With so much attention zeroing in on social media and its influence on the equities market, it’s easy to assume that everything has jumped in price. But the reality is much more nuanced than that. While individual names have soared to the moon, there are many remaining undervalued stocks that discount divers can pick up.
First, while social media is one of the hot topics of the trailing year, it’s important to note that those trading based off of random internet posts can’t bet on everything with gusto. If you take a look at the most popular meme trades — you know what they are — the situation doesn’t look very inviting now. And if you look to other plays, you’ll recognize that there are several undervalued stocks to advantage.
Second, the mass-scale push toward meme trades ultimately benefits companies that move on their fundamentals. This perfectly describes undervalued stocks, which are equity units tied to businesses that are priced below what their peers generate or have suffered from non-recurring headwinds. Once those challenges fade into the background, these under-the-radar opportunities can rise up to their true valuation.
As well, you have to figure that the meme phenomenon will impose a huge lesson on its participants. Based on what I can tell, most of the posts supporting popular meme trades allude to a moral directive. To put it another way, it’s pure speculation. While irrationality can move markets temporarily, you’re better off in the long run seeking undervalued stocks associated with stable businesses.
To be sure, these aren’t the most attractive plays. But like the childhood favorite tale, the flashy hare of meme trades may run out of gas. On the other end, the lumbering tortoise may win it all through steady dedication. On that note, here are some undervalued stocks to consider.
- Brookfield Renewable Partners (NYSE:BEP)
- American States Water (NYSE:AWR)
- Toyota (NYSE:TM)
- United Microelectronics (NYSE:UMC)
- Kinross Gold (NYSE:KGC)
- Energy Transfer (NYSE:ET)
- ViacomCBS (NASDAQ:VIAC)
As I’m writing this, I’m noticing some early rumblings in the major indices. Maybe it’s something, maybe it’s nothing. But if a sizable correction occurs, undervalued stocks will theoretically better absorb the volatility than growth names, though all sectors may suffer some red ink. Keep that in mind as you assess these underappreciated investments.
Undervalued Stocks: Brookfield Renewable Partners (BEP)
Among the world’s biggest publicly traded renewable power platforms, Brookfield Renewable Partners is as mainstay in the broader green energy business. Brookfield is particularly important in the hydroelectric power business, which comprises approximately 62% of its portfolio.
BEP stock rang in the new year auspiciously. Since late September 2020, shares of Brookfield Renewable jumped roughly 43%. But in February when the Texas winter storm devastated regional energy infrastructures, BEP and other renewable-energy-based investments tumbled badly. Partisan criticism regarding the green sector’s intermittency problem weighed heavily, even on companies which had little to do with the cold snap.
It seems investors are still leery of BEP, which might make it one of the undervalued stocks to buy. Despite taking a noticeable hit in revenue due to the novel coronavirus impact, Brookfield still managed to deliver sales of $3.8 billion, down just 4% from 2019’s result. Its performance from the first quarter of 2021 suggests that it’s on a recovery track, although profitability will be a concern.
All things considered, BEP should be on your list of undervalued stocks to watch, especially with climate change becoming an ever-rising threat.
American States Water (AWR)
Speaking of climate change, this is a great segue to discuss American States Water. A public utility firm specializing in its namesake product, American States Water is usually an easy idea to bet on. No matter how advanced we become as a civilization, we will always need the essentials. Also, AWR stock provides a dividend, although the yield isn’t anything to write home about.
But because of the desperate situation regarding water and its access, AWR will probably rise, if only based on cynicism. As a National Geographic article stated, “Climate change impacts the water cycle by influencing when, where, and how much precipitation falls. It also leads to more severe weather events over time.”
With water levels in the southwestern region of the U.S. reaching historic lows, this dynamic already exacerbates climate-related challenges. Ultimately, this will have an upward impact on water prices, forcing everyone to make do with less.
Interestingly, though, AWR is trading at a discount relative to its pre-coronavirus highs. Look for this to change over time, making it an intriguing idea among undervalued stocks.
Undervalued Stocks: Toyota (TM)
Due to the radical changes in the automotive and personal mobility sectors, Toyota, the ever-dependable automaker, found itself struggling for attention as electric vehicle firms like Tesla (NASDAQ:TSLA) stole its thunder — along with every other car manufacturer. While you might be tempted to jump onboard the EV train, you don’t want to ignore TM stock.
