Some investors believe that the market is always correct and that stock prices always accurately reflect reality. As a result, they will rarely if ever buy stocks that are tumbling and that are out of favor with the market. But, that philosophy is provably misguided because there have been many cases in which tumbling stocks have come roaring back. One such example that comes to mind is Tesla (NASDAQ:TSLA). In late 2022 and early 2023 the market was convinced that Tesla’s revenue and profits would plunge because of its tough competition and Elon Musk’s controversies. As a consequence, TSLA stock tumbled sharply during that time. But of course, the market was wrong and the automaker’s shares made a huge comeback. Here are three falling stocks to buy that I believe will eventually similarly reward patient investors.
Maxeon (MAXN)
Solar panel maker Maxeon (NASDAQ:MAXN) has really taken it on the chin since it provided weaker-than-expected third-quarter and full-year revenue guidance in August. But its second-quarter revenue soared 46% versus the same period a year earlier. And Maxeon still expects to report fairly impressive 2023 EBITDA, excluding certain items, of $80 million to $100 million.
The company blamed its guidance cut on weak demand for solar panels from homeowners. But it indicated that, over the longer term, it would be able to make up the shortfall by focusing on selling more solar panels to businesses. MAXN stock trades at an extremely low price/sales ratio of 0.4.
MGM (MGM)
MGM (NYSE:MGM) was the victim of a cyberattack earlier this month that greatly inconvenienced the casino operator’s guests. Since the attack, MGM has lost about 9% of its value. Moreover, the shares have sunk nearly 25% from their 52-week high of $51.35
While cyberattacks cost companies meaningful amounts of money and damage their reputations, I have never heard of any sizeable company whose business was not able to recover from such an attack. Moreover, the increased popularity of Las Vegas and the rapidly rising revenues and profitability of MGM’s online joint venture, BetMGM, should greatly lift MGM’s financial results in the long-term.
Given these points, I believe that the decline of MGM stock has been way overdone.
vTv Therapeutics (VTVT)
I’ve long been very bullish on vTv Therapeutics (NASDAQ:VTVT) due to its diabetes drug called TTP399. In a Phase 2 study, patients taking the drug suffered 40% fewer hypoglycemic episodes than those who received a placebo. Showing the great hopes that the FDA has for the treatment, the agency granted the drug breakthrough status back in April 2021. vTv has said that it would begin a Phase 3 study of the drug by the end of this year.
And recently, the company’s partner, Cantex Pharmaceuticals, divulged exciting news for the owners of VTVT stock. Specifically, the company reported that azeliragon, a drug discovered by vTv Therapeutics, would undergo a Phase 2 trial to determine its effectiveness as a treatment for a type of brain cancer. Moreover, a prestigious New York City hospital, Lenox Hill, will partner with Cantex on the study. vTv has strongly implied that it will receive a significant portion of any profits generated by the drug.
This gives vTv two positive catalysts with the potential to generate huge profits. Yet its shares have tumbled over 50% since May and have a truly tiny market capitalization of only $34.9 million, making it one of the best falling stocks to buy.
On the date of publication, Larry Ramer held long positions in MGM, VTVT and MAXN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.