July 28, 2021 | by sandeep
Top 9 Undervalued Stocks for You to Trade in 2021
By Mateo Jarrin Cuvi
The stock market has been performing admirably well in 2021 so we’d like to present you with a few companies whose stocks are currently undervalued or underperforming.
Before moving on to the list, however, let’s get some definitions out of the way.
An Undervalued Stockcan mean two separate things.
First, it can be a stock that investors are selling off after studying and probably reading too much into the company’s earnings report. Let’s say, it’s an overreaction of sorts.
Second, it can be an equity that hasn’t actually hit the fullest of its potential.
Generally speaking, you can consider an undervalued stock any stock that has ample room to move up in value.
Berkshire Hathaway Inc (.BRKB.N)
Believe it or not, Warren Buffet’s Berkshire Hathaway, the holding company for a veritable cornucopia of favorites such as Dairy Queen, GEICO and Fruit of the Loom, kicks off our list of undervalued stocks for you to trade in 2021.
During the past year, the Oracle of Omaha has gone on an impressive spending spree, repurchasing his company’s own stocks to the tune of $24.7 billion, which has set a company record in terms of stock repurchases.
According to Buffet in his annual letter to shareholders, this reshop-til-you-drop attitude will not stop considering his take on the current value of his company’s stock.
As reported by The Motley Fool, “Buffett seemed to hint that the market may be vastly underrating Berkshire’s prospects, and that the stock is quite cheap at the moment, at a time when most stocks seem pretty expensive.”
Buffet did remark, however, that the gains might be slow to come: “The math of repurchases grinds away slowly, but can be powerful over time. The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.”
If one of the richest people on earth and a seasoned investor of countless battles tells you a stock is undervalued, then you better perk up those ears and listen closely.
IBM is working on ramping up its work on cloud computing and data and transaction processing technologies, a wise move that should boost its value well into the future.
In October 2020, IBM split itself up into two publicly-traded companies with IBM shifting its focus to cloud computing and artificial intelligence.
This process was boosted by the company’s $34 billion acquisition of Red Hat to provide its clients with a reliable hybrid cloud architecture.
This transition has actually been positive for the tech giant with Q2 2021 results exceeding expectations and hitting its top growth in revenue in nearly three years. Cloud computing alone grew by 13% in Q2, reaching $7 billion and accounting for almost 40% of the company’s total revenue.
Despite the company’s stock ranging between $95 and $155 during the past decade, things might be looking up with IBM’s transition to more cloud-based activity, an industry that is expected to be worth $1 trillion well into the future.
Viacom, the communications company that owns the CBS TV Network, seems primed to break out with the release of its new streaming service Paramount+, a product that is expected to collect more than 70 million subscribers within three years.
If you add to this Pluto TV, the company’s free streaming platform that grants clients access to 250 live TV channels, things are looking up for Viacom.
According to Yahoo Finance, “ViacomCBS’ unique hybrid model is likely to help the company gain traction in both developed and emerging markets in the future” with the company positioning itself “to cater to the requirements of both users who prefer to pay a subscription fee to bypass commercial breaks, and users who accept advertisements as long as the platform is available for free.”
Industry experts predict Viacom’s average price target to range between $33 and $80 with $49.18 as its sweet spot, which would represent an upside potential of almost 21%.
Propelled by the huge success of its streaming service and a return to travel as the pandemic hopefully wanes, you should look into Disney as a company to invest in.
Disney+, which was launched to plenty of fanfare back in 2019 and has so far signed up close to 100 million paid subscribers, is expected to compete with Netflix moving forward as the world’s most dominant streaming service.
Likewise, despite taking a hit due to park closures and the delayed release of movies during 2020’s COVID-19 pandemic, the company should pick up steam in 2021 as economies open up and both tourism and travel returns to some semblance of normalcy.
As Disney’s non-streaming divisions catch up with Disney+, there should be plenty of potential for the company’s stock to move further up.
Qualcomm, one of the world’s leading digital wireless telecommunications companies, has positioned itself nicely to lead the charge into the fifth-generation mobile network or, as it’s colloquially known, 5G.
And, no, it’s not a technology aimed at controlling our every move like robots..
Its stock value has gained close to 150% since March 2020 when COVID-19 reared its ugly head. Still, since the 5G world is still in its infancy, there’s plenty of room for growth and a rise in the leading company’s stock value. Some analysts believe that the company’s stock price can match and surpass its high of about $168 seen earlier in 2021.
