Targeting sleeper stocks to buy might just be the strategy investors need in the current landscape. With numerous tech-centric stocks soaring to unprecedented heights, it’s thrilling to watch their trajectory. Yet, there’s an inescapable truth: they come with a hefty price tag.
In contrast, sleeper stocks provide a more gratifying journey. While there’s a certain allure to jumping on the latest popular trend, the thrill of discovering undervalued, overlooked stocks and seeing them flourish before the mainstream hops on is unmatched.
Additionally, these under-the-radar picks potentially offer a buffer against significant downturns. Unlike the high-flyers that have peaked and face the imminent risk of tumbling, sleeper stocks have the potential to climb. And even if they don’t? Their dormant status could mean they’re already hovering around their floor. So, if you’re seeking the best stocks to buy now, perhaps it’s time to shift focus from the glaringly obvious to the subtly promising. Let’s explore some compelling but neglected players in the market.
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Based in Providence, Rhode Island, Textron (NYSE:TXT) is an industrial conglomerate that leverages its network of aircraft, defense, industrial, and finance businesses to provide customers with innovative products and services. In particular, its aviation unit manufactures and sells business jets, turboprops, and piston aircraft. As well, it offers military trainers and defense aircraft, an obviously relevant idea.
Since the start of the year, TXT gained about 11% of its equity value. That’s not remarkable but it’s a solid enterprise. Better yet, it can still provide some growth at a fundamentally cheap price, making TXT one of the sleeper stocks to buy.
According to investment data aggregator Gurufocus, Textron shares trade with forward earnings multiple of 13.71x. In contrast, the sector median value comes in at 17.92x. As well, the company enjoys consistent profitability. Analysts appreciate TXT, pegging it a consensus strong buy. Their average price target is $86.88, implying almost 12% upside potential.
Everest (EG)
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A global reinsurance and insurance company, Everest (NYSE:EG) is one of the top entities in the underlying sector, providing property and casualty reinsurance to its clients. Additionally, Everest also offers a range of insurance products, including property, casualty, accident and health insurance. It operates globally, featuring businesses in the U.S., Europe, Asia, and other regions.
Fundamentally, EG represents one of the sleeper stocks to buy because of its stability. Not only does it enjoy a longstanding presence, Everest also benefits from a sort of captive audience. No matter what happens in the economy, both individual and business clients require financial protection. That’s especially the case in the post-pandemic environment where circumstances have gotten quite squirrely.
Financially, Everest enjoys a strong three-year revenue growth rate of 15.2%, above 84% of its peers. EG also trades at 6.57x forward earnings, lower than almost 80% of the competition. Most significantly, EG is one of the best stocks to buy now for its unanimous strong buy rating. With a $439.38 price target, analysts expect 12% upside.
Sleeper Stocks: ITT (ITT)
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Based in Stamford, Connecticut, ITT (NYSE:ITT) is a diversified global manufacturing company that produces a wide range of industrial products and services. Specifically, it designs and manufactures highly engineered critical components and customized technology solutions for the energy, transportation, and industrial markets. Since the start of the year, ITT gained 16% of its equity value.
However, it’s one of the sleeper stocks because, in the past five sessions, shares slipped 5%. With the rotation out of risk-on assets, some questions hang over broader economic stability. As a result, ITT may have lost some market value due to jittery nerves.
Still, it may be a chance to pick up one of the best stocks to buy now for stability. Sure, the company might not be a growth machine. However, it’s consistently profitable. That’s thanks to a robust net margin of 13.47%, above 83.35% of the sector. Lastly, analysts peg ITT stock as a consensus strong buy with a $110.43 forecast, implying just over 16% upside.
Synaptics (SYNA)
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Headquartered in San Jose, California, Synaptics (NASDAQ:SYNA) focuses on the development of human interface solutions. Since its founding in 1986, the company has been at the forefront of myriad innovations related to touch, display, and biometric products. Perhaps best recognized for its touchpad, the invention now represents a common interface device in laptop computers.
However, SYNA just isn’t getting much love right now. Since the beginning of this year, shares have fallen more than 11%. Over the past one-year period, SYNA gave up nearly 19% of its equity value. Still, the red ink might make Synaptics one of the sleeper stocks to buy.
Beyond its innovation, Synaptics is – outside of a few hiccups – generally profitable on an annual basis. Shares also trade at 11.18X free cash flow (FCF), lower than the sector median of 22.97x. Finally, analysts rate SYNA as a moderate buy. Their average price target comes in at $97.50, implying nearly 19% growth potential.
Sleeper Stocks: Power Integrations (POWI)
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Also based in San Jose, Power Integrations (NASDAQ:POWI) is a leading company in the field of high-performance, high-reliability semiconductor technologies used primarily in power conversion. Mainly, the company is known for its innovative solutions to help improve energy efficiencies in various electronic products. Since the January opener, POWI gained a bit over 7%.
To be sure, that’s not the most impressive performance. However, the slow jog through the Street makes POWI one of the sleeper stocks to buy. As the world embraces sustainability initiatives, more businesses may turn to Power for its energy-efficiency solutions.
On a financial note, Power features a three-year revenue growth rate of 16.5%, beating out nearly 62% of its semiconductor peers. Additionally, the company has enjoyed consistent profitability over the past decade. It also benefits from a zero-debt balance sheet. In closing, analysts rate POWI a moderate buy with a $92.40 price target, implying over 20% upside.
Rambus (RMBS)
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Hailing from Sunnyvale, California, Rambus (NASDAQ:RMBS) is a technology solutions firm. Historically, it has garnered attention for its innovations in memory architecture and platform security. Over the past few years, Rambus has begun expanding its business model beyond licensing its intellectual property (IP) to embedded security solutions. Since the start of the year, RMBS racked up more than 51% of its equity value.
On paper, that doesn’t make RMBS look like one of the sleeper stocks to buy. However, given its ongoing research and development and commitment to new technologies, Rambus enjoys significant relevancy. Also, the company benefits from certain robust financial metrics.
Perhaps most notably, Rambus prints a cash-to-debt ratio of 10.64x, beating out 71.35% of its peers. Also, it’s a highly efficient business, commanding a Piotroski F-Score of 8 out of 9. As well, its three-year revenue growth rate clocks in at 26.5%, outpacing 80% of the competition. Notably, analysts peg RMBS as a unanimous strong buy with a $71 price target, implying 34% upside potential.
Halozyme (HALO)
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Based in San Diego, California, Halozyme (NASDAQ:HALO) is a biotechnology firm focused on developing and commercializing novel oncology therapies. Specifically, it features a unique platform based on its patented enzyme, human hyaluronidase PH20.
This enzyme temporarily degrades hyaluronan, a natural sugar chain that exists in the extracellular matrix of tissues. Later, this degradation can enhance the absorption and dispersion of injected drugs and fluids. While incredibly promising, the issue with sleeper stocks in the biotech space is that many of them never wake up. Since the January opener, HALO slipped about 28%.
However, some potential exists for speculators. In the trailing year, HALO gained 3%. And while it could use some help in the balance sheet, it enjoys strong revenue and net margins. Even better, it’s undervalued at 9.83x forward earnings. On a final note, analysts peg HALO as a strong buy. Their forecast stands at $56.57, implying nearly 42% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
