Major US stock indices crashed on September 30, ending one of the worst months and quarters in recent history.
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Many of the finger points are on the Fed. In an effort to cool stubbornly high inflationChairman Powell’s aggressive rate hikes also appear to be cooling the economy.
FedEx and . Corporate Profit Alerts Nike have confirmed that consumer demand has slowed, an ominous sign as the main shopping season before the holiday season approaches. Gloomy prospects from companies like Carnival also indicate that we may be in for a rough winter.
For the optimistic investor, there is a silver lining. The pullback in the third quarter to new lows of 2022 made most stocks cheaper than they have been in a long time. About 350 S&P 500 members ended the quarter lower. FedEx was the second worst performer, surpassed only by the 35.3% drop in media group Charter Communication.
The list of most losing stocks in the third quarter includes a number of fundamentally healthy companies that look like bargains.
Why did Adobe Stock fall?
Adobe Inc. (NASDAQ:ADBE) fell in heavy volume on September 15, paving the way for a 25% decline in the third quarter. The company behind Acrobat, Flash Player, Photoshop and other creative tools adds itself to a growing list of tech names that have returned to early pandemic levels.
What caused the drop in September?
The market was completely overwhelmed by news that Adobe agreed to acquiring design collaborationn startup Figma. While the acquisition makes strategic sense, investors found the $20 billion price tag steep.
The premium price can be forgotten as Adobe probably considers Figma a valuable strategic asset worth paying for. Management clearly felt it was paramount to bring the fast-growing Figma under its wing to bolster its market leadership in the wake of emerging competition. It already boasts an industry-leading suite of content creation tools, but it lacks a collaboration platform. Figma’s popular collaborative web and mobile apps are sure to fill the void.
As the trend of working from home and hybrid workforces is expected to continue, Adobe has identified and addressed a vulnerability, albeit at a high cost. But as the global digital transformation is still in its infancy, Adobe has just cemented its position as a leading provider of video and advertising software. The company has a solid track record of value-added acquisitions. Over time, the market can see that the purchase of Figma was worth every penny.
Is AT&T stock undervalued?
AT&T Inc. (NYSE:T) ended 27% lower in the third quarter, continuing an ugly four-month slip. The old-school telecom service provider is showing its age and is currently trading at its lowest level since 2003.
It is now deep value or a deep pitfall?
At about $16, AT&T might be worth a try. Without a compelling growth catalyst, the main attraction is the dividend. That may be enough to bring in income-oriented investors. A low-risk P/E ratio can’t hurt either.
Even with a reduced forward dividend of $1.11, AT&T now offers a whopping 7% return. Corporate bond yields are more attractive, but at these levels, AT&T stock may be the better deal. For a long-term portfolio, a position can serve as a bond substitute with the added bonus of bottom-feeding upside potential.
Of course, AT&T’s stock price could continue to fall, washing away the income benefits. The company has shown signs of life, particularly in the area of wireless mobility. Recent performance in the segment has been encouraging and management has rightly made this its core focus. In today’s market environment, AT&T may be the ideal defensive income game.
Will Alcoa’s stock recover?
When Alcoa Corporation (NYSE:AA) reports Q3 gains on October 19, the bar will be set low. The 26% drop in the share in the third quarter says it all.
The aluminum producer The abrupt decline in grace (stock nearing $100 in March 2022) relates to a sharp turnaround in aluminum prices that began in early March. Aluminum futures have nearly halved on concerns about a recession-induced slowdown in production and the strong dollar. The metal has shown signs of recovery in recent days as talks over a ban on new supplies from Russia.
Where do aluminum and Alcoa go from here? With Chinese demand slowly coming back online and the potential for tighter supply conditions growing, the recent recovery could continue into the fourth quarter. The escalating recession fears will send aluminum prices to new lows.
Most importantly, Alcoa has a strong track record of surviving the ups and downs of the commodity cycle. In the long term, it will play a key role in the production of electric vehicles. Now may be a good time to turn Alcoa into a long-term value portfolio.
Adobe is part of the businesskinda.com Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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