1 Unreasonably Battered Stock to Buy Cheap Now

When you are looking into stocks that have been on a downward motion for a while as prospective investments, you should be reasonably sure about the recovery potential.

| More on:
Make a choice, path to success, sign

Image source: Getty Images

Not every stock that has been battered without an obvious reason has ample recovery potential, but a few do. The trick to split potential gems from “dead rock” is to look into the fundamentals of the battered stocks and figure out whether they are sound enough businesses to recapture investor attention when the market conditions are right.

A lot of times, what you might consider an unreasonable beating down of stock actually has reasons beyond the scope of the stock or the underlying company itself. Sector-wide tremors can often topple apparently stable stocks down to new depths.

But that also works in reverse, when attention and a demand spike in the sector can revive the stock, giving you the option to turn in a neat profit. And to maximize that return potential, you have to trust in the stock when it’s downtrodden.

One such stock is Equinox Gold (TSX:EQX)(NYSE:EQX).

A stock in a slump

Equinox Gold has been in a slump since August 2020. And it’s not the only one in the sector that has experienced this downfall. Gold stocks spiked following the 2020 market crash, as the investors started actively hedging their portfolios with the tangibility of gold. The shiny metal saw its prices rise to new heights, but the demanding hike and the glory it offered to the companies and their stocks were relatively short-lived.

Equinox Gold rose over 90% in fewer than six months, and then it started coming down. The slump reached its supposed depth (so far) in August 2021, concluding a 54% fall since the spike in 2020. The stock is still trading at a 34% discount from its all-time peak, and the value is just right — even lower compared to some larger players in the sector.

The stock has started to move upwards again. And if it’s gearing up for another growth run, as it had before the pandemic (between 2019 and 2020), it might be a good idea to consider adding this stock to your portfolio.

The company

Equinox Gold is a Vancouver-based company with an impressive presence in North and South America. With operations in four countries: Canada, the U.S., Mexico, and Brazil, its geographic portfolio of assets is well diversified. It’s also investing in five growth projects and working with partial stakes.

The company has access to 16.4 million ounces of proven reserves and over 30 million ounces of measured reserves. Even if we take its ambitious goal of producing one million ounces of gold every year, it would be over a decade before the company runs out of its reserves, and by that time, many more reserves are expected to become part of its portfolio.

Foolish takeaway

Equinox Gold is not worth considering only because it’s a battered-down, undervalued stock. It’s a good holding to consider, because, despite being a gold mining company, its stock has performed well in stronger stock markets as well and can offer more than just a hedge for your portfolio when the stock market is down.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

construction workers talk on the job site
Metals and Mining Stocks

2 No-Brainer Mining Stocks to Buy With $200 Right Now

You can buy these top Canadian mining stocks with just a $200 investment right now to start your long-term wealth…

Read more »

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Good Buy Right Now?

First Quantum is a TSX stock that trades 61% below all-time highs. However, the mining stock still trades at a…

Read more »

nugget gold
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Here are two of the best Canadian gold stocks that can yield some eye-popping returns in the long run.

Read more »

nugget gold
Stocks for Beginners

The Ultimate Mining Stock to Buy With $1,000 Right Now

This mining stock just saw a drop, but don't let that keep you from diving in. This miner is due…

Read more »

A plant grows from coins.
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Explore 2025’s top Canadian mining stocks – gold, uranium, and base metals offer big potential in a dynamic, commodity-driven market.

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

3 Reasons to Buy Nutrien Stock Like There’s No Tomorrow

Nutrien stock has lost 34% of its value just this year alone and looks incredibly cheap today. Yet, secular trends…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »