The stock market is a hot topic of conversation, given the velocity of interest rate speculation in the United States. As such, I anticipate a volatile market environment in which numerous stocks might drift away from their central tendencies.
To address the above, I suggest investors diversify their portfolios. I understand that diversification can be expensive, so I picked out three compelling stocks priced below $20. Methodologically, I dialed in on fundamental aspects, valuation multiples and technical behavior. Moreover, I ensured the market’s current rhetoric aligns with each.
Every investment analysis must be considered with caution as market analysts’ views aren’t homogenous, and this article is no different. However, if you share my fundamental outlook, then here are three stocks under $20 for you to consider.
Sibanye Stillwater (SBSW)
Sibanye Stillwater’s (NYSE:SBSW) stock is a deep-value play. It’s as simple as that.
The company operates as a diversified metals miner but primarily focuses on platinum group metals in South Africa and the United States. Unfortunately, Sibanye faced numerous headwinds in the past two years, including floods in its U.S. mines, labor strikes in South Africa, and sluggish platinum prices. However, a turning point has emerged.
First, the platinum futures curve shows that platinum prices might increase by approximately 3.5% by April next year, providing Sibanye with a better pricing environment. Furthermore, Sibanye is in the midst of a restructuring, including a possible $500 million capital injection via streaming and a 4,000 job cut to reduce its operating costs.
Sibanye suffered a loss of 45.216 million South African rand (approximately $2.49 million) in its most recent half-year, which is a risk factor to consider. However, the company has a five-year average net income margin of 10.28% and a price-to-book ratio of merely 1.49x, meaning a recovery in its headline operations might spike SBSW’s stock price.
Ford Motor (F)
Ford Motor (NYSE:F) is a household name that needs no introduction. A look at F stock’s trading pattern shows that it has slid by approximately 2.5% in the past month, prompting me to argue in favor of a buy-the-dip opportunity.
It might be an odd time to recommend an industrial stock as economic uncertainty paired with rising automotive delinquency rates raise concerns. However, I am a contrarian by nature and therefore argue that a pending interest rate pivot paired with a robust brand name will lend Ford the necessary attitude to outperform expectations.
A birdseye view of Ford’s fundamentals shows stealth. Despite headwinds in the auto industry, Ford’s first-quarter earnings before interest and tax surged by 1.62x, quarter-over-quarter, to reach $2.763 billion. I believe factors such as Ford’s endeavors into electric vehicles and its consumer bargaining power will lead to excess profitability through the economic cycle, providing the company’s investors with much to cheer about.
Ford has a price-to-book ratio of only 1.13x and a forward dividend yield of 4.94%. Although an isolated observation, these metrics convey high-quality shareholder value.
Paramount Global (PARA)
Paramount Global (NASDAQ:PARA) is the subject of a $26 billion takeover bid from Sony (NYSE:SONY) and Apollo Global Management (NYSE:APO). The offer entertained shareholders as the stock surged by more than 10% after the announcement. However, the question beckons: Is a merger arbitrage opportunity in the cards?
Some might question this deal’s execution risk. However, I am confident that Paramount will be acquired. What’s my basis? Well, Paramount’s return on common equity ratio of -3.39% shows its growth is slowing. Moreover, the firm seems overly diversified, meaning it has numerous inefficiencies. As such, I think shareholders will approve a deal.
Paramount has a price-to-book ratio of 0.36x and a moderate relative strength index of about 47. These metrics, combined with the aforementioned argument, communicate that an acquisition has yet to be priced in by the marketplace. Although a failure to close should be considered, PARA stock looks like a golden investment opportunity!
On the date of publication, Steve Booyens did not hold (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.
