The S&P 500 index suffered a significant decline last October; from its 52-week high of 2939.86 on October 3, it dropped 11.44% to as low as 2603.54 on October 29. However, it has recuperated 6.82% since then to close on November 9 at 2781.01. Nevertheless, 70 companies among the S&P 500 index components have seen their stocks dropping more than 30% from their 52-week highs.
Some of these declines can be justified by deteriorating performance of these companies. However, some of the share price drops have been exaggerated and have been a result of companies temporarily becoming out of favor with investors without a real reason for such a decline. Among these companies, we can find some big bargains with a good chance of a significant price appreciation when the market recovers.
The table below presents the 30 companies among the S&P 500 index components that have shown the highest decline from their 52-week high, their market cap, their sector and the drop from their 52-week high to November 9 close price.
Source: Portfolio123
The highest number of companies have been from the Consumer Discretionary and the Information Technology sectors, with six companies from each one; four stocks have been from the Industrials and the Health Care sectors, three companies from the Financials and the Energy sectors, two stocks from the Communication Services sector, and one company from the Materials and Consumer Staples sectors.
Applied Materials
Shares of Applied Materials (AMAT), the worldwide largest manufacturer of semiconductor equipment, have fallen 45.1% from their 52-week high of $62.40 on March 12. In my opinion, this drop is entirely exaggerated. AMAT’s fundamentals are excellent, and its valuation metrics are extremely low. In fact, its shares are traded now at a trailing twelve months price to earnings ratio of as low as 7.95, forward price to earnings ratio of 8.38, and its price to earnings to growth ratio (PEG) is very low at 0.59.
