Despite the recent volatility following the banking sector turmoil, the S&P has gained 6.58% year-to-date and 14.4% in the past six months. While the S&P 500 comprises some of the largest and most well-established companies in the world, I present two affordable S&P stocks, BorgWarner Inc. (BWA) and Tapestry, Inc. (TPR), which are trading under $50.
Following the wild swings of 2022, the S&P had been performing relatively well this year. However, the recent collapse of the US banking sector sent global markets into a minor panic. The sudden and mostly unforeseen banking crisis also caused high volatility in the stock market, which impacted the index’s performance.
Fortunately, concerns about the ripple effect of failing banks did not materialize as regulators and big banks worked together to stabilize the industry. As a result, as per Forbes Adviser, the stock market is expected to pick up again in April, historically one of the strongest months of the year for the S&P 500.
Moreover, the S&P 500 didn’t drop below its December low in the first quarter of 2023, a market indicator that has historically been a bullish sign for the rest of the year.
Also, the Bureau of Labor Statistics reported that consumer prices climbed 5% in March, down from 6% in February. The latest inflation reading represents the ninth-straight month of easing price growth on an annual basis and is down from a 9% high last June. On a month-over-month basis, prices increased by 0.1%, the lowest reading since last July.
According to data published by Goldman Sachs, wage growth has slowed significantly, with workers’ earnings growing at less than 5% per quarter, down from as much as 8% in 2021. The bank’s economist David Mericle said that there is less urgency for the Fed to continue aggressively hiking interest rates.
However, the fallout from the recent banking crisis is likely to push the US economy into a mild recession later this year, according to notes from the Federal Reserve’s March policy meeting.
Let’s discuss the stocks mentioned above in detail:
BorgWarner Inc. (BWA)
BWA provides solutions for combustion, hybrid, and electric vehicles worldwide. The company operates through four segments: Air Management; E-Propulsion & Drivetrain; Fuel Injection; and Aftermarket.
On March 1, BWA announced that it had completed its acquisition of Hubei Surpass Sun Electric’s Electric Vehicle Charging Solution, Smart Grid, and Smart Energy businesses. The acquisition is an important move for BWA’s electrification business in Asia and is expected to complement the company’s existing charging footprint in Europe and North America.
On February 9, BWA announced that it is building upon its current 400V inverter business with a major global OEM by now also supplying 800V silicon carbide-based inverters. The efficient and scalable high-voltage inverters are destined for battery electric vehicle platforms.
Two variants will be used in the passenger BEVs, one 250kW for passenger cars and all-wheel drive crossover utility vehicles and a second 350kW module for the OEM’s performance vehicles.
BWA’s forward non-GAAP PEG multiple of 0.80 is 36.9% lower than the industry average of 1.27. Its 1.39x forward P/B is 45.6% lower than the industry average of 2.56x.
BWA’s trailing-12-month net income margin of 5.97% is 31.1% higher than the 4.56% industry average. Its trailing-12-month EBITDA margin of 14.19% is 24.1% higher than the 11.43% industry average.
BWA pays an annual dividend of $0.68. This translates to a yield of 1.41% at the current market price. The four-year average dividend yield is 1.73%. Its dividend payments have grown at a CAGR of 1.9% over the past five years.
During the fiscal fourth quarter that ended December 31, 2022, BWA’s net sales increased 12.4% year-over-year to $4.11 billion. Its net earnings increased 81.2% year-over-year to $279 million, whereas its adjusted earnings per share increased 18.9% year-over-year to $1.26.
BWA’s revenue is expected to increase 6.7% year-over-year to $4.13 billion during the fiscal first quarter that ended March 2023. Its EPS is expected to increase 4.5% year-over-year to $1.10 for the same quarter. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 47.4% over the past six months to close the last trading session at $48.07.
BWA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade in Growth and a B in Value, Momentum, and Quality. The stock is ranked #4 in the 59-stock in the A-rated Auto Parts industry.
Click here to see the POWR Ratings of BWA (Stability and Sentiment).
Tapestry, Inc. (TPR)
TPR provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments: Coach; Kate Spade; and Stuart Weitzman.
TPR’s forward non-GAAP PEG multiple of 1.01 is 21% lower than the industry average of 1.27. Its forward EV/EBIT of 10.50x is 18.1% lower than the industry average of 12.83.
TPR’s trailing-12-month EBIT margin of 16.80% is 115.6% higher than the 7.79% industry average. Its trailing-12-month net income margin of 12.69% is 178.4% higher than the 4.56% industry average.
TPR pays an annual dividend of $1.20. This translates to a yield of 2.91% at the current market price. Its four-year average dividend yield is 3.34%.
TPR’s net sales came in at $2.03 billion in the fiscal second quarter, which ended December 31, 2022. Its net income increased 3.8% year-over-year to $329.90 million. Also, its net income per share increased 18.3% year-over-year to $1.36.
TPR’s EPS is expected to increase 17.4% year-over-year to $0.60 during the fiscal third quarter that ended March 2023. Additionally, it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 32.3% over the past six months to close the last trading session at $41.29.
TPR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
TPR also has an A grade for Quality. It is ranked #20 out of 67 stocks in the B-rated Fashion & Luxury industry.
To access additional ratings for TPR’s Growth, Momentum, Sentiment, Stability, and Value, click here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low priced companies with the most upside potential in today’s volatile markets.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks which could double or more in the year ahead.
BWA shares were trading at $48.13 per share on Thursday morning, up $0.06 (+0.12%). Year-to-date, BWA has gained 19.98%, versus a 7.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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