1 stock near its 52-week low to consider buying now

This stock has multi-bagged before and could do so again. But is it one to buy now, or one to watch like a hawk for a good entry point?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young female business analyst looking at a graph chart while working from home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Considering stocks and aiming to buy when they’re near 52-week lows can be dangerous. But it can also be a way of finding companies with a cheap valuation.

The danger arises because of trends. Studies have shown that trending stocks tend to continue trending more often than they handbrake-turn and change direction.

And a stock near its 52-week lows suggests it has suffered a downtrend that may still be in progress.

Should you invest £1,000 in Severfield Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Severfield Plc made the list?

See the 6 stocks

Fundamental reasons for price falls

I’m not inclined to put much faith in share-price charts. But falling stocks often plunge for a reason. And often that reason is a decline in earnings, cashflows and operational momentum.

Nevertheless, the whole ethos of value investing often has investors sifting through the dustbin of fallen stocks to find the rough diamonds. But, as mentioned, searching for the precious stones among the slag takes some skill and can be a frustrating experience.

And operational problems in the business tend to come with the territory. So we aren’t likely to find companies trading well in the short term – that’s more a characteristic of stocks trading near 52-week highs.

Meanwhile, my recent sift through the 52-week-low screen has thrown up a company I think is worth further and deeper research.

It’s the housebuilding firm Persimmon (LSE: PSN). And investors probably don’t need me to tell them about the challenges faced by the wider property sector right now.

With the cost of mortgage borrowing rising, many are waiting for the possibility of a house price crash. And Persimmon’s share price reflects investors’ anxieties as well as weakness in the business.

Created with Highcharts 11.4.3Persimmon Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

In April, the company reported a disappointing set of first-quarter figures it said were due to “challenging” trading conditions. However, the directors said trading was beginning to show some signs of encouragement since the end of the quarter. 

A strong balance sheet

Nevertheless, I’d describe the outlook comments as hopeful rather than optimistic.

Meanwhile, City analysts expect the crash in earnings to stabilise in 2024. And the best time to buy a cyclical stock like Persimmon is when the share price and earnings are near the bottom of their cycle. And that might be now. Or perhaps it’s not, and the stock has further to fall.

Either way, I reckon it’s a good time to pile in with thorough and deeper research. Because a well-timed entry into the stock may serve investors well over the coming years.

Indeed, investors who bought Persimmon near its lows in 2008 saw multi-bagging returns over the following decade. And a similar outcome may happen again, although that’s not certain or guaranteed.

But Persimmon has a strong balance sheet, flush with a sizeable net cash position. And I see the business as being well-placed to ride out the downturn in the housing market.

It may not prove to be the best time to buy the stock right now. But it’s certainly a good time to watch it closely with the aim of buying it at some point.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

After falling 17% in a month, Tesco shares yield 4.3% with a P/E of just over 11!

Tesco shares have been among the most solid on the FTSE 100. But after being caught up in market turbulence,…

Read more »

Investing Articles

1 beaten-down FTSE 100 share I just bought again — and again!

The FTSE 100's had a rocky few weeks. Our writer has been repeatedly adding to his shareholding in one well-known…

Read more »

Investing Articles

At what point would the Rolls-Royce share price become a bargain buy?

The Rolls-Royce share price was in pennies just a few years ago and has since grown enormously. Is it at…

Read more »

Investing Articles

A £10,000 investment in IAG shares a year ago’s now worth…

IAG shares have risen sharply in price during the last 12 months. But can the FTSE 100 airline company continue…

Read more »

Investing Articles

How much passive income could a £20k Stocks and Shares ISA earn?

Christopher Ruane digs into some of the key variables that help determine how much passive income a Stocks and Shares…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

1 S&P 500 stock to consider buying in a recession

The S&P 500 might be most associated with growth stocks focused on technology. But it also has some businesses that…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

I own the FTSE 350’s highest-yielding dividend share. So why am I concerned?

Our writer draws on his own personal experience to highlight why high-yielding dividend shares should sometimes be treated with caution.

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Here’s the FTSE 100 stock UK investors have been buying and selling this week

In an unusually volatile week for share prices, one FTSE 100 company's been receiving more attention than most – both…

Read more »