If there’s one collective benefit associated with the novel coronavirus, it’s that an increasing number of people have given their financial future a rethink. Before the pandemic, many financial advisors noted that the current generation of young Americans were not involved in the equity markets like prior generations at the same age bracket. Now, seemingly everyone is learning their lesson, which presents a great opportunity for value stocks.
While it might appear that the public is gaining a financial education because of the coronavirus-fueled lockdowns, there could be another story in the writing. It’s more than possible that the uptick in market participation is due to gambling or merely filling in the boredom with an enticing activity. As you know, sports were shut down during the first few months of the crisis, creating an entertainment gap.
Therefore, many folks, especially those that were now “working” from home, found another opportunity to wile away the hours. As a result, we saw tremendous volume spikes in publicly traded companies which are popular with millennials. But for the true contrarian, the real opportunity is in underappreciated value stocks.
Honestly, you couldn’t ask for a better setup for those who like going against the grain. What we saw and continue to see is groupthink at its finest. Just because the collective has lowered in average age doesn’t take away the groupthink nature of this pandemic-spoiled year.
If you’re really thinking about your future, it’s best to avoid the crowd sometimes. True, many of the high-flying names will continue to perform well in the new normal. But if you anticipate a return to some semblance of normalcy, you may be best served with these value stocks to buy.
- Verso (NYSE:VRS)
- AbbVie (NYSE:ABBV)
- Merck (NYSE:MRK)
- 3M (NYSE:MMM)
- Korea Electric Power (NYSE:KEP)
- Momo (NASDAQ:MOMO)
- ANA (OTCMKTS:ALNPY)
Keep in mind that in the new normal that in the second quarter of 2020, the price-earnings ratio of the S&P 500 index hit 31.24, according to Ycharts.com. That’s up nearly 44% on a year-over-year basis. Clearly, the risk-reward proposition has shifted toward value stocks, with these ideas providing possible upside over the next several months.
As a paper production specialist, Verso may be the ultimate in value stocks to buy. Obviously, we’re embracing digitalization at a breakneck speed. Innovations such as the Internet of Things makes it unlikely that we’re going to reverse course anytime soon. Therefore, it’s no surprise that VRS stock is on paper (no pun intended) grossly undervalued.
Who wants paper products in the information age? Well, more than you might think.
After all, while the smart devices and computers that you enjoy utilize the latest technical innovations, the manner in which these products were delivered to you is still old school analog. More importantly, the new normal, with its emphasis on contactless services and online shopping, incentivizes the case for VRS stock.
Although e-commerce as a percentage of sales has skyrocketed during the pandemic, we again come to an unavoidable fact: shipped products require extensive paper, from the cardboard exterior to the inner packaging materials.
Plus, digital products aren’t entirely as great as they may appear. For example, reading e-books on your tablet can cause “computer vision syndrome.” Indeed, the pandemic has bolstered the case for this most surprising name among value stocks.
As I’ve mentioned before, 2020 could go down as the year of the pivot. When the novel coronavirus first hit us, pharmaceutical and biotechnology companies all had the same idea: get to cracking on a coronavirus vaccine or treatment. Furthermore, the White House’s initiative Operation Warp Speed encouraged this healthcare segment with some freshly minted Benjamins.
Included in the collective search for a solution was AbbVie, which extended its hand to help accelerate discovery efforts. Still, no one is rushing to buy ABBV stock for its coronavirus narrative. That sentiment has gone to this year’s higher-profile companies such as Moderna (NASDAQ:MRNA) or Novavax (NASDAQ:NVAX).
But not getting too deeply involved may suit ABBV stock just fine in the long run. For one thing, vaccines typically take years to research, develop and distribute. Don’t get me wrong – I don’t doubt American resourcefulness and ingenuity. However, some will argue that we must be realistic. And diving too deeply into the vaccine search is risky if things don’t go according to plan.
While AbbVie isn’t exactly making headlines this year, it’s poised to become one of the more viable value stocks in the post-pandemic era. Once society stabilizes, the company’s Botox sales – which declined sharply during the pandemic – should rise again. Plus, Botox caters to the wealthier, older crowd, who will now have the ability to undergo non-essential services.
Merck is one of the more intriguing plays among value stocks this year. As you know, the pharmaceutical giant is best known for its cancer drugs, particularly Keytruda, a humanized antibody used in cancer immunotherapy. Unfortunately, the Covid-19 crisis created a massive influx of hospitalizations. What’s worse, people with underlying conditions are at greater risk for complications.
Therefore, it made sense for long-term patients to avoid healthcare facilities. Of course, that dampened the narrative for MRK stock as everyone was focused on the emergency at hand. However, in the post-pandemic era, you’d expect Merck to make up for lost ground, giving it a credible edge compared to other value stocks.
