Unless your name is Matt McCall, I think very few would have predicted the robust response in the equities market following the disaster that is the novel coronavirus. Although it’s true that the pandemic continues to rage throughout the U.S. and much of the world, there’s also a growing sense of optimism that the worst is behind us. If so, this may be a great time to consider stocks selling at a discount.
Of course, there are many ways to determine which publicly traded companies are undervalued. Particularly, fundamental analysis, such as analyzing price-earnings ratios of target corporations relative to their underlying industries, is one of the most commonly deployed tactics. But for this list of stocks selling at a discount, I’m going to focus on securities that are undervalued against their potential.
Here’s what I mean. With so much disruption caused by Covid-19, it’s incredibly difficult to determine value based on forward indicators like revenue or earnings. True, this has never been an easy task. However, forecasted numbers could be wildly off because we don’t yet have the coronavirus under control. Thus, I’m going to zero in on narratives rather than financial statements for deciphering stocks selling at a discount.
Also, we don’t know the long-term impact of the various fiscal and monetary policies that have been enacted to fight the pandemic. As you probably know because you may have received it, millions of Americans received a second stimulus check. Now, there’s talk about President-elect Joe Biden pushing a third round of checks as soon as possible.
But how will that affect the stability of the economy? Pre-pandemic, politicians would fight over budgets that ran over by billions. Today, we’re talking about a fiscal hole in the magnitude of trillions. In other words, the rules have changed for everybody, requiring perhaps a fresh methodology on finding the next stocks selling at a discount.
- Zynga (NASDAQ:ZNGA)
- Winnebago Industries (NYSE:WGO)
- Sirius XM (NASDAQ:SIRI)
- Identiv (NASDAQ:INVE)
- FAT Brands (NASDAQ:FAT)
- Spark Networks (NYSEAMERICAN:LOV)
- Ford (NYSE:F)
- Altria Group (NYSE:MO)
- MindMed (OTCMKTS:MMEDF)
What we can say about the economic recovery is that it’s disjointed. Some sectors have been brutalized while others, such as electric vehicles, have received tremendous enthusiasm. But in this craziness, there are opportunities to be had. So without further ado, here is my list of stocks selling at a discount.
Throughout most of 2020, investments related to the wide-ranging video game sector were one of the clear winners. Indeed, multiple companies that specialized in digital entertainment – or I guess it’s now called contactless entertainment – thrived. From Activision Blizzard (NASDAQ:ATVI) to Netflix (NASDAQ:NFLX) and everything in between, a new era of engaging players and viewers had arrived.
Of course, this dynamic implies that it’s difficult to find stocks selling at a discount in this market. However, I’d take a look at mobile-gaming outfits like Zynga.
First, contactless is still the priority in the broader investment sphere. Recently, I came across a Variety article that really hit me in the gut because I know people who work in the cineplex and film industries. It cited a Deloitte report that discovered that for the first half of 2021, slightly over half of Americans won’t go back to the movies. And only 18% of survey respondents did during the crisis.
That’s particularly devastating for cineplex operators but cynically a powerful tailwind for ZNGA stock.
Second, a sustained economic downturn could see consumers eschew expensive gaming machines and instead opt for cheap mobile entertainment. Plus, ZNGA stock is nominally priced lower than its console-based counterparts, making it an intriguing pick among stocks selling at a discount in the gaming arena.
Winnebago Industries (WGO)
One of the biggest mistakes I made last year was casting doubt on Camping World (NYSE:CWH). When the pandemic initially struck the U.S., I interpreted the development as a severe, possibly catastrophic economic headwind. No way did I think that Americans would go out on vacation, affluent or not.
Well, lesson learned – never underestimate Americans’ love for vacationing, or imprudence depending on your perspective. Over the trailing year, CWH has gained nearly 92%, one of the top stocks selling at a discount in hindsight.
Technically, CWH trades hands cheaper than Winnebago Industries, one of its recreational vehicle rivals. However, WGO stock is up a little over 19% over the same period. Therefore, I like the upside potential of Winnebago, even if it’s not cheaper on paper.
