against adversity. Some S&P 500 firms are struggling at the same time as the index sits near all-time highs. A few of these stocks are down from their former highs by as much as 43%.
As an alternative of chasing what’s hot, consider why these three struggling stocks made the S&P 500 in the primary place. Their current struggles don’t change the very fact they’re wonderful buy-and-hold candidates price considering in your portfolio today.
1. A powerful play on artificial intelligence
Super Micro Computer (NASDAQ: SMCI) is one in all the index’s newest members; it was added to the S&P 500 just a couple of months ago. The corporate began in electronic components within the early Nineties, but its primary business today is constructing modular server systems for data centers. Corporations without the know-how or desire to custom-build data centers can turn to Super Micro Computer for turnkey systems.
Demand for artificial intelligence (AI) has corporations heavily investing in data centers, which helped speed up Super Micro Computer’s revenue growth to 200% 12 months over 12 months in its most up-to-date quarters. The stock has been a winner, surging over 200% over the past 12 months. Nevertheless, shares have cooled and are actually down 31% over potential concerns about how sustainable this growth is.
While triple-digit growth won’t last endlessly, the long run stays shiny. Experts anticipate sustained investments in data centers over the approaching years, which should steadily boost Supermicro’s business.
Super Micro Computer has noted it’s taking market share, which underlines its strong fame in the sector. Analysts consider the corporate’s earnings will grow by over 50% annually for the following three to 5 years. That makes the stock a possible bargain today at a forward price-to-earnings ratio of just 34.
2. A legendary consumer staples name getting back on its feet
Most consumers are aware of Clorox (NYSE: CLX) and its various household products from brands like Clorox, Pine-Sol, Brita, Glad, Burt’s Bees, and more. Consumers gravitate toward these products on account of name recognition, and folks routinely buy them. That makes Clorox a durable business that performs well in good and bad times.
Clorox’s stock has been uncharacteristically volatile; shares are down over 40% from their highs, its steepest drop for the reason that early 2000s.
So, what happened? First, the stock did thoroughly in the course of the pandemic on account of increased demand for disinfectant products. Shares surged to over 40 times earnings, a really steep price for a consumer staples stock.
Then, hackers breached Clorox last summer, disrupting the corporate’s operations. The attack hit Clorox’s supply chain, hurting the corporate’s ability to process and fulfill orders. The breach was the catalyst that began the stock’s reversion to a more reasonable price.
Clorox is getting back on its feet. Analysts anticipate revenue growth starting next 12 months and earnings growth of 10% annually for the following three to 5 years. While a P/E ratio of 40 was nonsensical, today’s forward P/E of 23 makes the stock a possible buying opportunity for long-term investors.
3. A pacesetter in renewable energy
NextEra Energy (NYSE: NEE) is the world’s largest producer of renewable energy and America’s largest electric utility business. The corporate has benefited from broad growth of renewable energy in America over the past several a long time. Renewable energy remains to be just over 20% of all electric power generated in the US, leaving lots of room to grow over the upcoming a long time. The corporate can also be a well known dividend growth stock; management has raised the dividend for 30 consecutive years.
Energy and utility businesses require lots of investment to construct recent capability and maintain infrastructure, so NextEra relies heavily on borrowing money. Rising rates of interest make borrowing costlier, which is a headwind for NextEra’s business and has cooled sentiment on the stock. Shares have fallen over 20% from their high, though they’ve already rebounded from as much as 40% down.
Shares are still inexpensive at just over 20 times earnings, notably below its average P/E of 28 over the past decade. Investors can expect continued demand for renewable energy to fuel regular growth for NextEra, which has helped the stock outperform the S&P 500 for a long time. NextEra is a superb company that’s trading at a solid price today.
Must you invest $1,000 in Super Micro Computer without delay?
Before you purchase stock in Super Micro Computer, consider this:
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Justin Pope has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends NextEra Energy. The Motley Idiot has a disclosure policy.
3 Magnificent S&P 500 Dividend Stocks Down 25% to 43% to Buy and Hold Without end was originally published by The Motley Idiot