But that’s not all. Merck decided to enter the coronavirus vaccine race, although late into the game. You’d think that MRK stock has no chance based purely on its Covid venture. However, the company is forwarding a concept that’s incredibly rare in this arena: a single-dose and oral vaccine.
Currently, most of the vaccine candidates feature two-dose regimens, which creates logistics challenges. As well, these vaccines are injected into the patient, which is a problem: approximately 50 million Americans are scared of needles.
Another interesting candidate among value stocks of 2020 is 3M. At first, demand soared for 3M’s N95 respirators due to their industry standard protection against airborne particles. But then, the company was vilified because it couldn’t meet demand. For an example of this, check out Fox Business anchor Maria Bartiromo grill 3M CEO Mike Roman.
It was must-see TV. And you know what? It didn’t help MMM stock optically when the underlying company had to import its N95s from 3M factories in China. That’s according to the Washington Post, which I heard is not President Trump’s favorite news agency.
Despite the controversies, MMM stock has generally treaded higher since the March doldrums. In my opinion, it could go higher still. What we have to remember is that based on longstanding social consequences from the 1918 flu, we could see lingering behavioral changes in the new normal.
Primarily, this may involve an attitude shift regarding personal protective equipment (PPE). To be fair, extensive research demonstrates that N95 respirators are not conclusively any more effective than surgical masks in real-world conditions. Nevertheless, the fear of missing out on the industry standard of PPE may drive up sales of N95 respirators, just in case.
Korea Electric Power (KEP)
As you well know, the U.S. is having a heck of a time controlling Covid-19. Although new daily coronavirus cases ebb and flow, since Sept. 8, infections have been rising according to the Centers for Disease Control and Prevention. As well, Europe is experiencing a second wave, which raises questions about why some countries/regions are performing better than others.
Specifically, Asian countries generally have fared better than western nations. That’s not just my observation but a dynamic that CNN reported on recently. Of course, the thorny question is why?
In my opinion, I believe that because western nations are immigration-friendly, the resultant diversity has sparked into tensions, misgivings and suspicions among all communities. In contrast, the homogenous nation of Korea saw an increase in trust within society and toward government agencies. And this brings me to Korea Electric Power and KEP stock.
As a utility play, Korea Electric Power will always be relevant. But I like KEP stock as part of a broader exposure to the Korean economy. Frankly, we should all learn from the Koreans about testing and tracing procedures, along with cooperation on beating a pandemic.
Keep in mind that the Koreans are victims of the coronavirus which originated from China. Yet the Koreans didn’t act like a bunch of idiots like many of us Americans have. That’s a plus for Korea-based value stocks and KEP in particular is a bright spot.
For singles, one of the biggest impacts of the novel coronavirus has been to their dating life. Now, the idea of meeting up with that special someone doesn’t seem that enticing, no matter how special they are. In this context, companies that specialize in online dating could be considered value stocks. However, China’s Momo may be a better play for speculators.
Although we often hear that this crisis will eventually pass, I’m not so sure now. At some point, you’ve got to figure that the virus itself will fade away. But as I mentioned earlier, major pandemics have imposed lingering social consequences. And this dynamic could be more problematic for the U.S. with its highly diverse population.
As the New York Times once pointed out, diversity can breed mistrust. I would argue that mistrust grows even more with an invisible enemy like the coronavirus. But in China, most people are Han Chinese, eliminating the diversity challenge. This suggests that as global societies normalize, China will be among the first to do so, which bodes well for MOMO stock.
Also, Asian countries have handled this crisis better. Therefore, just based on a mass-scale health perspective, MOMO stock is in a favorable market.
Among the value stocks on this list, ANA is easily the riskiest. The acronym stands for All Nippon Airways, which right there I’ve perhaps lost most of you. You see, there’s a reason why I put ALNPY stock dead last in this gallery. Nevertheless, for the hardened speculator, ANA could offer significant upside.
Generally, I don’t like the airliners. Thus, based purely on its own fundamentals, I wouldn’t even think about ALNPY stock. As well, there’s nothing special about the Japanese air travel industry. According to Nikkei Asia, ANA is seeking to layoff employees as well as reducing “monthly pay for around 15,000 employees. The cuts are expected to lower annual compensation by about 30%.”
What you’re seeing in the airliner industry is absolutely heartbreaking and it’s a narrative shared across the world. However, what gives ANA a possible edge is the rescheduling of the Summer Olympics to 2021, which Tokyo will host. That could give a tourism boost that may help Japan’s biggest travel companies.
However, I must warn you that there’s a chance the Olympics will be cancelled outright. While Tokyo desperately wants to host the tournament, the Japanese government cannot risk a massive second wave. So, consider ANLPY a high-risk, high-reward venture among value stocks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.