Whatever you choose, I don’t think you can go wrong with either name. For me, WGO stock is undervalued relative to its narrative. As Deloitte pointed out in its movie theater sentiment report, I don’t think Americans are ready to travel en masse. Thus, Winnebago could remain one of the stocks selling at a discount, at least for the first half.
Sirius XM (SIRI)
Though digital entertainment companies largely rank highly today, that’s not 100% the case across the board. A perfect example is Sirius XM. This is an organization that really could use a bull market. Since virtually everybody hates their morning commute, SIRI stock was relevant thanks to its underlying satellite radio business. But the coronavirus had a word or two to say about that and shares have not looked healthy this year.
Still, is there a possibility that Sirius could end up becoming one of the most underappreciated stocks selling at a discount? Never say never. True, Covid-19 infections remain elevated, as do hospitalizations. Many state governors have locked down their economies, implying an extended “staycation” for millions. Logically, these circumstances don’t help SIRI stock.
Nevertheless, no pandemic has permanently upended human civilization. This too shall pass, which helps SIRI on a big picture note.
Also, keep in mind that if SARS-CoV-2 becomes endemic, personal travel data from CouponFollow.com indicated that Americans preferred driving in their personal vehicles during the holidays. This could be a hidden catalyst for SIRI if the crisis worsens. So don’t dismiss Sirius from your list of potential stocks selling at a discount.
As I mentioned earlier, Camping World was a howler for me, and it certainly wasn’t the only one. However, I don’t want to give the impression that I only pick out losers. Although to be fair, my critics will point out that that’s all I do because I’m developmentally challenged.
It doesn’t quite jive with the other criticism that my opinions move the market. Point is, take everything I say with a grain of salt.
In my defense, security and access management specialist Identiv was a company that I identified as one of the stocks selling at a discount on Aug. 13, 2020. Since then, INVE stock has gone up nearly 49%. Here was my main argument:
Eventually, though, you’ve got to figure that employees will return to the office. As America gradually comes back from “vacation,” access management will become far more crucial. This is where Identiv’s frictionless and hands-free solution should help lift INVE stock.
Again, to be fair, the worsening pandemic suggests that INVE shares could go on a near-term discount. Nevertheless, I really like Identiv as a hedge in your portfolio in case the recovery happens sooner than anticipated.
FAT Brands (FAT)
You know those folks that supersize everything but order diet sodas for some oddball reason? With a name like FAT Brands – their use of capitalization, not mine – management does not hold back any punches. I like that. In a world of political correctness and cancel culture, it’s refreshing to see an organization just say what it means. But does that mean you should buy FAT stock?
In November of last year, I labeled the underlying company as one of the sin stocks to buy. So far, it’s done well. On short spurts between then and today, it’s done very well. If I may, this implies that I do have all my chromosomes. Whether this is a sad fact or not, I’ll let you be the judge.
Anyways, one of the factors that makes FAT stock an excellent candidate for viable stocks selling at a discount is that Americans love their fast food. In my November write-up, I stated that “…the social seclusion and sedentary lifestyle that people have suddenly incurred has been terrible for our mental health. Many of us just need some relief. And that often translates into high consumption of fast food.”
Yes, it’s cynical but it’s cheaper on paper than McDonald’s (NYSE:MCD). Plus, you’ll have a much better opportunity of being fat (in a green way) with FAT stock.
Spark Networks (LOV)
It may not look like it from a pure fundamental analysis perspective. But if you can handle volatility risk, Spark Networks could be one of the cheapest among stocks selling at a discount. That’s because a pandemic won’t stop the human urge to connect with someone. Of course, the dating narrative has changed, which benefits LOV stock.
For now, though, most of that benefit has gone to rival Match Group (NASDAQ:MTCH) because of course it did. Match has the brand leverage that it has been building for many years. Suddenly, when everybody is forced to be at home, online dating become a golden commodity. Thanks to the long, successful marketing campaign, Match is the brand that a broad audience is most familiar with.
