Not all value stocks are equal. Investors looking at these value stocks at 52-week lows may think they’re among the worst picks in today’s market. But, in the case of these three companies, their 52-week lows mark a potential pivot point.
Each has unique bullish tailwinds building behind them, whether imminent news or corporate strategic realignment, that supports a thesis that they’ll soon break free from their downward momentum.
At the same time, each is the quintessential value stock and prioritizes profitability over rapid, outsized and unsustainable growth. To that end, each offers a decent yield via dividends and buybacks to boot, meaning investors holding these value stocks at 52-week lows can reap income rewards in the meantime — and use those dividends to dollar-cost average into a larger position.
Sturm Ruger (RGR)
Gun sales typically peak in election years. Accordingly, Sturm Ruger (NYSE:RGR) is well-positioned as a small-cap value stock to capitalize on this trend despite sitting at 52-week lows today. With a modest valuation of 14x earnings and 1.5x sales, this stock is set for a strong performance in 2024.
The company’s 52-week lows come on the heels of a tough 2023 that included poor sales stats and a stagnant market as consumers cut spending. Still, sales fell throughout the year, Sturm Ruger reported a respectable $1.06 earnings per share and offered existing investors a 23-cent dividend. The company commits itself to offering investors 40% of its income quarterly as a dividend, reinforcing its value stock status.
However, historical data shows that gun sales hit record highs in 2020 during the election, surpassing the high rates observed before former President Barack Obama’s second term in 2012. Independent of political motivations, investor sentiment should remain objective. Looking ahead, Sturm Ruger is well-situated to benefit from another potentially contentious election season.
Iridium Communications (IRDM)
Growth stock investor Cathie Wood holds Iridium Communications (NASDAQ:IRDM) as part of multiple funds, yet its status as a value stock at 52-week lows remains intact. Despite falling 54% over the past year, this dip presents an ideal entry point for investors keen on adding this small-cap value stock to their portfolios.
The recent downturn primarily arose from the company’s decision to end its joint venture with Qualcomm (NASDAQ:QCOM) last November. The initial plan was to use Qualcomm’s cell-centric semiconductor expertise to develop chips that would enable standard cell phones to connect to Iridium’s low-earth satellite array. However, the dissolution of this partnership seemed to marginalize Iridium in the rapidly evolving space-based telecom market.
Nonetheless, Iridium is redoubling its efforts to integrate its satellite constellations with consumer smartphones. That strategic pivot could boost the stock’s value, positioning Iridium as a more established player in the specialized telecom sector. Instead of modifying cell phones to fit their satellite capabilities, Iridium is adapting its satellite protocols to work with existing devices. The approach will likely broaden Iridium’s total addressable market, opening further growth avenues for this value stock at 52-week lows.
Sirius XM (SIRI)
A Warren Buffett endorsement is as good as any if you’re looking for a reliable indicator of quality value stocks, even those at 52-week lows. Buffett has been actively purchasing Sirius XM (NASDAQ:SIRI), indicating imminent upside for this satellite radio stock. Despite Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) recent focus on selling rather than buying, Sirius stands out as one of the few exceptions.
Buffett sees value in Sirius XM not only for possible corporate restructuring but also as a solid value investment. Sirius XM trades at low multiples yet maintains steady and reliable sales. The company has consistently achieved over 30% EBITDA margins for the past four years and generated free cash flow of over $1 billion during this period. Moreover, Sirius XM offers an attractive 4.69% dividend yield with a 34% payout ratio, demonstrating the company’s effective cash management that balances reinvestment and growth.
Sirius XM is rapidly falling close to penny stock territory, so investors hoping for a turnaround can accumulate a fairly hefty position on the cheap at today’s prices.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.