When Robert Frost wrote his famous poem “The Road Not Taken,” he probably never thought about investing. However, one of his key points – that taking the road most people don’t often lead to great rewards – certainly applies to investing as well.
contrarian investing It is based on this principle. Buying shares of a company that many others don’t view positively can in some cases pay off handsomely. There are several contrarian bets that I think are particularly compelling right now. Here are three stocks where conventional wisdom can yield huge gains for long-term investors.
1. Occidental Petroleum Corporation
No doubt you’ve heard the prediction that fossil fuels are going the way of the dinosaurs. If this view is correct, renewable energy will replace oil and natural gas in the coming years.This would seem to make stocks like occidental petroleum corp. (NYSE:OXY) For long-term investors, this is a poor choice.
then why is Warren Buffett hands over fist to buy Occidental Petroleum stock? Did he make an unusual mistake? I do not think so. Instead, I suspect Buffett recognizes a reality that many investors don’t: Global demand for oil and natural gas is likely to decline. rise rather than declining over the next few decades.
Occidental Petroleum’s valuation doesn’t reflect optimism about the future. Its shares trade at less than 11.6 times forward earnings. By comparison, S&P 500 IndexThe forward price-to-earnings ratio is close to 20.7.
Occidental Petroleum CEO Vicki Hollub predicts that there will be a global oil shortage by the end of 2025. Hollub is leading the company’s investments in increasing oil and gas production. For example, Occidental Petroleum announced plans in December to acquire CrownRock for $12 billion to bolster its U.S. onshore portfolio.
The company is also making a big bet that could be a game changer. Occidental Petroleum continues to lead the way in developing direct air capture technology that can absorb carbon dioxide from the atmosphere. If this effort proves successful, Occidental Petroleum should be a huge winner for investors in the long run.
2. PayPal Holdings
PayPal Holdings (NASDAQ: PYPL) One view is that the advent of fintech has been left behind. apple Based on this view, payments and similar products have largely rendered PayPal irrelevant. Supporters of this theory may point to the fact that PayPal stock has plunged more than 80% from its 2021 peak as proof that they are correct.
Still, PayPal’s business looks surprisingly strong for a so-called has-been. The company’s revenue increased 9% year-over-year in the fourth quarter of 2023 to $8 billion. Adjusted earnings per share soared 19%. PayPal ended 2023 with a cash hoard of $17.3 billion, compared with $11.3 billion in debt.
The company is focused on increasing use of its Venmo debit card, which generates six times the revenue of peer-to-peer Venmo customers. The company is promoting PayPal Rewards, a program that incentivizes higher engagement and increases average revenue per account. PayPal is also beefing up its offerings for small and medium-sized businesses. These moves could pay off well in the coming years.
Meanwhile, PayPal stock is extremely cheap, with shares trading at less than 11.5 times forward earnings. Wall Street expects the company to grow at an average annual rate of nearly 20% over the next five years. This level of growth makes PayPal’s valuation look even more attractive.
There are several seemingly rock-solid reasons for investors to avoid Pfizer (NYSE:PFE)The big drugmaker’s revenue and profits are declining (along with its stock price). Fewer people are choosing to use Pfizer’s COVID-19 vaccine Comirnaty and the oral antiviral drug Paxlovid. The company also faces losing exclusivity on several of its best-selling products. The next few years.
To be sure, all of these are serious concerns for Pfizer. However, these issues should be considered in conjunction with some other, better news for the big pharma company.
Pfizer’s pipeline, for example, has been so efficient that the company expects new products and new indications for existing products to generate approximately $20 billion in additional revenue annually by 2030, more than offsetting the expected revenue impact from the drug’s loss of exclusivity Influence.
Pfizer expects new business development deals to add another $25 billion in annual revenue by 2030. The company has recently completed a number of acquisitions, notably Seagen.
2024 could also be Pfizer’s trough year for COVID-19 revenue. Management expects that in the near future, the company hopes to bring a combination coronavirus vaccine to market, which may lead to sales growth.
Pfizer’s 6% dividend yield means the stock doesn’t have to do much to earn a solid total return. However, I think as the results of the company’s new products and acquisitions start to come to fruition, more investors will realize that Pfizer’s story is better than they thought.
Should you invest $1,000 in Pfizer right now?
Before buying Pfizer stock, consider the following factors:
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Keith Speights The Motley Fool holds positions in Apple, PayPal and Pfizer. The Motley Fool holds positions in and recommends Apple, PayPal and Pfizer. The Motley Fool recommends Occidental Petroleum and recommends the following options: Short the March 2024 $67.50 call option on PayPal. Motley Fool holds disclosure policy.
Contrarian investing: 3 stocks that are bucking the trend and could deliver big gains Originally published by The Motley Fool