Now that the confetti and champagne bottles have been cleared away, many people are looking to start the new year off by adding some new names to their portfolios. With so many stocks to consider, it’s easy to feel overwhelmed with the choices. One smart place to start the search is with stocks that have suffered declines recently, since they can provide great buying opportunities.
Two Fool.com contributors think that Nio(NYSE: NIO) and Devon Energy(NYSE: DVN) are especially compelling right now, as the future remains bright for these beaten-down names.
Scott Levine (Nio): From the prospect of new European tariffs to dwindling revenue, a number of factors motivated investors to steer this electric car (EV) stock out of their portfolios over the past year. In fact, shares of Nio plunged about 52% in 2024, in contrast to the 24% rise they enjoyed in 2023. But that doesn’t mean investors should forsake the EV company, as the stock could very well drive higher in the coming months.
Nio stock may have slid last year, but one thing that’s not sliding is customer demand. On Jan. 1, Nio reported 31,138 vehicle deliveries in December 2024, representing a year-over-year increase of 73%. After expanding the perspective to the entirety of 2024, investors will find that the company’s strong performance wasn’t limited to the last month of the year. Nio delivered 221,970 vehicles in 2024, a 39% increase over the number it delivered in 2023.
Another encouraging sign for the company is the expansion of its offerings. While Nio drove onto the EV scene as a provider of luxury vehicles, this past September, it launched the L60, a mid-size SUV marketed toward families. The vehicle was the first offering from the Onvo brand, which is associated with more family-oriented models and diversifies the company’s vehicle line-up beyond luxury EVs. Customers are taking note of the new offering, too. Nio delivered 10,528 Onvo vehicles in December, compared to deliveries of 4,319 Onvo-branded vehicles in October.
With regards to its financials, Nio seems to be moving in the right direction. During third-quarter 2024, Nio reported a 10.7% gross margin, representing a year-over-year expansion of 270 basis points. Moreover, it reported positive free cash flow for the quarter, and management forecasts that the company will report positive free cash flow again in the fourth quarter of 2024.
Lee Samaha(Devon Energy): Down almost 28% last year, the dip in Devon Energy’s share price is creating a superb buying opportunity in the oil exploration and production company. That’s particularly the case given that the price of oil started last year at around $71 a barrel and finished at roughly the same price.
As such, the decline can’t be attributed to the price of oil. Instead, investors may have deserted the stock due to several other factors, including the acquisition of Grayson Mill Energy and management’s decision to prioritize repaying debt and making share buybacks rather than its variable dividend in 2024.
Still, there’s a strong argument in both cases that management did the right thing. The acquisition adds assets in the Bakken region to Devon’s existing assets and creates opportunities to share technology, infrastructure, and expertise, leading to the potential for significant cost synergy generation.
The capital allocation priority also makes sense, given the low valuation and the need to improve the balance sheet after the Grayson Mill acquisition. Elsewhere, it was a successful year for Devon, as its investments in its core assets in the Permian region helped improve oil well performance and productivity.
With Wall Street analysts expecting free cash flow to average about $2.9 billion in 2024-2026 , and a market cap of just $21.5 billion, Devon Energy looks like an excellent value, provided the price of oil holds up.
For investors looking to put some pop in their passive income machines, Devon Energy is a great consideration. While the market turned a cold shoulder to the upstream energy stock, it’s certainly possible that shares can rebound in 2025, and investors can collect some substantial dividends in the meantime. Those looking to hitch a ride with an EV stock, on the other hand, would be well-served to consider Nio right now. The company continues to enjoy strong customer demand, and its financials seem to be driving in the right direction.
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Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
