2 Magnificent Stocks to Buy That Are 20% Below Their 52-Week Highs

Investors often shift from extreme to extreme, placing massive price tags on some investments and diminutive valuations on others. Right now the S&P 500 is lurching to new all-time highs. But some industry leaders are lagging behind, with giants like United Parcel Service (NYSE: UPS) and Nucor (NYSE: NUE) both roughly 20% below their 52-week peaks.

Here's why you might want to take a look at both of them.

UPS is working through a turnaround

There's a reason why United Parcel Service, usually just called UPS, is lagging behind the market. Put simply, the business hasn't been hitting on all cylinders lately. For example, through the first nine months of 2024, the company's operating profit fell to $5.5 billion from roughly $6.7 billion in the same period of 2023. Operating margin declined to 8.4% from 10.1%. Investors, perhaps understandably, aren't exactly pleased with the way things are going.

But the story isn't all bad. For example, UPS is one of a small number of package delivery giants. With more and more consumers buying online, the company likely has a tailwind at its back over the long term. Management is working to improve performance and results are starting to respond. Third-quarter operating profit rose to about $2 billion from $1.3 billion in the same quarter of 2023. Operating margin increased to 8.9% from 6.4%. That's not a full recovery, but UPS appears to be moving in the right direction.

Meanwhile, UPS has increased its dividend annually for 15 consecutive years. And the stock is offering an attractive 4.9% dividend yield. If you can handle a turnaround situation, which already appears to have hit a critical inflection point, UPS could be a good pick for your portfolio.

Data by YCharts.

Nucor is handling another industry swing just fine

Nucor's story is very different. The company is one of the largest steelmakers in North America, with an incredibly diversified business that includes both bulk steel and higher-margin specialty products. Nucor is easily one of the best-run steel companies in the world. But that doesn't change the normal ebbs and flows of the highly cyclical industry. Right now steel prices are retreating and investors are reacting by selling Nucor.

To put a number on that, Nucor's third-quarter 2024 revenue dropped 8% sequentially from the second quarter of the year and 15% compared to the third quarter of 2023. The thing is, this isn't an unusual event. When industry dynamics are good, Nucor does very well. When industry dynamics aren't good, it does worse. But over the long term, Nucor has proven incredibly adept at dealing with the industry cycles it has to face.

The best example of this is the fact that Nucor is a Dividend King, a member of the highly elite group of companies that have increased their dividends annually for at least 50 years. You can't create a record like that, particularly in a highly cyclical industry like steel, if you aren't running your company exceptionally well. One of Nucor's biggest strengths is its focus on reinvesting in its business, particularly during periods of weakness (when it can get the best bang for its spending buck). To that end, the company is in the middle of a capital spending plan that management believes will prepare Nucor for an even brighter future. That's the kind of story that should interest long-term investors.

Down but definitely not out

UPS and Nucor are survivors with impressive histories of success. But even good companies go through hard times, and that's clearly what's happening with these two industry giants. With their stocks still roughly 20% below their respective 52-week highs at the time of this writing, long-term investors might want to take a closer look even as the broader market reaches all-time highs.

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Reuben Gregg Brewer has positions in Nucor. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.