With the market remaining underwater for the year, you may be looking for bargain stocks to buy. Purchasing the shares of such names now, ahead of macroeconomic improvements, could provide investors with big gains when a bull market arises.
In particular, purchasing stocks that were hit hardest by the downturn can result in outsized returns. Take, for example, a stock that falls from a high of $100 to $25. For investors who buy it at $25, a partial rebounds to $50 per share would mean a 100% gain. If it climbs back to $75, they would triple their money.
These five stocks to buy can eventually deliver huge comebacks. But investors should tread carefully with them, as external and company-related factors may send them to new lows before they start meaningfully recovering.
Upstart Holdings (UPST)
On paper,Upstart Holdings(NASDAQ:UPST) looks like a very good comeback stock to buy. Trading for less than a tenth of its all-time high, a partial rebound could mean big gains for those who buy UPST stock. Upstart operates a cloud-based artificial intelligence (or AI) lending platform.
But there’s a good reason why this growth stock now trades for just 22 times analysts’ average 2023 earnings estimate. Specifically, its AI-based platform hasyet to be tested during a recession.
A severe recession could damage the reputation of its platform as a worthy alternative to traditional loan underwriting methods. Worse, asInvestorPlacecolumnist Faizan Farooque argued in July, a downturn could cause the loans thatit has placed on its balance sheet to generate big losses for Upstart. While UPST stock is a possible moonshot, it could just as easily be a “falling knife.”
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