- Uber Technologies (UBER): This rideshare giant had a major win and has recently raised guidance.
- DuPont (DD): A relatively quiet company with upside from helping out in Ukraine.
- Charles Schwab (SCHW): Rising interest rates will make this solid bank stock a sure thing in April.
- Oshkosh (OSK): Increasing revenue and multiple catalysts should make all of 2022 boom times for this heavy equipment and truck manufacturer.
- Bank of America (BAC): Federal Reserve rate hikes and strong performance vis-a-vis other banks make it worthwhile.
- Target (TGT): This retailer has analysts on board as it reaches new revenue milestones.
- Dollar General (DG): Buy low in April on management’s full fiscal year expectations.
This year started off with many difficulties which have reverberated through the markets and created opportunities in undervalued stocks. There’s a lot going on, but two of the more important factors are Russia’s invasion of Ukraine and rampant inflation that hit 7.9% in February. As you’ve likely heard, that’s the highest level seen in the U.S. since 1982.
As a result, market performance has not been robust. Major U.S. indexes are down year-to-date.
The Dow Jones Industrial Average has sloughed off 4.71% so far in 2022. The S&P 500 has dropped 5.3%, and the Nasdaq leads the pack, having dropped 10.5% in 2022.
There are a few ways to view market performance through early 2022. The pessimist’s view is that things are going to get worse — perhaps much worse. Headlines including the words “recession” and “stagflation” are becoming common.
The optimist’s take is of course the opposite. The Federal Reserve is increasing interest rates, and we should hope for the best. There are deals to be had, and the undervalued stocks listed below should fare better.
|BAC||Bank of America||$43.73|
Uber Technologies (UBER)
Many users will be aware booking a ride through Uber (NYSE:UBER) is possible in most U.S. cities. The process is as simple as drivers choosing to be listed there. But the reason investors should be very keen on Uber in the coming weeks is that all taxis in New York City will now be listed on Uber.
New York is the most populous city in the U.S., and it also has the greatest number of taxis of any urban center in the country. The deal is the first citywide alliance for Uber in the U.S. and will likely pave the way for similar partnerships in the future.
The other reason to scoop up UBER stock in April relates to improving business prospects. The firm raised its EBITDA guidance from between $100 and $130 million to between $130 and $150 million for this quarter. That strongly signals the worst of its pandemic-related struggles could be in its rearview mirror.
DuPont (NYSE:DD) is known for chemicals, agricultural products and specialty materials. I’ll get to one of those specialty materials in a moment, because it’s critical to understanding why DuPont is a buy in April. But first, let’s understand how it is undervalued.
DD stock currently trades for about $78. However, it carries an average target price of $97.35. In other words, there’s nearly 25% upside in analysts consensus projections for the firm. The question then becomes: why should DuPont soon rise to reach those projected prices?
For the answer, look to recent commentary by my colleague Josh Enomoto, who noted, “under the Biden administration’s aid package, it will send defensive assets to Ukraine such as body armor. As it turns out, DuPont originated the Kevlar material that forms the backbone of such armor.”
DuPont is also attractive in that its Kevlar products protect rather than harm. Some investors shy away from products used in warfare that are designed to do damage, but Kevlar is not one of them. Therefore, DD is worth adding to your list of undervalued stocks to buy.
Charles Schwab (SCHW)
The market has entered a risk-off period. Growth stocks are no longer in favor and value is at the forefront. The shift is largely attributable to rampant inflation, which has reached historic highs for multiple months on end. In response, the Fed hiked interest rates on March 16.
That bodes well for financial firms, including Charles Schwab (NYSE:SCHW). Those rising interest rates will lead to greater revenues as banks charge higher interest on loans.
A few days prior to the Fed’s rate hike announcement, Charles Schwab reported an 11% increase in client assets under control. Those assets reached $7.69 trillion in value.
The underlying catalyst here is Schwab should be able to reasonably expect that interest charge increases favor the firm. That, along with increasing assets under management, should lead to increased revenues.
Bank picks are historically favored in times like these. SCHW is a solid choice among them and undervalued stocks in general.
Oshkosh (NYSE:OSK) is in position to benefit from multiple initiatives forwarded by the current administration. A few fact sheets from the White House outline spending initiatives that will benefit the company.
It has strong fundamentals and multiple positive catalysts that put it on our list of undervalued stocks. 2021 was a strong year for Oshkosh despite all of its difficulties.
2021 sales reached $7.74 billion, up from $6.86 billion in 2020. That resulted in rising net income as well. The company reported a net income of $472.7 million through 2021, up 45.7% from $324.5 million in 2020.
Oshkosh could see those sales numbers increase in 2022 on the infrastructure push. It sells heavy equipment including JLG lifts, Jerr-Dan towing vehicles and London concrete vehicles within its portfolio of brands.
On the electric vehicle front, Oshkosh just received its first order for the United States Postal Service’s (USPS) Next Generation Delivery Vehicle. That order is valued at $2.98 billion and includes 50,000 vehicles, at least 10,019 of which will be battery electric vehicles (BEVs).
Bank of America (BAC)
Like Charles Schwab, Bank of America (NYSE:BAC) is in position to benefit from cyclical interest rate trends. Banks earn a significant portion of their revenue from the interest charged on loan products.
Higher interest rates logically result in boon times for bank stocks. That’s the good news moving forward for the bank, which is the second-largest such entity domestically.
The other positive news is that Bank of America has already proven it can operate exceptionally well in low-interest periods. Back in mid-January when it released its Q4 earnings, the news was positive. Profits increased 28%, from $5.47 billion a year earlier to $7.01 billion to end 2021. What was especially impressive was that other leading banks saw their profits decline in the same period.
All of that bodes well for Warren Buffett’s favorite bank play heading into April.
Target (NYSE:TGT) had a 2021 to remember. Its revenue soared to $106 billion in the year, crossing the $100 billion threshold for the first time. That was quite an improvement from the $77.1 billion the retailer reported in 2020.
TGT stock still faltered through the early part of 2022 despite the record sales figures. Share prices began the year near $232 and declined as far as $206 in mid-March.
They’ve since recovered to $222, and that’s looking more and more like a strong opportunity as April begins. That’s because the analysts covering TGT stock give it an average target price of $280.
Currently, TGT sits below the low analyst price of $230. That simple observation should inspire confidence in investors looking to buy undervalued stocks.
Dollar General (DG)
The narrative for Dollar General (NYSE:DG) is extremely straightforward: If a recession hits, the discount retailer will become much more attractive.
Dollar General’s management already stated that it expects strong growth throughout the coming fiscal year. Net sales could grow by 10%, resulting in net earnings per share growth between 12% and 14%.
The caveat here is the growth is expected to come later in the year. The company expects the coming quarter to be difficult. That means the reason to buy DG stock in April is that it will be beaten down. Investors who are willing to hold on until later in the year can expect to see prices pop if management is correct about the guidance it has given.
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 InvestorPlace.com Publishing Guidelines.