And growth is already in the works.
As explained by Trefis Team, “this is evident from Qualcomm’s Q2 2021 results, where revenue came in at $7.9 billion, up from $5.2 billion in Q2 2020, driven primarily by a 55% rise in chipset sales ($6.2 billion in Q2 ’21 vs $4.1 billion in Q2 ’20). Operating income jumped 2.2x from $991 million to $2.17 billion over the same period, which helped EPS rise from $0.41 to $1.53, an increase of more than 3x
Okta Inc (.OKTA.N)
Okta, the tech company that builds cloud software to help companies with identity and access management, was one of the large beneficiaries of COVID-19 and the shift to work from home.
Additionally, with the growing threat coming from cyberattacks, cybersecurity has taken center stage when it comes to risk management and companies have poured millions of dollars into protecting their data, products and employees from cybercrime.
With this in mind, companies like Okta are only bound to benefit from this increasing focus on cybersecurity moving forward.
From March 2020 to July 2021, Okta’s stock value has risen from around $115 to about $255, hitting a high of almost $292 in February 2021. Plus, according to MarketBeat, Okta’s current consensus price target is $275, which represents a 7% shift on the upside.
Wells Fargo (.WFC.N)
Since October 2020, Wells Fargo, the US’s third largest repository of deposits, has been performing admirably well with its stock price moving from about $20 to $45.
The bank’s results for Q2 2021 went way past expectations, its earnings per share (EPS) clocking in at $1.38 after an estimate of only $0.98. Additionally, Wells Fargo’s price-to-book ratio is 1.08, which falls significantly under the industry’s average of 1.56.
This follows a scandalous period in 2018 when the bank was placed on limits by the Federal Reserve for creating millions of fake accounts to ramp up its sales and meet its yearly objectives.
However, the Fed has accepted the bank’s plans to improve its risk management and corporate practices, and the cap it’s facing could be completely lifted towards the end of 2021 or early 2022.
Once this happens, Wells Fargo could be positioned to revisit the highs it hit in early 2018 when the company’s stock was valued at almost $60.
Advanced Micro Devices (.AMD.OQ)
Advanced Micro Devices is a leading global producer of semiconductors, as well as being heavily involved in the computing and graphics industry.
As technology pushes forward, becoming more expansive and complex, semiconductors are likely to grow in importance. AMD is one of few companies that is equipped and ready to deliver these components to sectors in need. The California-based company is well positioned to make the most of this advantage and continue to grow its business in a positive direction.
Even though AMD’s stock price has been fluctuating between about $55 and $100 during the past year, there’s plenty of potential there for it to take off once supply-side problems are solved and the company can once again keep up with this growing demand.
Despite supply constraints in Q1 2021, AMD managed to improve its year-ago results.
The company’s unit share of sales of its desktop processors, notebook processors and CPUs grew to 19.3%, 18% and 8.9%, respectively, which represented good gains from last year’s results.
According to Investor’s Business Daily, AMD should “generate sales of $3.6 billion, up 86% year over year” in Q2 2021 and “revenue growth of about 50% over 2020.”
Salesforce Inc (.CRM.OQ)
Salesforce is a global software-as-a-service (SaaS) powerhouse, helping businesses for the past two decades handle customer service in an efficient and positive way.
During the past five years, the CRM master’s stocks have moved north by 188%, hitting a high of close to $280.
It’s 20% market share positions it to benefit more than its direct competitors from the growing need of CRM services and companies keeping their loyal customers happy and fully serviced.
Plus, the results have followed, particularly for Q1 2021, when the company recorded its best readings ever.
Here’s Salesforce President and CFO Amy Weaver: “Our performance in the first quarter was strong across all financial metrics…We saw record levels of new business and strength across all products, regions, and customer sizes. Our impressive start to this year helps fuel our momentum for the rest of the year as we keep pace toward our goal of $50 billion in revenue in FY26.”
Innovation has also been one of Salesforce’s strong suits, investing money into artificial intelligence with its Einstein AI software tools, which, according to Investor’s Business Daily, “[helps] salespeople predict which deals are most likely to close based on a company’s historical lead and account data.”
Likewise, Salesforce recently acquired Slack, which offers Internet relay chats to businesses. This acquisition will allow Salesforce to make a strong move into other areas of marketing and e-commerce.
As indicated by The Motley Fool, all things considered, “Salesforce’s massive market opportunity, strong financial execution, and innovative culture should make it a good long-term investment in almost any scenario.”
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