After the 15% decline since September, there are plenty of ways to look for stocks that have gotten too cheap. One is by looking for beaten-down names that will generate lots of free-cash flow, which is often a better measure of a company’s business than earnings.
There are 10 companies in the S&P 500 that are down at least 40% in 2018 through Thursday and are trading at less than 11 times free-cash flow estimates for next year, according to FactSet data. That is a significant discount to the market’s average valuation.
The diverse list includes fashion retailer L Brands, flooring company Mohawk Industries , consumer health company Perrigo , chip maker Western Digital , food makers Conagra Brands CAG -0.98% and Kraft Heinz, and biotechnology company Celgene .
These stocks are all down for good reasons beyond the market selloff and probably won’t rebound quickly. Celgene fell sharply after the Food and Drug Administration refused to review a new drug application. Perrigo has changed CEOs twice this year and recently disclosed a potentially crippling surprise tax bill.
...The problems these companies face are real. Still, investors should remember that a pleasant back story forms the basis for stocks to sell at high prices. Bad news can be an investor’s friend when paired with a long time horizon.
https://www.wsj.com/articles/what-to-buy-after-the-stock-market-selloff-11545994800
Submitted December 28, 2018 at 09:27AM by Wolf_Of_1337_Street http://bit.ly/2Q7VoWt
