Major stocks hit 52-week lows this week including Bank of America Corporation (BAC), Best Buy Co. Inc. (BBY) and Yahoo Inc. (YHOO) amongst others. Investors fled stocks as worries about the U.S. economy and European debt crisis strengthened. Washington's Debt Ceiling agreement took the center stage as investors demonstrated their disapproval by selling stocks and causing many pessimistic theories about the U.S. Economy to surface. It shouldn't be a surprise if Friday's job reports accelerate sell-offs further.
All three indexes closed down 4 to 5 percent on Thursday. The Dow Jones industrial average closed down 4.31 percent at 11,383.68 points. The Nasdaq Composite Index closed down 5.08 percent at 2,556.39 points. The Standard & Poor's 500 Index closed down 4.78 percent at 1,200.07 points. The last time the Dow fell over 500 points in one session was on Dec. 1, 2008 falling 679 points.
While stocks are near their 52-week lows, it may not be a bad idea to go against the crowd and buy certain good stocks at low prices. Naturally, economic and company risks should be considered first.
Bank of America Corporation is impacted by weak U.S. consumer trends and exposure to residential lending and credit. The stock will see its highs in the long-term when consumers start buying houses and banks start lending again. Bank of America continues to struggle with the costs of its mortgages, which it inherited from Countrywide. Due to its large market share in mortgages, credit cards, and consumer banking, Bank of America may eventually take off higher than the peers in the long-term, but impacted worst than the peers in the short-term.
Best Buy is impacted by a highly competitive environment for consumer electronics retailing. Best Buy faces numerous rivals (store-front and internet retailers) and a strong price competition. On the positive side, the company has a strong balance sheet and a sizable market share. Maintaining competitive pricing and an increase in online offers will help Best Buy survive the competition.
Yahoo is impacted by the rapid change in the markets from internet content to internet services. Furthermore, these markets have relatively low barriers to entry intensifying the competition. Yahoo is a well-capitalized leader in many of the Internet areas and can survive the competition with technology innovation and increases in Yahoo content across the web, in turn increasing advertisement revenues.
Other major stocks that hit their 52-week low this week include:
- Aflac, Inc. (AFL)
- Avon Products Inc. (AVP)
- Berkshire Hathaway Inc. (BRK.A)(BRK.B)
- Credit Suisse Group (CS)
- Corning Inc. (GLW)
- General Motors Company (GM)
- HCA Inc. (HCA)
- Hewlett-Packard Company (HPQ)
- Juniper Networks, Inc. (JNPR)
- Lloyds Banking Group plc (LYG)
- Marriott International, Inc. (MAR)
- Nokia Corporation (NOK)
- Northern Trust Corporation (NTRS)
- PACCAR Inc. (PCAR)
- PG & E Corp. (PCG)
- Royal Bank of Scotland Group plc (RBS)
- Research In Motion Limited (RIMM)
- Teva Pharmaceutical Industries Limited (TEVA)
- Thomson Reuters Corporation (TRI)
- Veolia Environment S.A. (VE)
- Wipro Ltd. : Down 1.04% to $11.39. (WIT)
- Waste Management, Inc. (WM)
Disclosure: I am long BBY, BAC.