Ironically, though, the long-term outlook favors LOV stock. That’s because Spark focuses on meaningful connections based on faith or common identity. As pbs.org noted, the emphasis on the contactless dating scene is on people’s character rather than their looks.
Sure, looks matter. But if a publicist was dating a writer and found out that the person was a plagiarist, that relationship might not work so well. Spark Networks enables relationships to foster on a foundation that is core to the clientele’s identity, making LOV a must-watch investment.
For the last three stocks selling at a discount, I’m going to give you my most speculative ideas. But I’m going to go a step further, something that I don’t think I’ve done: all these names are companies that I own. So, this “special” person has skin in the game, if that makes you feel better (maybe not).
First up is Ford. As you know, 2020 has been the year of the coronavirus and the SPAC, or special purpose acquisition company. And a large portion of these SPACs are related to electric vehicles, either directly as EV manufacturers or indirectly as charging/battery plays. As well, you have a litany of Chinese EV makers, along with Tesla (NASDAQ:TSLA) on its gravity-defying journey.
In this context, buying F stock seems, well, “special.” And right now, I can feel you heading toward the exits. But just wait up for a second.
As I explained regarding my hesitation toward Tesla, the company is basically only profitable because it sells carbon credits. That’s a government-mandated artificial market if there ever was one. Further, I’ve been talking recently about Norway. But oh crap! The incentives to buy EVs in Norway are so numerous that it doesn’t make sense to buy combustion-based cars.
However, these folks sell oil and gas to other countries to boost its own GDP.
This suggests that EVs are not viable without government intervention. However, F stock would be viable as its underlying business supports both combustion cars and EVs.
Altria Group (MO)
Just prior to the pandemic, the Centers for Disease Control and Prevention was known as an institution for giving good news rather than the reputation it has today: a CIA-controlled organization deployed to engage in a psy-op against the American people.
At least, that’s what I hear from the “YouTubes.” Seriously, though, the CDC was encouraging, declaring that cigarette smoking among adults hit an all-time low. Arguably, the rise of the vaporizer or e-cigarette has contributed to the cessation rates. Still, vaping created its own challenges – the platform is very appealing to underage users.
To be sure, the vaping community has become a powerful political lobby. Nevertheless, the incoming Biden administration may send a chill down vape users’ spine. According to January 2020 Bloomberg report, “Biden said he would halt the sale of vaping products until more research about its effects is conducted, proposing even tighter restrictions than the Trump administration’s partial ban on the sale of flavored products.”
That doesn’t bode well for the vaping industry. But in a cynical sense, it may be the lifeline that MO stock needs. Essentially, less vaping opportunities means a return to “analog” cigarettes.
Furthermore, the stress of the pandemic has taken its toll on the American people. If the crisis worsens, we’ll see higher demand for acute stress-relieving platforms. It’s a dirty business but this could help lift MO stock.
Easily the riskiest among stocks selling at a discount, psychedelic medicine specialist MindMed nevertheless probably has the highest upside potential. That’s saying a lot, I understand. Over the trailing year, MMEDF stock has skyrocketed to the tune of over 672%.
Now, in fairness to myself, I did mention MindMed early on. In fact, I was the first person at InvestorPlace to mention MMEDF stock. Of course, those that insist on me being mentally regressed will not change their mind. However, I think we can all agree that MindMed is a very special company – in a good way.
As I explained in late April of last year, part of the allure is that the company will never pursue recreational drugs. That was a key stipulation before Kevin O’Leary – yes, Mr. Wonderful himself – would give his blessing on MMEDF.
More importantly, well before the pandemic, psychedelic drugs became the focus for advanced research into mental health and addiction problems. As well, this platform may provide an opening to help restore proper sleeping schedules for sleep-deprived or disrupted individuals. As the Washington Post detailed, “coronasomnia” has become a serious condition during the Covid lockdowns. And it could lead to other health problems down the line.
Though I like the potential of MMEDF, investors should realize that this is a speculative opportunity. Therefore, only invest money which you can afford to lose.
On the date of publication, Josh Enomoto held a long position in F, MO, and MMEDF.
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.