Buying fundamentally strong stocks at every major dip is a solid strategy to create long-term wealth and generate outsized gains consistently. You can use technical indicators, such as the death cross signal to identify beaten-down stocks. In the simplest terms, the “death cross” is an indicator where the 50-day moving average of a stock crosses below its 200-day daily moving average, which suggests that the stock might be oversold.
Historical trends indicate that death-cross signals can present a viable opportunity for investors to buy stocks at a discount, despite the volatility surrounding the equity markets. Here are three beaten-down stocks from the Dow Jones Industrial Average ($DOWI) that fit the bill this October.
Is Nike Stock a Good Buy?
Down 44% from all-time highs, Nike (NKE) is valued at a market cap of $146.55 billion. Nike is among the most recognizable brands in the world, and reported adjusted earnings of $0.94 per share in fiscal Q1 of 2024, compared to estimates of $0.75 per share.
Analysts tracking Nike stock expect adjusted earnings per share to increase by 14.6% annually in the next five years. Due to the ongoing pullback, NKE is priced at 25.6x forward earnings - which is not too steep, given its widening profit margins.
Greater China remains a major revenue driver for Nike, as sales in this region surged by 12% year over year in the August quarter. This growth was offset by rather tepid sales in North America, as revenue was down 1% compared to the year-ago period. Overall, sales were up 2% in Q1, and are forecast to increase by almost 4% in fiscal 2024.
Out of the 26 analysts tracking Nike stock, 15 recommend “strong buy,” three recommend “moderate buy,” seven recommend “hold,” and one recommends “strong sell.” The average target price for NKE stock is $124.35, which is 28% higher than current prices.
Is Honeywell International Stock a Buy, Sell, or Hold?
Shares of Honeywell International (HON) are down 18% from all-time highs, valuing the company at a market cap of $119.5 billion.
A diversified technology and manufacturing giant, Honeywell has four primary business segments that include aerospace, performance materials & technologies, safety & productivity solutions, and Honeywell building technologies.
Honeywell aims to increase sales between 4% and 7% annually over the long term, while maintaining gross margins of 40% and free cash flow margin of over 13%, which should support dividend hikes. Despite a higher cost base, Honeywell is forecast to increase adjusted earnings by 8% annually in the next five years.
Honeywell pays shareholders an annual dividend of $4.12 per share, indicating a yield of 2.29%. These payouts have risen by 9% annually in the last two decades, which is exceptional.
Priced at 19.6x forward earnings, HON trades at a discount of 15% to consensus price target estimates. Out of the 15 analysts tracking Honeywell stock, nine recommend “strong buy,” five recommend “hold,” and one recommends “strong sell.”
What is the Target Price for Merck Stock?
The final Dow Jones stock on my list is Merck (MRK), which is down about 12% from record levels.
A healthcare heavyweight, Merck reported sales of $15 billion in Q2, an increase of 3% year over year. The key revenue driver for Merck was its cancer drug Keytruda, which brought in $6.3 billion in sales, up 19% year over year. The company expects sales for Keytruda to surge to over $30 billion in 2028 from $20 billion in 2022.
Two years back, Merck acquired Acceleron Pharma for $11.5 billion, providing it with access to sotatercept, which was effective in clinical trials for pulmonary arterial hypertension (PAH). The drug is currently under review, and might unlock another billion-dollar revenue stream for the company.
Merck pays shareholders an annual dividend of $2.92 per share, indicating a yield of 2.82%. In the last decade, these payouts have risen by 66%.
Priced at 12.3x 2024 earnings, Merck is quite cheap, and trades at a discount of 16.9% to consensus price target estimates.
Out of the 17 analysts tracking MRK, 13 recommend “strong buy,” and four recommend “hold.”
