A Shift in Market Dynamics
As the bull market unfurled its powers since November 2022, growth stocks have held the scepter of leadership high above the realm of investment. Yet, as the market sprawls, sectors tied to value, like financials and utilities, have begun to stir. Could this portend a seismic shift in market dynamics, where value stocks reclaim the throne, making way for undervalued gems to sparkle?
It was no secret that growth stocks commanded the spotlight for over a year, with the technology, media, and telecommunications sector orchestrating a grand earnings crescendo. But as the curtains part on 2024, whispers abound of an earnings renaissance stirring in other sectors of the market.
Financial, consumer discretionary, and healthcare sectors are anticipated to usher in a robust earnings resurgence over the next three quarters. This favorable wind of change could propel these bargain stocks, trading at less than 12 times forward earnings, into the limelight once more.
Bristol-Myers Squibb: A Prescription for Value
Enter Bristol-Myers Squibb (NYSE:BMY), a titan in the pharmaceutical realm and a contender for one of the choicest bargain stocks in the market’s treasure trove. At a mere 6 times forward earnings and boasting a 15% trailing free cash flow yield, BMY stock glistens with untapped potential.
Concerns arose over Bristol-Myers’ waning fortune as its cash cow Revlimid faced the slings and arrows of generic competition in key markets. The toll was evident as Revlimid’s revenue plummeted by 39% from $9.9 billion in 2022 to $6 billion in 2023. Yet, hope flickers in the company’s depth, with a rich late-stage pipeline and a shrewd strategy to navigate the storm.
Having fortified its arsenal through strategic acquisitions, including Mirati Therapeutics, Karuna Therapeutics, and RayzeBio, Bristol-Myers Squibb charts a course to reignite its revenue engines. While the shadows of patent expirations loom, Bristol’s diversified oncology pipeline belies a story of resilience and growth.
Citigroup: A Financial Phoenix Rising
Amidst the echoes of recession fears that reverberated in 2023, Citigroup (NYSE:C) emerged from the ashes, a phoenix of the financial realm poised for resurgence. CEO Jane Fraser’s orchestration of a radical reorganization breathed new life into the bank, streamlining operations, and trimming excess fat.
Analysts like Mike Mayo of Wells Fargo herald Citigroup as a beacon of undervaluation, foreseeing a twofold increase in earnings over the next three years. With a conservative price-to-earnings ratio of 11, Citigroup lurks in the shadows, awaiting its turn under the market’s spotlight.
BorgWarner: Gearing Up for Growth
BorgWarner (NYSE:BWA) stands as the unsung hero of the automotive realm, a stalwart supplier of cutting-edge air management systems and drivetrain technologies to the behemoths of the industry. Its symbiotic relationship with global automakers positions it as a key benefactor of the impending shift towards electric vehicles and stringent emission standards.
As the world pivots towards cleaner automotive solutions, BorgWarner’s portfolio of EV technologies, combined with a forward P/E of 9 and a trailing EV/EBITDA ratio of 6, positions it as a darling among bargain hunters. The company’s resilience and foresight into the electric vehicle future make it a compelling consideration for investors seeking value in a sea of overpriced assets.