First, as much traction as EVs have made on a percentage basis, it remains to be seen if they can pull off a personal transportation paradigm shift in the years ahead. While EVs are probably the future, when that future is remains the key question mark. As you know, investors’ patience won’t last indefinitely, especially if it means collecting the rewards posthumously.
Second, Toyota represents an accessible brand. Its core business of course is selling reliable economy vehicles to the masses. These folks are grateful for the company’s no-nonsense approach to dependability. Also, Toyota has the Lexus brand and through it, the company has given German luxury automakers something to think about.
Finally, Toyota is no slouch in the EV department either, as evidenced by its research and development efforts into building solid-state batteries.
United Microelectronics (UMC)
Taiwan-based United Microelectronics faces one of the toughest challenges among undervalued stocks — or any publicly traded company for that matter. First, there’s the always hot-button issue of China and its military threats. Second, you have the coronavirus and the impact it imposed on global supply chains. In particular, the world is focusing on the semiconductor industry as computer chips are vital to modern functioning.
But the bad news for consumers hasn’t been exactly terrible for UMC stock. Over the trailing year, shares have jumped 239% as demand unexpectedly soared for electronics and other products that use semiconductors, such as modern vehicles. That left everyone in the semi supply chain scrambling for inventory. But it might be a long time before the situation normalizes.
According to the Taipei Times, UMC’s copresident Chien Shan-Chieh stated that the global semiconductor shortage can last until 2023 due to rising demand for automobiles and smart home devices. If so, UMC could be one of the more surprising undervalued stocks since it has already gone so high, yet could go even higher.
Undervalued Stocks: Kinross Gold (KGC)
On the surface, it doesn’t seem as if Kinross Gold would be a natural candidate for undervalued stocks to consider. First, Kinross is one of the few companies that enjoyed robust sales performance in the pandemic-disrupted year of 2020, generating $4.2 billion. That’s up more than 20% from 2019’s revenue tally.
Further, in the company’s Q1 2021 report, it disclosed revenue of $987 million, up 12% from the year-ago quarter. Yet on a year-to-date basis, KGC stock is down more than 21%. What gives?
Primarily, the underlying gold spot price isn’t cooperating, falling from its rally that took it to around $1,900 in June to approximately $1,800 where it’s trading now. This dynamic implies that inflation pressure isn’t as strong — which is weird because the mainstream media (and pretty much everyone else) has been screaming about inflation.
So assuming a lack of long-term inflation risks, is there a point to buying KGC? In my opinion, it’s possible that the fear trade (of market corrections and social unrest) could make precious metals and related investments like KGC attractive.
Energy Transfer (ET)
Before I get into my next name for undervalued stocks, I should note that Energy Transfer is a master limited partnership. This means that Energy Transfer’s annual income, gains, losses, deductions and credits pass through to ET unitholders, which are required to report their allocated share of these amounts on their individual tax returns.
It also means dealing with the Schedule K-1 (Form 1065), which isn’t exactly my cup of tea. However, many others like the benefits of MLPs, of which there are many. So, understand your situation before getting involved with ET stock.
That said, my takeaway is that after the devastation of the Covid-19 pandemic, Americans are ready to reclaim their daily activities. Data from the Bureau of Transportation Statistics suggests that people are resuming their normal traffic patterns. Further, the concept of “revenge shopping” — that is, buying products and services that consumers missed out on because of the pandemic last year — should drive energy demand due to increased interest in vacationing.
Undervalued Stocks: ViacomCBS (VIAC)
Somewhere in the luxurious halls of Mar-a-Lago, former President Donald J. Trump must be smiling to himself. True, the 2020 election result didn’t exactly favor him — though I’m almost certain he’s going to make a massive comeback effort in 2024. But he was absolutely right about something.
The mainstream media misses him. It’s about as extreme of a love-hate relationship as you’re going to get but it’s drama personified at the highest level. Now, what is everyone going to talk about?
That’s the burning question for ViacomCBS, which has seen better days. Covering the Biden administration just doesn’t have the same pizazz that it used to. Still, VIAC could be one of the biggest undervalued stocks to advantage.
According to Bank of America analysts, ViacomCBS revenue can rise based off “continued momentum in streaming, robust content licensing and healthy advertising trends.” Further, the company could be insulated from streaming competition by major players like Netflix (NASDAQ:NFLX) thanks to ViacomCBS’ streaming platform Pluto TV and its rising demand profile.
On the date of publication, Josh Enomoto 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 InvestorPlace.com Publishing Guidelines.
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.