Stock market indices may be racing to records, but a trio of stocks is still feeling the heat.
Wireless-infrastructure provider Nokia (NOK) is more than 40% this year, the world's biggest maker of generic drugs Teva Pharmaceutical Industries (TEVA) has tumbled 42% and telecommunication giant Vodafone (VOD) is off 20%-plus.
Are these stocks to avoid or great value plays?
Even a decade ago Nokia was the acknowledged leader of the cellphone business.
Things have taken a darker turn since then. Selling off the entire division to Microsoft, Nokia is left with little else other than its wireless-infrastructure equipment arm.
Demand for the company's network products has been largely dull as investors have realized that wireless-infrastructure services are rapidly becoming commoditized.
Plus, dividend-income investors who were once deeply satisfied with its hefty yield of 7.03% are beginning to understand that these ever-rising numbers are unsustainable. As business weakens, operating cash flows will definitely be under pressure.
Avoid Nokia, as it doesn't look likely to turn around anytime soon.
On the other hand, shares of Israeli-based drug maker Teva Pharmaceutical Industries are a bargain, making them a screaming buy.
A lowered full-year forecast, reduced revenue from new drug launches and a growth push-back to next year and 2018 has taken the wind out of the company's sails, but those negatives look temporary.
The company, known for its immense scale and capability for mass-production of low-cost renditions of blockbuster drugs, acquired Actavis Generics from Allergan this year for $40.5 billion, becoming the largest generics player in the world.
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Valued at just 6.3 times, the stock trades at an incredible level. This has been a year of transition for Teva Pharmaceutical Industries as it worked on the integration of Actavis Generics and simultaneously progressed with its branded pipeline, though the outcome of the Copaxone patent infringement litigation is a headwind.
Analysts see a 70%-plus upside in the company's shares for those who get in now.
British emerging-markets and telecom major Vodafone was hit hard by the Brexit turbulence.
Additionally, setbacks in India have also marred the fortunes this year of the company, which is comparable in size to U.S. giants such as AT&T and Verizon Communications.
Brexit issues have affected markets outside the U.K. as well, even as Vodafone grapples with a new Indian entrant offering free calling services.
The extremely competitive nature of the telecom services industry, coupled with its inherent capital intensive structure, suggests that for the better part of the past 12 to 18 months, Vodafone has been battling a series of challenges.
In fact, there is hardly any possibility for a turnaround. Unlike U.S. telecom stocks intent on becoming content-drivers in addition to carriers, Vodafone hasn't attempted a similar strategy.
Its dividend yield at 5%-plus seems attractive, but the stock should be avoided.
The upshot: Buy Teva Pharmaceutical Industries and avoid Nokia and Vodafone.
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