Two shares currently experiencing over 60% price drop, potential buying opportunities.
Two shares currently experiencing over 60% price drop, potential buying opportunities.
Despite the S&P 500 experiencing a nearly 20% growth this year, certain stocks have underperformed significantly and are far from their peak values. High-interest rates have been the primary impediment for numerous companies, with investors fearing this challenge could persist for an extended period.
However, fear often clouds judgment and may lead to missed chances. Companies that leverage robust growth triggers can weather the storm and potentially rebound shortly as markets begin to recognize their worth.
Two such undervalued stocks appearing to hold promising investment prospects are NextEra Energy Partners (NEP) and Cognex (CGNX). Following recent slumps, these stocks are now over 60% below their all-time highs, creating a promising opportunity for investors. Let's delve into why these two stocks might be worth considering.
NextEra Energy Partners sets sights on 6% annual dividend growth
Neha Chamaria (NextEra Energy Partners)
NextEra Energy Partners shares have witnessed a staggering 74% decline from their all-time highs, with the majority of losses occurring in 2023. This renewable energy stock has seen its value decrease by 69% this year alone.
NextEra Energy Partners has gained popularity among income investors due to its dividend reliability and growth potential. However, its recent decision to lower its dividend growth forecast from 12%-15% annually to 5%-8% through 2026, with a goal of 6%, left investors surprised. Higher interest rates made it expensive for NextEra Energy Partners to maintain its previous growth targets, leading the company to revise its strategy.
But it seems the worst may be behind the company. NextEra Energy expects a 6% growth rate to be sustainable, comparable to its peers, and beneficial for unit holders in the long term. Additionally, NextEra Energy Partners does not plan to issue shares to raise additional funds until 2027 as it executes its transition plan.
NextEra Energy Partners is taking measures to enhance its cash flows. It will boost the efficiency of its existing wind assets and sell its natural gas pipelines. The company has already set its sights on repowering some wind assets through 2026 and has secured a deal with oil and gas infrastructure company Kinder Morgan to sell its Texas natural gas portfolio for $1.8 billion early in 2024.
NextEra Energy Partners boasts a comprehensive renewables portfolio and backing from NextEra Energy. With a transition plan already set in motion, the stock, now boasting a yield of 14.5%, looks like a promising long-term investment opportunity.
Cognex will revive its growth; the only question is when
Lee Samaha (Cognex)
The stock for machine-vision company Cognex has dropped 22% this year and is now 61% below its all-time high. According to Lee Samaha, the recent share price decline simply reflects investors' short-term pessimism rather than judging the stock's long-term growth prospects.
Cognex's main markets are consumer electronics (with Apple being a significant customer), logistics (regarding e-commerce warehousing), and automaking (using machine vision in manufacturing). Unfortunately, all these markets have faced challenges in 2023. High-interest rates have impacted consumer spending on electronics, e-commerce warehousing has seen a slowdown after experiencing rapid growth due to the pandemic, and automakers are also reducing production plans.
However, a positive turn in inflation may spur interest rates to drop, driving investors to reassess their expectations for companies like Cognex. The company's growth could rapidly pick up once investors reinstate their forecasts based on enhanced customer spending plans.
If patience is exercised and the near-term potential challenges are weathered, Cognex is a highly appealing long-term investment opportunity.
Despite the challenges faced by certain stocks due to high-interest rates, investors might find promising opportunities in undervalued stocks such as NextEra Energy Partners (NEP) and Cognex (CGNX). NextEra Energy Partners, a renewable energy stock, has experienced a significant decline, with its shares currently 74% below their all-time highs. However, the company aims to sustain a 6% annual dividend growth, providing a potential long-term investment opportunity for income investors.
Similarly, Cognex, a machine-vision company, has seen its stock plummet due to challenges in its main markets. However, with a positive turn in inflation potentially leading to reduced interest rates, investors might reevaluate their expectations for companies like Cognex, making it a potentially attractive long-term investment opportunity.