3 Beaten-Down Stocks That Haven’t Gotten the Message About the S&P 500’s Record Run

These gold assets are priced for $1,800 gold [it's over $4,000] (From Golden Portfolio)

Despite many warning signs to the contrary, the S&P 500 continues to climb to fresh record high levels. The latest earnings season showed remarkably resilient performance for many standout companies, but not every quality growth name has gotten the message so far. Some firms have indeed been left behind despite having solid fundamentals and posting healthy revenue improvement, strong margins, and other favorable metrics.

The disconnect here presents an opportunity for investors willing to be patient. Several former favorites in the market are currently trading below their recent high levels, although their underlying businesses remain healthy. Three names fitting that description are On Holding AG (NYSE: ONON), Grocery Outlet Holding Corp. (NASDAQ: GO), and Birkenstock Group AG (NYSE: BIRK). Each has stumbled for factors either internal or related to the macro environment, but fundamentals are still strong, and investors who are able to wait may eventually see a positive repricing.

On's Growth Prospects Are Still Intact

On Holding is one of the fastest-growing premium athletic brands worldwide, but shares are down almost 35% year to date (YTD) amid moderating wholesale performance. The company's latest dip came after its Q2 earnings report, which appeared weak but, on closer inspection, shows that many aspects of On's business are actually doing quite well.

Revenue for the quarter was below analyst predictions, the result of headwinds including tariffs and foreign exchange (FX) conversion issues, among others. Still, on a more positive note, direct-to-consumer (DTC) sales were particularly strong, with more than 34% year-over-year (YOY) growth for the quarter. On continues to perform well across all of its geographical regions, showing that its premium brand status is enough to command strong customer loyalty despite inflation and slowing consumer spending overall.

On also maintains an efficient business that is getting more so over time: the company's gross margin expanded to 65.4% in the latest quarter, and adjusted EBITDA margin was similarly up, prompting management to raise full-year margin predictions as well.

Now trading at 21x earnings, ON shares present a more compelling valuation prospect than they have in some time. There's a case to be made that investors have a real buy-the-dip opportunity—and one that analysts already recognize, given 19 Buy ratings versus just six Holds and Sells from Wall Street.

Grocery Outlet Turnaround May Continue

Despite a slow rally that has brought share prices up more than 9% YTD, Grocery Outlet stock is still down by about 40% from where it was a year ago. The company's challenges have been operational, as it has struggled to integrate new acquisitions amid leadership changes. Still, Grocery Outlet's unique discounted model on name-brand goods gives it a niche within food retail that could be positioned to thrive as consumer belts continue to tighten.

Key to Grocery Outlet being able to offer steep discounts is its sourcing, which involves buying excess inventory from major manufacturers. This model may become even more advantageous as the firm continues to expand its locations—it currently operates just a fraction of the number of stores as its larger national rivals.

The upward share price trend may continue thanks to the company's efforts to streamline its operations: last quarter, Grocery Outlet closed 36 underperforming stores in a single month, helping it achieve its goal of reducing millions in annual adjusted EBITDA drag. This helped the company to raise the low end of full-year guidance. To be sure, revenue gains of just 1% were modest, but investors willing to wait for improvements to take effect could be rewarded.

Birkenstock's Brand Is Strong Despite Challenges

BIRK shares are down almost 16% YTD after an early-June rally, but a healthy majority of analysts call the stock a Buy. One key reason for this is the strength of the company's brand: the latest quarter showed that the newest products are performing well, a sign that Birkenstock can continue to sell its footwear at full price even as customers grow increasingly concerned about costs amid inflation.

That's not to say that there isn't room for growth. The company's penetration in the Asian market is far from complete, despite sizable growth. Last quarter, the cost of sales climbed by about 18% YOY, outpacing both DTC sales and business-to-business sales growth of 14% and 13%, respectively.

Ultimately, though, a lot of the pressures on Birkenstock shares are likely due to factors outside of the company's control. Both increased costs due to tariffs and higher freight charges weighed on earnings last quarter, for example. Buying now may allow investors to capitalize when the environment allows Birkenstock's business model to shine once again.

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