Buying the dip on unpopular stocks is a risky venture. There may be sound reasons why a stock isn’t getting the credit it deserves — but sometimes, a company’s dips and dives are more than justified. Luckily, I think there are good reasons for investors to like the following cheap stocks…
Simon Property Group (NYSE:SPG), JD.com (NASDAQ:JD), and Tilray (NASDAQ:TLRY), are all in this category of good-valued companies that are temporarily in trouble. Let’s look at why the shopping mall operator, the Chinese e-commerce tech company, and the cannabis grower are some of the best contrarian stocks to buy now.
1. Simon Property Group
On the surface, investing in shopping mall real estate investment trusts (REITs) seems like a fool’s venture. Even before the pandemic shutdowns, shopping malls were facing declining traffic due to the rise of e-commerce. What’s so special about Simon Property Group, especially after a 38% dive from its pre-COVID highs?
Unlike many others, the largest shopping mall operator in America has turned high vacancy rates into opportunities. Instead of leasing out space to other retailers, the company is transforming its malls into community and commercial centers. Within its former and current shopping centers, Simon Property is building multifamily residences, hotels, healthcare facilities, offices, and self-storage facilities. It is even moving forward with constructing National Hockey League (NHL) skating rinks and fulfillment warehouses for Amazon within those malls.
Strategies like this should keep up investors’ hopes for sustainable growth. In 2020, the company’s funds from operations (FFO) decreased to $9.11 a share from $12.04 in 2019. Luckily, each of its 203 properties across the country has reopened. This year, it expects its FFO to bounce back to between $9.50 and $9.75 per share. Out of that amount, the company will pay $4.20 per share in dividends, giving the stock a dividend yield of 4.44%.
The company closed $13 billion in equity and debt financing last year. In Q1 2021, it announced a $300 million stock offering and a 750-million-euro loan raise at 1.125% interest. The new capital is more than enough for Simon Property to expand its new ventures. It’s a top choice at 32 times earnings, still far below the 50 times earnings of the average REIT stock.
Shares of China’s No. 1 retailer, JD.com, have fallen nearly 30% from their all-time highs after the U.S. Securities and Exchange Commission (SEC) threatened to delist Chinese companies if they did not comply with new regulations. Companies identified by the regulatory body will need to hire U.S. auditors to review their financials and disclose Chinese Communist Party (CCP) officials on their boards of directors. The company has been using Deloitte as its auditing firm since 2019.
In part due to fears that a new audit may uncover malicious activity, or that the company could face pressure from the CCP not to comply with the new rules, JP.com’s stock is trading at a considerable bargain — just about 17 times earnings.
Last year, the e-commerce firm grew its revenue by…
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