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3 beaten-down stocks Credit Suisse says are buying opportunities

Out-of-favour industries can yield bargain buys for stock hunters looking for a turnaround in fortunes and possibly a better dividend yield to make it worth their time.

If the general consensus of an industry is that it’s terrible, miserable and should not be touched, then it’s time to go hunting.

You’re probably not going to find many shining and fresh stocks. It will actually be like the bargain bin of bruised fruit and dented cans at the supermarket. Everything is marked down 10%, 20%, 30%.

Financial services company Credit Suisse analysts have recently said that some retail stocks are buying opportunities now.

Weaker consumer sentiment, a harsh Federal budget and unseasonably warm weather have thrown retailers off-kilter and sent their stocks spinning down. Low interest rates should be pushing customers to the stores, but this EOFY season may see heavier discounts and lower margins. Specifically, Credit Suisse singled out three companies as buying opportunities.

1)   Premier Investments Limited (ASX: PMV)

The clothing retailer has strong brand names like Just Jeans, Portmans, Jay Jays, as well as the highly successful Smiggle stationery shop that is now expanding into the UK. The stock fell from about $10 down to $8 and has slightly rebounded to around $8.50. That “mark down” has made its dividend yield 4.6% fully franked.  Earnings are forecast to go up, so lock in the cheaper price and higher yield now.

2)   OrotonGroup Limited (ASX: ORL)

The handbag and accessory specialty retailer also deals in strong brands such as Brooks Brothers and Gap. Business is expected to rebound within several years with a good number of new branded stores created here and in Asia.  The $163 million company could even be a possible takeover target if it turns around well.  The dividend yield is a huge 8.0% fully franked. The stock fell from about $7 to $4 over the past year.

3)   Specialty Fashion Group Ltd (ASX: SFH)

The operator of clothing brands such as Millers, Katie’s and Crossroads has been relatively subdued in share price over the past year, around 80 cents to $1. It’s at $0.88 now and offers a nice 4.6% yield fully franked. Management is strong and experienced. It recently acquired the distressed Rivers brand and all of its stores for a very low price, so that could be a turnaround story to boost the company.

A better stock pick than these

Of these three, I would prefer Premier Investments. Its growth potential here and in the UK is strong and management is very talented. However, there's one more winning stock every investor should know about.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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