Several ASX stocks hit a 52-week low during today's market meltdown. But some of these laggards may represent a good buy for 2021.
I know it's hard to think about buying stocks after seeing the S&P/ASX 200 Index (Index:^AXJO) tank so dramatically.
The tumble on the ASX is part of a global equity sell-off that's triggered by resurging COVID‐19 cases in the US and parts of Europe. There're also worries about next week's US presidential election.
Image source: Getty Images
Why you should buy the dip
Investors are indiscriminately selling stocks as they rush for the exits. This is an opportunity for investors as the factors are temporary and not structural.
You will likely be kicking yourself for not buying during the sell-off when you look back at this period in mid-2021.
There are three ASX stocks that are either at or near their lowest point in a year, if not longer, that I think are value buys.
Don't miss this boat on this ASX laggard
The first is the Austal Limited (ASX: ASB) share price, which sunk 3.6% to $2.70 today.
Investors are abandoning ship after the shipbuilder issued FY21 revenue guidance of $1.8 billion. This is a little softer than what the market was expecting.
The stock was already taking on water leading up to the guidance update. Some were concerned that if Joe Biden won the White House, the Democrat president would cut military spending like most Democrats do.
But with the Austal share price trading at less than 12 times FY21 earnings per share, Citigroup believes too much bad news is in the share price.
I can't help but to agree. I don't think any US president can cut back on military spending when China is flexing its military might.
Talk about killing two birds with one stone – building warships is also a great way to stimulate an economy.
Citi is recommending the stock as a "buy" with a 12-month price target of $4.30 a share.
It's yield, not growth, that's key to TLS share price
Another stock scraping a more than one-year low is the Telstra Corporation Ltd (ASX: TLS) share price.
Australia's largest telco lost a quarter of its value this year to close at $2.70 on Thursday. Fears of a margin squeeze from the latest NBN wholesale pricing plans and lack of growth in mobiles despite 5G are some of the reasons I believe are weighing on the stock.
But just like Austal, I think too much bad news is being priced in. Even if Telstra had to cut its dividend by 12.5% to 14 cents a share, the stock is still yielding 7.4% if franking is included.
Given that the Reserve Bank of Australia looks set to drop interest rates to just 0.1% next week, I think the Telstra share price is looking attractive.
Ready to harvest
Finally, the sagging Nufarm Limited (ASX: NUF) share price is also looking enticing after its 42% fall from grace since January 2020.
The seeds and crop protection group has been hit by a string of disappointments. These includes the class action linking the active ingredient in weed killers to cancer, devastating droughts and slower than expected sales of its new omega-3 enriched seeds.
But I believe these headwinds are transitionary. The drought is no longer an issue, although I recognise the risk from El Nina, which could cause damaging floods.
I also believe that sales of its new seeds will start to accelerate in 2021 and that the stock is looking cheap. With the stock this depressed, I don't think Nufarm needs a big step change in earnings to rally significantly from here.
