The Morningstar U.S. Market Index lost 19.4% in 2022, its biggest annual loss since 2008. So if you were looking for U.S. stocks to buy heading into 2023, you would have faced a big dilemma.
On the one hand, many of the largest stocks in the country were cheaper in January than a year earlier. But on the other hand, the Morningstar index — which tracks the performance of stocks with 97% of the total market capitalization of American equities– gained 7.3% in the final quarter of the year.
And many of the names that might have been cheap at the end of September weren’t nearly as inexpensive entering 2023. That’s because, in the first six weeks of 2023, the index rose 7.1%.
So, over the last 4.5 months, the index has gained nearly 15%. With the markets rebounding, finding stocks that lost 5% in the past week won’t be very easy. The index , however, did lose 1.3% in the five days between Feb. 6 and Feb. 10. While that was the worst weekly performance of 2023, I still thought that I may have trouble finding three good stocks to buy on weakness.
However, I did manage to find three such names.
Boot Barn Holdings (BOOT)
Boot Barn Holdings (NYSE:BOOT) lost 7% last week. However, it is up nearly 33% so far in 2023.
I’m not sure why the western and workwear retailer had a bad showing last week. On Feb. 7, BTIG analyst Janine Stichter initiated coverage of Boot Barn with a “buy” rating and a $110 price target. Further, of the 14 analysts covering its stock, 12 have a “buy” rating on it, and their average price target on BOOT is $93.77.
If that’s not enough ammunition from the analysts, Yahoo Finance took a closer look at JPMorgan’s top 15 stock picks for 2023 on Feb. 10. Boot Barn was one of JPM’s 15 choices, partly due to the high number of hedge funds that owned BOOT at the end of Q3.
In January 2022, I picked Boot Barn to double in value for a second consecutive year. Then, unfortunately, a bear market hit, and all bets were off. However, I would not put it past the growing retailer to double in 2023. After all, it’s already nearly one-third of the way there.
There is no question that Boot Barn’s Q3 results fell sharply versus the same period a year earlier. Still, despite its higher costs pulling down its margins, it remains extremely profitable.
Specifically, its trailing 12-month operating margin of 14.33% was 3.6 percentage points higher than its five-year average.
eXp World Holdings (EXPI)
eXp World Holdings (NASDAQ:EXPI) lost 8.2% in the past week, but It is up 44% in 2023.
The holding company has three main businesses: eXp Realty, Virbela, and Success magazine. Although they are separate businesses, they do complement each other.
First, there’s eXp Realty, one of the world’s fastest-growing real estate agencies. It finished Q3 with more than 85,000 agents worldwide, generating $1.2 billion of revenue.
Secondly, Virbela created an “enterprise metaverse” that enables companies’ employees to collaborate remotely. The virtual platform allowed eXp Realty, which has been using Virbela since 2016. to be far more productive than a typical real estate agency. eXp liked the platform so much that it bought the company in November 2018. Virbela has grown tremendously since the acquisition.
Lastly, the holding company acquired Success, a 125-year-old magazine focused on personal development , to enhance its real estate business.
eXp’s profits were down year-over-year in Q3 due to a big increase in its general and administrative expenses. According to eXp, it spent more on those categories in an effort to increase its market share. However, as the firm’s revenue continues to climb, its cost per revenue will moderate.
Any weakness in EXPI stock should be viewed as a buying opportunity.
Yeti Holdings (YETI)
Yeti Holdings (NYSE:YETI) lost 14.3% last week. It is up 3% in 2023.
In October 2019, I wrote a piece about Yeti, a designer, retailer, and distributor of outdoor products, such as coolers and backpacks,. At the time, I had three reasons to buy YETI stock: 1) Its direct-to-consumer (DTC) business was booming, 2) Analysts liked its stock, and 3) Inventories were being held in check despite its growth.
All in all, its business was in fine shape. That’s why its stock appreciated by 232% from $32.81 when the article was published to an all-time high two years later of $108.82. After YETI stock tumbled 63% in the 16 months since October 2021, let’s consider how its business has changed on all three of these fronts.
In Q3, Yeti’s DTC business increased by 15% to $227.4 million, accounting for 52.4% of its overall revenue. In Q2, its DTC unit only generated 37% of its top line, so its business has become even more balanced. Sure, its growth has slowed, but that is to be expected as its sales get larger.
Of the 16 analysts covering YETI today, ten rate it “overweight” or an outright “buy.” The other six analysts have a “hold” rating on the shares. Their average price target is $53.27, well above the current share price
Finally, the value of its inventory increased 65% year-over-year to $439.4 million because its product mix shifted from drinkware to coolers and other equipment. Sequentially, its inventory declined by $50 million. Investors can expect its inventory to continue declining over the next few quarters.
The company’s business remains solid. As of Sept. 30, its debt was just $91 million higher than its cash, The $91 million figure equates to just 9% of its total assets and 3% of its market capitalization.
On the date of publication, Will Ashworth 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.