Will Ashworth
6 min read
In This Article:
If I were to classify my investment style, I would consider myself a contrarian, rather than a value or growth investor.
David Dreman first published Contrarian Investment Strategy: The Psychology of Stock Market Success in 1979. It was one of the first books that got me hooked on investing in the 1980s. The other two: The Intelligent Investor by Benjamin Graham and Peter Lynch’s One Up on Wall Street. These three books showed me that you could make money investing.
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“Dreman believed that investors are prone to overreaction, and, under certain well-defined circumstances, overreact predictably and systematically,” Validea’s page about Dreman states.
“They typically overvalue the popular stocks considered the ‘best’, and undervalue those considered the ‘worst’, often going to extremes in these over- and under-valuations.”
Unfortunately, because growth stocks have ruled the roost for most of the past two decades, contrarian investors haven’t fared too well. Eventually, Dreman’s philosophy will deliver the goods.
But I digress.
My commentary today focuses on three profitable companies whose stocks hit new 52-week lows on Tuesday. All of them have the potential to deliver outsized returns over the next 3-5 years for investors who are tolerant enough to stay the course.
Here’s the how and why for each.
Thermo Fisher Scientific (TMO) hit its 24th 52-week low of the past 12 months yesterday.
The maker of scientific instruments’ stock is down 31.3% over this period and is trading at its lowest level since July 2020.
Admittedly, I’m not a big follower of healthcare stocks, but it’s a well-known name in the sector, so I’m curious what’s holding it back.
Analysts like it. Of the 24 covering its stock, 20 rate it a Buy (4.54 out of 5) with a mean target price of $554.46, a level it traded at as recently as February. These same analysts expect it to earn $22.32 a share in 2025 and $24.68 in 2026. Its shares trade at 17.5x and 15.8x these estimates.
Thermo Fisher’s current enterprise value of $175.73 billion is 4.35 times its trailing 12-month (TTM) revenue. Its EV/revenue multiple hasn’t been this low since March 2017.
