Share prices are usually much more volatile than the performance of the underlying business. It’s quite commonplace for shares in even large and mature companies to swing by 20% in either direction during the course of a year.
For this reason, buying shares in good companies when they’re temporarily depressed can be a profitable strategy – hence the popularity of screening for stocks at 52-week lows.
Against the backdrop of this year’s market volatility, I recently dusted off my 52-week low screen to search for potential bargains. In this article I’m going to look at three stocks we’ve rarely – or never – covered in the DSMR.
52-week lows: one sector dominates
I first created this screen in 2023. It uses some simple rules to find potentially businesses that might be interesting and are trading within 10% of their 52-week low share price:
The obvious caveat to any stock screen that highlights companies with falling share prices is that some of them will be falling for a good reason!
For this reason, I’ve used the StockRanks as an initial sanity check, stripping out any companies with a StockRank below 60.
At the time of writing, this screen produces 63 results, although its focus on momentum and price movements means that results change regularly.
>> My 52-week screen is here.
In this article, I’m going to concentrate on companies with a StockRank of at least 80. By focusing on stocks with strong factor scores, I hope to tilt the odds in my favour and narrow down the options to a more manageable selection.
This requirement produces the following list of 21 stocks, which I’ve ordered by StockRank:
Consumer slowdown?
There’s a fairly broad mix of businesses in this list. But one sector dominates, perhaps unsurprisingly:
Investors are concerned that the current macroeconomic backdrop will lead to weaker trading as the year progresses. Just this week in the DSMR, I’ve covered earnings downgrades from Jet2, Warpaint London and Taylor Wimpey, for example.
Not all companies in this sector are suffering though. Indeed, a number of the companies on the list above have recently issued positive or in line trading updates:
