Tired of high-flying stocks not giving you a chance to buy? Many stocks have risen, and some market experts even say it's too late to get in on the action as prices might come crashing down any day now. If the high flyers are not viable, perhaps it's time to look at companies investors have not considered. If you’re anything like me, you might already be considering contrarian investing.
What is contrarian investing?
Contrarian investing is an approach focusing on securities the market doesn’t like. The strategy takes the “buy when others are selling, and sell while others are buying” adage to heart. Falling prices don’t always mean that the company is doing poorly. Sometimes, price drops result from investor overreactions, pricing in events that analysts have already considered, and making them sell their positions lower than the fair market value. This presents a great opportunity for contrarian investors to swoop in, buy them at a discount, and sell them high when prices return to normal. However, they expose themselves to huge risks as they are essentially going against market sentiments.
In this article, we’ll look at 3 quality dividend companies that have been oversold and currently trade near their 52-week lows.
Kimberly-Clark Corporation (KMB)
Kimberly-Clark Corporation is a paper-based consumer products manufacturer specializing in personal care goods. KMB’s products are made from natural or synthetic fibers with high absorbency, capitalizing on their advanced fiber technology to provide high-quality offerings. The company operates in three main segments:
- Personal Care
- Consumer Tissue
- K-C Professional
These segments include popular products like Huggies, Kotex, Kleenex, WypAll, and KleenGuard.
Kimberly-Clark has been one of the biggest names in the industry and has been loved by many income investors. This is due to the company’s 52 years of continuous dividend increases, making it a part of the elite Dividend Kings. KMB currently offers a dividend yield of 3.69%.
What’s the plan?
KMB broke down on its $130.00 support level while dancing on its 14-day RSI's oversold line. Today, it appears the stock price is trying to find a support level and is potentially heading down to test its previous strong support at $122.00. Investors can keep tabs and wait until the price touches down around $122.00 or reclaim the $130.00 and potentially reject the downward trajectory.
NextEra Energy (NEE)
NextEra Energy, Inc. is an energy company operating through its wholly-owned subsidiaries in U.S. and Canada. This includes:
- NextEra Energy Transmission, LLC (collectively, NEER)
- NextEra Energy Resources, LLC
- Florida Power & Light Company (FPL)
NextEra operates in two primary segments: FPL, which is a regulated electric utility that supplies electricity to Florida’s East, Northwest, and Lower West Coasts, and NEER, which builds and operates electric generation facilities for the company’s wholesale of energy in the U.S. and Canadian markets.
The company offers a dividend yield of 2.71% and has continuously increased its dividend payments for the last 30 years, making it a part of the exclusive Dividend Aristocrats list. Analysts also love it, giving it a “Strong Buy” recommendation.
Should you buy now?
NEE is now hovering between its 2022 and current-year low, while moving barely above its oversold territory. Low prices and potentially oversold conditions can provide investors with opportunities in the short term for an excellent entry with high potential returns.
Albemarle Corp (ALB)
Albemarle Corporation is a specialty chemicals company specializing in converting resources into critical ingredients of its products intended for mobility, energy, connectivity, and health. The company operates in three main segments:
- Ketjen
- Energy Storage
- Specialties
These segments cater to specific aspects of their business. Ketjen focuses on increasing the efficiency of natural resources output for usable products. The Energy Storage business caters to the EV market by providing its users with efficient use of renewable energy with grid storage. The Specialties segment works on fire prevention, emission reduction, and fuel efficiency products.
While ALB’s 0.85% yield is not much for dividend investors to get excited over, it is still a part of the Dividend Aristocrats list thanks to its 30 years of consecutive dividend increases. And with 13 out of 18 analysts recommending the company as a “Strong Buy,” I think it’s a company worth watching.
ALB is oversold now. What next?
ALB is now trading in oversold conditions while approaching its year low. This might allow investors to pick up Albermarle at a discount before it returns to its short-term resistance around the $242.00 area.
Final Thoughts
Going against the crowd is not for everyone. However, it can be gratifying once you master the concepts behind the contrarian approach. Investors and traders must remember this strategy is not for the faint of heart. Due diligence and high levels of risk management are always required when considering these stocks to ensure the wins outweigh the losses.
