Thursday, April 25, 2024
Stocks To Buy

The 7 Most Undervalued Value Stocks to Buy Now

The weak economy continues to result in multiple opportunities in undervalued value stocks. High inflation, uncertainty surrounding the Fed’s direction for interest rates, and the threat of a 2023 recession are all conspiring to create a difficult market. 

While that news is negative, there are also positives. Many undervalued value stocks have been dragged downward simply due to overarching conditions. 

Investors should look for a few characteristics when identifying undervalued value stocks in this environment. Strong fundamentals are key. Although costs are driving profitability down, investors should seek strong revenues in most cases.

Dividends, too, are an excellent cue. They act to bolster returns and can serve as income. Positive business catalysts must be considered too. Essentially, stick to the basics and you have the best chances of identifying the undervalued value stocks in this market. 

ABBV AbbVie  $165.12
NTR Nutrien  $76.63
LAC Lithium Americas  $24.09
LOW Lowe’s  $204.72
F Ford $13.16
D Dominion Energy  $57.96
PFE Pfizer $50.79

AbbVie (ABBV)

AbbVie (NYSE:ABBV) stock has faced a lot of scrutiny and selling pressure for little other reason than its success. Rather, I should say the success of its blockbuster immunosuppressant, Humira.

The drug has racked up more than $200 billion in sales since 2002 but will face competition from biosimilar drugs in the U.S. next year. European patent protection is gone and Humira is feeling the effects based on AbbVie’s latest earnings release. 

International revenues for Humira fell 25.9% during Q3, to $603 million. Overall, Humira accounted for $5.56 billion of AbbVie’s $14.81 billion in revenues in Q3. So, it’s easy to understand the overall concern. 

But, at the same time, it would be naive for investors to believe the company hasn’t acted in advance to address the gap Humira will leave. And AbbVie has, which makes it one of the undervalued value stocks in pharma.

Skyrizi and Rinvoq have accounted for an increasing portion of AbbVie’s immunology revenues. Imbruvica, a hematologic oncology drug is also emerging as an important asset. Importantly, sales increased 3.3% overall in Q3. 

The company has a long runway to develop more blockbuster drugs and it pays a dividend yielding 3.67% for those investors willing to ride along. 

Nutrien (NTR)

Fertilizer company Nutrien (NYSE:NTR) remains undervalued, giving investors a good opportunity currently.

Traditional value metrics indicate that Nutrien’s upside is strong, so we’ll begin there. But first, investors should realize that NTR has roughly 25% upside based on target prices. Additionally, Nutrien includes a dividend yielding 2.44%, making those potential returns even greater. 

But back to those traditional value metrics. Nutrien carries a P/E ratio of 5.57. That’s better than 82% of its competitors in the agriculture industry. It’s also far lower than the 18.24 median P/E ratio of the company over the past 10 years. Both of these metrics indicate NTR stock could rise significantly moving forward. 

This has been a strong year for Nutrien. Sales increased by 48%, to $30.351 through the first 9 months of the year. Diluted EPS increased from $3.41 to $11.96 during the same period. Global fertilizer supply challenges are expected to continue into 2023, creating a positive environment for Nutrien’s business overall. 

Lithium Americas (LAC)

Lithium Americas (NYSE:LAC) continues to look like one of the biggest opportunities ancillary to the booming EV industry. Its stock price has roughly 50% upside simply due to the fact that it is poised to serve the U.S. industry in a major way moving forward. 

While Lithium Americas remains in the pre-revenue stages, it isn’t as high risk as that might seem to imply. Instead, the company is on the brink of commercialization and remains very well-funded. 

The firm has collected more than 100 tons of lithium ore from its Thacker Pass operations in Nevada to date. It is producing product samples for potential customers from that ore. A feasibility study for its operations is expected in Q1 ‘23 which should coincide with regulatory rulings over its operations.

It is also working to apply for Energy Department loans that could set it up among vital lithium producers for the American EV industry. 

The company has access to more than $450 million in liquidity and credit which means it can continue to operate for at least another 2.5 years given its net losses of $40 million in Q3. 

Lowe’s (LOW)

Lowe’s (NYSE:LOW) stock might appear to be in a bad position overall. The housing market has stalled with rising interest rates resulting in much higher mortgage rates than this time a year ago. The theory then is that since fewer people are buying homes, home improvement firms like Lowe’s ought to suffer as well. 

So far, that hasn’t been the case. Q3 sales increased by more than 2%, beating analyst expectations. The positive news led Lowe’s management to raise its full-year earnings outlook. 

Basically, Lowe’s has adroitly pivoted with the Fed’s rising interest rates. Flagging H1 sales from its non-professional customer base are being addressed and the company should continue to see improved demand from homeowners who remain less likely to sell homes or buy them. Instead, they are investing in home improvement projects as high mortgages drive home selling and buying demand down. 

Investors should consider that LOW stock also includes a modest but reliable dividend along with upside in price and buy. 

Ford (F)

Investors are well aware that Ford (NYSE:F) stock is pivoting to address the opportunity the emerging EV industry presents.

It’s clear that demand for Ford EVs remains very strong. That is what investors should put their capital behind despite ongoing supply chain issues.

Ford’s EV delivery growth remains stellar. In November, Ford delivered 6,255 EVs. That represented a 102% increase over the same period a year earlier. It also represented the 5th consecutive month that Ford’s EV sales growth rate hit triple digits. 

It wasn’t all roses for Ford, which saw overall vehicle sales decrease 8% YoY on a volume basis. Further, F-150 lightning sales fell 15% from October levels to 2,062 vehicles. 

However, Ford intends to produce 150,000 F-150 Lightning EV trucks in 2023. It could end up being a huge seller in the U.S. where its internal combustion counterpart F-Series has been a perennial best seller for a long time. The pivot to EVs will raise F stock’s value making current cheap prices attractive. 

Dominion Energy (D)

Dominion Energy (NYSE:D) stock has massive upside and its management knows it. Based on share price alone, D stock has more than 23% upside in consideration of the target price.

That doesn’t take into consideration its 4.42% dividend which sweetens the opportunity. 

Yet, Dominion share prices remain muted and company management knows it. The positive news is that they have decided to do something to address the issue, and have launched a business review to increase stock prices

D stock has fallen from $78 to $60 year-to-date yet company performance has been strong. In Q3, the company continued to grow fundamentally with earnings per share of 91 cents on $778 in overall earnings. That was a respectable improvement YoY above the 79 cents earnings from $654 million overall earnings a year earlier.  

Importantly, operating revenues and adjusted earnings beat analyst expectations. In short, Dominion seems to be doing a lot of things well. Investors can take advantage of the company’s efforts to better market its stock which should result in higher prices moving forward. 

Pfizer (PFE)

Let’s take a moment to put numbers to Pfizer (NYSE:PFE) stock’s upside. There are two components to that upside; price expectation and dividends. 

First, price upside. Pfizer is expected to appreciate in price by roughly 6.5% over the next 12 to 18 months. Second, dividends. If historical trends hold, Pfizer is likely to increase its dividend by 1 cent in 2023 just as it did in 2021 and 2020.

That will bring each quarterly dividend(2) to 41 cents, equating to an additional $1.64 in returns during the year. Therefore, Pfizer has about 9.7% upside including dividends and average target price consensus figures. That’s a reasonable return in a normal market and even more so in this market. 

Pfizer remains underpriced despite its success in developing a Covid vaccine. That success sets the company up to develop its next blockbuster pharmaceutical. That’s the pharmaceutical business model and Pfizer continues to play the game well making it investment-grade. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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