About the only good part of a market crash is the fact that during such a crash, it gets much easier to find stocks trading for bargain prices. Still, it’s tough to root for market crashes, because when the rest of your portfolio is plummeting in value, it can be hard to come up with cash and to make rational buy decisions.
Fortunately, bargain prices aren’t only available during market crashes. Occasionally, there are times when otherwise solid companies find their stocks on sale. Yes, you will likely be looking at companies whose shares look like they’ve been damaged for one reason or another, but that’s often what it takes to find values in today’s market.
So with that in mind, don’t wait for a market crash. These two top stocks look like they could very well be on sale.
A behind-the-scenes giant quietly changing the world
Unless you work in a corporate facilities job, you may not realize all that goes into making an office building work. There are things like climate control, security, fire detection and suppression systems, automated lighting, and other occupancy-triggered controls, all of which just have to work. Johnson Controls (JCI -0.61%) can handle all this and more, making it a key behind-the-scenes player in many major buildings around the world.
Thanks to downbeat guidance when it announced earnings in August, Johnson Controls’ shares are down fairly steeply year to date. Still, for investors with a longer-term focus, the company’s operations remain strong. Analysts expect it to be able to increase its earnings by more than 15% per year over the next five years.
With the company trading just above 13 times it anticipated forward earnings, that combination puts it squarely in the position of being attractively prices for its prospects. Add a solid yield around 2.8%, and investors get a decent income while they wait for the company’s shares to recover.
In terms of drivers for that potential stock recovery, Johnson Controls is playing a big role in enabling energy efficiency. For instance, it just earned a grant to boost its U.S. manufacturing capacity for heat pumps, a key technology for using less energy to heat homes and offices. That sort of technology will be needed to retrofit existing buildings, not just in new construction, and it will help support Johnson Controls’ expected earnings.
A world-class pharmaceuticals titan going through a short-term rough patch
Pharmaceuticals titan Bristol Myers Squibb (BMY 0.69%) has faced some research-related setbacks recently. For instance, it recently found out that the Food and Drug Administration would not be able to give a timely decision on its request to extend the use of Abecma to help with more cases of multiple myeloma.
That delay, along with a halted trial of a competitor’s blood-thinning product (Bristol Myers Squibb has a similar product in development), certainly look like bad news for Bristol Myers Squibb. After all, research-oriented pharmaceuticals companies need to bring new compounds to market in order to continue to drive profit and growth. Their patents only last 20 years — and about half that time is spent in research and testing. Once their patents expire, generics can copy them, eroding their profitability.
Still, a setback is not necessarily a crisis, especially for a company as large as Bristol Myers Squibb. It has over 45 compounds in various states of research, covering over 40 different disease areas. That broad-based research allows the company to face setbacks like these and still have a solid chance of thriving over time.
Thanks in parts to those setbacks, investors can buy Bristol Myers Squibb’s shares for less than 7 times the company’s expected forward earnings. Even with virtually no earnings growth projected beyond that for the next five years, that looks like a decent value price for the business. Add its decently covered 4.6% yield, and it looks like patient investors could get paid a solid income while they wait to see if some good pipeline news could spark a stock recovery.
Bad news can be good if you’re willing to buy ultimately solid companies
Both Johnson Controls and Bristol Myers Squibb have had their stock prices cut by bad news affecting their businesses. For investors able to look past the short-term issues, that bad news may very well provide a great chance to buy solid business at value prices.
If they look interesting to you, though, don’t delay. Just as easily as bad news can knock their shares down to these apparently bargain prices, good news can boost them back up. So if you think they may be decent fits for your portfolio, be sure to take action while their prices still look cheap.