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2 Great Stocks to Buy Near 52-Week Lows

If you’re looking for stocks that have fallen out of favor on Wall Street, consider Stanley Black & Decker and Nucor today.

Wall Street is a fickle place where investors often punish stocks harshly for seemingly small transgressions. That’s why some people take a contrarian stance and actively try to find investment opportunities that other investors have rejected. A good place to look for such ideas is stocks that have fallen near 52-week lows. Stanley Black & Decker (SWK 2.76%) And Nucor (NEW 2.07%) are worth a closer look right now.

Stanley Black & Decker brings the ship back on course

Stanley Black & Decker’s share price is within striking distance of its 52-week low. But the story goes back much further than a single year. It begins in 2021, when the tool maker posted record results thanks to a surge in demand caused by the coronavirus pandemic. Essentially, people stuck at home decided to spruce up their homes. The company’s adjusted earnings for the year came in at $10.48 per share.

SWK diagram

SWK data from YCharts

And then things went terribly wrong for the industrial icon: In the next two years, profits fell due to falling demand and rising inflation. Adjusted earnings in 2023 were just $1.45 per share. But Stanley Black & Decker did not bury its head in the sand. In fact, as soon as the company noticed a problem, it started working on a recovery plan.

Efforts have included selling non-core assets, reducing debt, streamlining operations, and rationalizing product offerings, among others. Executives expect a significant turnaround in earnings in 2024, with adjusted earnings expected to rise to $3.50 to $4.50 per share. The company’s first-quarter 2024 adjusted earnings were $0.56 per share, so it’s on track to get there. But the more important number is probably the 590 basis point improvement in gross margin over the first quarter of 2023. This improvement in profitability shows that management’s turnaround efforts are taking hold.

So Stanley Black & Decker seems to be doing quite well to get back on its feet. The problem is that consumer demand is not picking up as quickly as hoped, so Wall Street fears the turnaround is stalling. But if you can stomach a little uncertainty, you can own a dividend king with a historically high dividend yield of 4%. That’s hardly something to complain about.

Nucor’s business is volatile, but it’s still a great company

Nucor’s stock isn’t quite as close to its 52-week low as Stanley Black & Decker’s, but the big story is that the steelmaker’s shares have fallen dramatically by about 20% from their 52-week high in April, putting them much closer to their lows than their highs, which makes sense.

The steel sector is driven by commodities, and prices haven’t been particularly strong lately. First-quarter 2024 earnings were $3.46 per share, up from $4.45 a year ago. And the company recently forecast second-quarter earnings to be between $2.20 and $2.30 per share, suggesting things are getting worse rather than better.

Diagram NUE

NUE data from YCharts

But that’s the way it goes in the commodity-driven steel sector. Investors need to focus on the long term, and in that regard, Nucor has been a big winner. Not only is the company one of North America’s largest and most diversified steelmakers, but it’s built on modern electric steel mills. These can be ramped up and down with demand relatively easily, bolstering profitability over the cycle. And Nucor is increasingly using its own steel to supply its higher-margin specialty products businesses that make things like structural components. Not just a steelmaker, Nucor continues to evolve its portfolio, becoming more diverse every year. Lately, the company has been working to increase its ability to supply the fast-growing data center niche with the steel it needs to build new data centers quickly.

If you like owning the biggest and best companies in the industries you invest in, then Nucor is the name to own in the steel sector. And sharp sell-offs are usually buying opportunities for this company. Plus, like Stanley Black & Decker, Nucor is a dividend king. That speaks volumes about the company’s reliable approach to business given the highly cyclical nature of the steel sector.

A giant in need of renovation and a misunderstood giant

To be fair, Stanley Black & Decker is a stock that takes some getting used to. Only more aggressive investors are likely to want to buy it, but with a turnaround that seems largely to be going according to plan, it looks attractive again given its historically high yield and low price for nearly 52 weeks. Nucor is an industry leader, with investors getting in and out of it based on the ups and downs of the steel sector. It’s currently down, but long-term investors should pay more attention to the underlying growth that’s being created. In fact, despite the recent earnings decline, Nucor’s business model helps it continue to excel.

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