Buying stocks that have lost value in the past year may seem risky at first glance. Yet such investments often hold the greatest potential. Historical declines don't necessarily mean poor future prospects - on the contrary, when the market turns around, these stocks can deliver significant gains.

For investors who are unafraid to take advantage of opportunities and believe in a turnaround, undervalued stocks may just be the key to high returns in the year ahead.

Opendoor Technologies

Opendoor Technologies $OPEN is a leading digital platform for buying and selling residential real estate that focuses on simplifying and accelerating the entire process. Its growth story has been interrupted recently by the housing market downturn, but this also provides investors with an opportunity to acquire shares at a bargain price.

In 2023, the total value of residential real estate transactions reached $1.6 trillion, with digital platforms like Opendoor capturing less than 1% of that volume. This means the potential for growth is huge.

Macroeconomic factors, including inflation and rising interest rates, are influencing the growth in housing demand. Because of this, many potential buyers have found themselves out of reach of housing. Even though Wall Street forecasts a 25% decline in Opendoor's revenue in 2024, analysts expect 42% growth in 2025especially if interest rates fall and mortgages become more affordable.

Currently, Opendoor stock is trading at a price to sales (P/S) ratio of 0.29, which is very low compared to the industry. Once the real estate market recovers, the stock is likely to experience growth.

Dutch Bros

Dutch Bros $BROS, a fast-growing chain focused on selling coffee and other beverages, could be an interesting opportunity for investors in the coming years. Veteran investor Peter Lynch showed in the 1980s that investing in fast-growing restaurant brands can yield huge profits - and Dutch Bros looks to be another similar example.

Dutch Bros was founded more than 30 years ago, but has made a significant splash since its IPO in 2021. The company's culture is focused on friendly service and internal growth, which has fostered long-term expansion. With more than 912 branches operating by the end of June 2024, the company has a target plan to expand its network to 4,000 branches.

Despite challenging market conditions, the firm has reported 4% year-on-year same-store sales growth, demonstrating its resilience. Meanwhile, analysts underestimate the potential of Dutch Bros, which trades at a P/S multiple of 2.5, while Starbucks, for example, has been trading around 3.7 for the past decade. If economic conditions improve, Dutch Bros stock could rise quickly.

Walt Disney $DIS

Walt Disney, one of the world's most iconic and traditional brands, has a history of more than a century of entertaining generations. In 2023 alone, over 17 million people visited the Magic Kingdom at Walt Disney World, contributing to $33 billion in theme park revenue.

The company's stock has lost ground in recent years due to weak financial results, while the Disney+ streaming service with over 118 million subscribers has weighed on the company's bottom line with high content costs. Shares are now 52% lower than at their peak.

However, history shows that similar declines in the past have been great buying opportunities. After three big drops in the past fifty years, the stock price has always bounced back, delivering substantial gains for investors. For example, a $1,000 investment in Disney in 1972 would be worth $70,000 today with dividends reinvested. Analysts are now predicting that the company's profits will rise in 2025 and growth will continue at an average of 14% per year.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source: TheMotleyFool