Are you worried about today’s lofty equity valuations? You should try combing through the market’s discount bin.
Stocks trading under $5 per share can be a great source of investment
ideas. Just like your department store bargain rack, many securities
are only put here because they’re out of season.
For those of us who don’t mind being out of step with Bay Street’s
latest fashion, these stocks are sometimes outright steals. After
combing through the discount bin myself, here are five companies that
have been unfairly marked down.
1. Spartan Energy
Spartan Energy (TSX: SPE) is the fastest-growing
junior in the Canadian oil patch. Since the company is only spending 80%
of cash flow, management still has plenty of room to accelerate
that expansion further through acquisitions. Although investors are
starting to discover this company, it’s still a relatively unknown name
on Bay Street. I don’t expect that situation to last for long.
2. Denison Mines
Denison Mines (TSX: DML)(NYSEMKT: DML) has been
completely abandoned by the investment community due to low uranium
prices. However, the industry is beginning to consolidate and a small
player like Denison would make an attractive acquisition target. Even if
no buyout occurs, the company still has a great asset portfolio and
huge exploration potential.
3. Kinross Gold
Kinross Gold (TSX: K)(NYSE: KGC) has been hammered
by falling metal prices and reckless spending like the rest of the gold
mining industry. However, there are some signs of a turnaround at the
struggling company. Its new CEO has suspended the company’s dividend,
halted unprofitable mines, and slashed spending. With operating costs
coming down, Kinross Gold’s shares could start to rally even without
higher gold prices.
4. Novagold Resources
Novagold Resources (TSX: NG)(NYSEMKT: NG) has also
struggled thanks to soft metal prices and higher costs. However, most
the the company’s largest asset writedowns are behind it and
tough cost-cutting measures are returning it back to profitability. In
recent months a number of notable hedge fund managers have built large
positions in this stock, including John Paulson, David Iben, and Seth
Klarman. The smart money clearly sees lots of upside potential.
5. Sherritt International
Sherritt International (TSX: S) has struggled in
recent quarters due to problems at its Cuban and Indonesian operations.
This has left the stock trading at a fraction of book value. Given that
most of these problems have already been priced in, any good news could
send shares sharply higher.
Please share this article
No comments:
Post a Comment