Five battered stocks could be poised for comebacks

LIKE Brittny Griner, the U.S. basketball star who was imprisoned in Russia last year, stocks are sometimes punished out of proportion to whatever they did wrong.

Such stocks are good candidates for a comeback, and that’s the idea behind my quarterly Casualty List. It contains stocks that have been smacked down in the latest quarter and that I believe will rise again.

In the first quarter this year, energy stocks were battered, as the price of a barrel of oil — which had been over $100 last summer — slid from $84 to $73. My best guess is that oil will spend most of the next five years at $80 a barrel or more, so I’m sweet on oil stocks.

For my latest Casualty List (the 80th), I will lead off with Patterson-uti Energy Inc., a drilling company whose stock fell 30 percent in the first quarter. With seven losses in the past 15 years, Patterson is not as high-quality as the stocks I customarily recommend. But I think it’s a good bet now.

Patterson-uti earned only 70 cents a share in 2022. But analysts look for $1.72 a share this year and more than $2 a share in 2024 and 2025. If they’re right, the stock — at $11.70 on March 31 — is selling for less than seven times this year’s earnings.

Archer-daniels

Far more consistently profitable is Archer-daniels Midland Co. (ADM), a food-processing and commodities-trading giant that has made money in each of the past 30 years.

A company is considered a “dividend aristocrat” if it has increased its dividend each year for 25 years or more. Archer Daniels qualifies and then some, with 50 straight years of dividend increases.

In the latest quarter, Archer Daniels stock fell 14 percent. Analysts think the company’s blockbuster earnings of $7.71 a share in 2022 won’t be repeated in the next three years; they expect earnings to settle in the $6 to $7 zone.

CF Industries

CF Industries Holdings Inc. (CF), out of Deerfield, Illinois, is one of the larger fertilizer producers in the U.S. Fertilizer prices rise and fall with the price of natural gas, an important input. CF was down 14 percent in the first quarter. But the company has shown a profit in 14 of the past 15 years, and the stock looks quite cheap at five times earnings.

Westrock

With consumers headed back into stores, shares of Westrock Co. (WRK), which makes corrugated packaging, have fallen. Investors figure the days when everyone bought everything online are over.

But I still think there’s a long-term trend for people to do a lot of their shopping online, so I like Westrock, which fell 13 percent in the first quarter, and sells for 10 times earnings.

First Republic

As a speculation, I recommend First Republic Bank (FRC), raked for an 88 percent loss in the first quarter. Investors see it as particularly vulnerable to a bank run because it has a lot of large deposits not fully covered by federal deposit insurance.

I’m prejudiced in this bank’s favor, having personally banked there for more than a decade.

I think regulators will gently prod another bank to take it over. My hope is that the takeover price will be north of the stock’s current price, which was $13.99 at the end of March.

Last year

My Casualty List from a year ago posted a 0.2 percent gain while the S&P 500, including dividends, declined 8.8 percent. Lennar Corp. (LEN) and LKQ Corp. (LKQ) did well, rising 30 percent and 27 percent, respectively.

Quest Diagnostics Inc. posted a moderate gain, while Western Digital Corp. and Stanley Black & Decker Inc. were big losers, down 24 percent and 41 percent.