It’s common knowledge that investing in undervalued stocks can generate some juicy returns over the long haul.
However, the tricky part is investing in the right stocks at the right time. Investors often favor certain sectors over others and undervalued stocks tend to be in the latter category.
Although 2021 is shaping up to be a bull cycle, there are still plenty of stocks trading below their value. Investors looking for a value play should consider buying these stocks as these gravitate towards the prices they are worth.
Here are three stocks that should be in for greater upside this year.
Undervalued Stocks: Ford (F)
In the Ford versus General Motors (NYSE:GM) wars, GM comes out on top this year for its recent venture into the autonomous vehicle space. However, there is plenty of evidence to prove that Ford is in a great position to close the performance gap in the coming months.
One key tailwind is Rivian, the electric truck manufacturer. In 2019, Ford announced a minority stake in the electric truck start-up which is worth $28 billion. Although the company is yet to generate sales, its first vehicle is expected to come out later this year. This could bolster Ford’s bottom line as well.
Adding to its partnership with Rivian, Ford is also expected to develop a line of electric vehicles in-house. In 2020, the automaker started distribution of its Mustang-Mach E and deliveries of the electric F-150 truck will begin this year.
Ford has a market cap of just $45 million with free-cash-flow (FCF) of $3 billion. At this ratio, Ford is among the top undervalued stocks in the market. Under the hem of its new CEO Jim Farley, the company is primed for a major comeback this year.
For the period ended in December, IBM stock took a hit after the company reported some poor quarterly results.
A major reason for the 6% dip in revenue (year-over-year) was its slow adoption of cloud-based solutions. As expected, the Q4 earnings resulted in a massive sell-off bringing its share price back to March 2019 lows.
Although this should deter investors from throwing their support behind the stock, IBM’s future prospects make it a great investment at its current price.
For one, IBM’s recent transition to cloud solutions gives the company plenty of opportunities to grow in the coming years. According to CEO Arvind Krishna, hybrid cloud computing will be a $1 trillion opportunity for the company. This along with developments in artificial intelligence (AI) will translate to higher revenue levels in the second half of this year.
Given the positive trends, I think IBM remains one of the most undervalued stocks on the market right now. Investors should get behind the investment before prices go higher.
Intel Corporation (INTC)
Another company that’s had a tough run this year is the chipmaker Intel.
During its earlier than expected earnings call, CEO Pat Gelsinger stated that the company will continue to manufacture its chips in-house. This came as a disappointment to many investors who were hoping the company would outsource the manufacturing to improve internal efficiency.
The news overshadowed Intel’s earnings, which beat analyst estimates on both revenue and earnings per share. Although the reaction to the earnings was a mixed bag there are still plenty of reasons to hold on to Intel stock.
Intel stated that it will not outsource the production of its chips but there is a possibility it could do so for its other line of products like GPUs. As far as CPUs go, keeping the production of this in-house is capital intensive and could very-well lower its market competitiveness.
However, there is good reason to believe that it can catch up to rivals like Advanced Micro Devices (NASDAQ:AMD), an emerging leader in the space.
Last month, Intel introduced a new line of processors that will hit the market this year. As CPU sales spike, Intel will be able to capture a greater share of the market this year. Intel definitely has its challenges but in the grand scheme of things, the company has numerous opportunities to come out on top in 2021.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.