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

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 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.

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 disc...