Antique or junk? Undervalued stock or stinker?

Top 6 and a Half Undervalued Stocks

May 22 by Leonardo Siligato

Trying to find undervalued stocks can be like looking for a gem in a vintage shop. If you spot something nice, it’s usually grossly overpriced. And the rest just seems like decrepit old sh*t.

Fortunately for you, we wonks at BUX have managed to uncover some stock bargains, using a sweet little metric called the PEG ratio. It’s used to calculate a stock’s value while taking the company’s expected growth into consideration. We won’t bore you with details here but just remember this: If the PEG ratio is more than 1, it means the stock is expensive. But if it’s lower than 1, it’s a sign the stock could be underestimated.

So, ready to take a sift through the bargain bin to find some truly undervalued stocks?

1. Fiat Chrysler
PEG ratio: 0.22*
Buying this stock could be more or less like buying a Maserati Granturismo on a Fiat Panda budget. Why? It’s been feeling the heat from a diesel emissions probe. The Italian-American automaker is currently under the scrutiny of US regulators for using illegal software to cheat at emissions tests – which could potentially lead to billion-dollar fines. But then again, look how Volkswagen has rebounded from its “Dieselgate” crisis to log near-record profits!

 They see me rollin, they hatin’…

2. ArcelorMittal
PEG ratio: 0.26*
The Luxembourg-based steelmaker, which supplied steel for New York’s One World Trade Center, has been languishing in stock market purgatory for a while now. This is because the world has been producing more steel than it needs, leading to years of ultra-low prices and profitability. But demand for steel is starting to rise again, making it one of the undervalued stocks flying under your radar. Though ArcelorMittal’s future finally looks rosier, just steel yourself for any volatility in the raw materials market. Because that will definitely impact its outlook.

 ArcelorMittal could provide real steel for robot boxing in the future…

3. Glencore
PEG ratio: 0.37*
Like ArcelorMittal, this Anglo-Swiss mining giant hasn’t had the best of times thanks to low commodity prices. In 2015, investors were dumping its shares faster than a pair of Salvation Army shoes. They feared the company wouldn’t be able to overcome its mountain of debt. But Glencore has done good on its turnaround, slashing costs and greatly reducing debt. Higher prices will benefit Glencore, as well as the rise of electric cars. Electric vehicles use 4 times as much as copper as traditional cars and – surprise surprise – Glencore supplies 50% of the world’s copper.

 

4. Peugeot
PEG ratio: 0.48
The old Peugeot lion may have looked more like a defanged kitten to shareholders lately. But it’s roaring back into action after a brush with bankruptcy and a government bailout in 2014. Cost-cutting and sales of higher-specs models have helped the French automaker to lift profits. But watch out: like Fiat-Chrysler, it’s also under investigation for diesel emissions cheating. So keep a close eye on how this story unfolds, folks.

 I am Peugeot, hear me roar

5. Celgene
PEG ratio: 0.78
2016 was a tough year for biotech stocks. In addition, investors have recently been selling off Celgene on fears that it’s getting too reliant on one drug (Revlimid) for revenue. But they’ve got many different drugs in the pipeline, which all have the potential of becoming the next Revlimid. A blockbuster drug can rake in over a billion dollars in sales every year – plus, they’re protected by patents for at least a decade. This is why we think Celgene is one of the undervalued stocks you shouldn’t overlook. They just need to keep showing progress on that pipeline!

Keep trying to find the cure, Tom

6. Morgan Stanley
PEG ratio: 0.84
Despite Trump’s election victory rocketing bank stocks to the stratosphere, the PEG ratio suggests Morgan Stanley’s stock could still be selling at a discount. (Even if it’s not a steep one.) Over the past year, Morgan Stanley shares have also outperformed those of its peers, like Goldman Sachs and JPMorgan. Even if Trump doesn’t push through looser rules for the financial industry, many think there are still good times ahead for Wall Street.

 

6 ½. Facebook
PEG ratio: 1.20
Your initial thought is probably, “Facebook undervalued? You must be kidding.” OK, so its PEG ratio is just a whisker over 1 and it may not exactly be a cheap stock. But many experts think there’s still more room for growth. If you think Facebook has already reached the height of its powers, think again: It has the potential to bring many more users online in markets like India, where they’ve just launched free Wifi hotspots. It only recently introduced advertising on Instagram and hasn’t even begun to monetise Messenger or Whatsapp yet. Plus, it’s also in a prime position to capitalise on growing trends like artificial intelligence and virtual reality. Triple whammy!

 I have no more likes left to give…

 

*Data based on 5-year expected growth, taken from Yahoo Finance as of May 22, 2017

Written by

Leonardo Siligato

Holds a degree in Economics and Finance from Bocconi University, where he also worked as a research assistant for a while. After several years at Italian national all-news radio station Radio 24, he now delivers financial news and articles at BUX. A mountain enthusiast, he could not have chosen a better place to pursue his passion than the Netherlands… Look him up on BUX: @Siligon_Valley

Disclaimer: All views, opinions or analysis expressed in articles are that of the author and do not represent the views of BUX. Neither BUX nor the author provide financial advice and these articles should not be construed as such.

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