The S&P 500 could be hovering near record highs, but 2023 wasn't kind to some stocks. While some stocks crumbled on reasonable concerns, others were punished despite deserving better. Two such stocks are Brookfield Renewable (BEPC -0.70%) and Whirlpool (WHR -0.74%).
While one company continues to grow steadily and looks on track to deliver record numbers for financial year 2023, the other is making all the right moves to navigate the challenging times and emerge a stronger player in the industry. Here's why you'll want to buy them while they're still each down more than 50% off their all-time highs.
Time to get greedy when the market is fearful
Neha Chamaria (Brookfield Renewable): Shares of Brookfield Renewable disappointed in 2023, generating barely a quarter of the S&P 500's return in the year as investors grew wary of the company's growth prospects amid rising interest rates. The renewable energy stock's been knocked almost 54% off its all-time highs now. That may sound scary, but for anyone looking for a value pick that also offers dividend growth, Brookfield Renewable stock is a great choice.
To be sure, Brookfield Renewable's growth slowed down a bit in the third quarter, with its funds from operations (FFO) per unit growing around 7% year over year. However, the company is confident of delivering at least 10% FFO growth in 2023 as it closes some impending acquisitions in the fourth quarter.
That also means Brookfield Renewable could deliver record results for 2023 despite the market's fears. The company also sees ample opportunities to invest in growth via acquisitions, especially in the current high-interest environment where businesses with strong backlogs lack access to funds to develop those projects. Meanwhile, demand for renewable energy continues to rise. With a humongous development pipeline of nearly 150 gigawatts, Brookfield Renewable is positioned to benefit.
The company has consistently delivered 10% or more compound annual growth in FFO over the past decade, is confident of maintaining the run rate through 2028 , and aims to grow dividends by 5% to 9% annually in the long term. This 4.6%-yielding stock deserves your attention.
Whirlpool's 6% dividend yield can't be ignored
Lee Samaha (Whirlpool): It hasn't been an easy year for home appliances companies. Rising interest rates have put the brakes on the housing market, and it's no surprise to see Whirlpool stock down around 16% in 2023, as of this writing. It's a move that took the stock down to a level more than 53% below its all-time high.
In addition to a slowing housing market, Whirlpool has suffered margin pressure from rising raw material costs and ongoing pressure from many supply chain issues that have plagued manufacturers since the lockdowns negatively impacted supply chains.
That said, management isn't standing still. In fact, it's responding to the difficult trading conditions by cutting costs -- management is targeting $800 million in 2023, with potentially more to come in 2024. Whirlpool also has an agreement to sell its Middle East and Africa businesses to a Turkish company, Arcelik.
In addition, Whirlpool will contribute its European domestic appliance business to create a European-focused company with Arcelik, with Whirlpool gaining a 25% stake in the new company. Arcelik will contribute its "domestic appliance, consumer electronics, air conditioning, and small domestic appliance businesses" according to the press release announcing the deal.
It all adds up to a company in restructuring mode, and with management expecting $500 million in free cash flow this year, the plan to distribute $400 million in dividends to shareholders in 2023 looks easily achievable. Throw in the possibility of lower interest rates turning around conditions in its core North America market in 2024, and Whirlpool is an excellent option for investors who are willing to take a contrarian view.
