Five Incredibly Undervalued stocks you don't want to miss
About The Frugal Prof:
The Frugal Prof has been a portfolio manager for the past 24 years. He has an MBA from the Johnson School at Cornell University. He has been featured by the Financial Times, Reuters, and CNBC.
About Value Gems:
I’ve been a professional money manager for 30 years. I wrote a very popular column for an investing platform called Seeking Alpha. I had nearly 2,500 followers and had some extremely profitable recommendations.
Now, it’s time for a new venture. This is it. My goal is to deliver value added content that will make you a lot of money.
Thank you for your support.
Legal Disclaimer: The FrugalProf is not a registered investment advisor. Investing involves risk. Financial information provided is believed to be accurate but we are not responsible for inaccuracies. I may own these securities for myself or in accounts that I manage. Past performance is no guarantee of future returns. “The intelligent investor is a realist who sells to optimists and buys from pessimists.”
― Benjamin Graham, Dean of Value Investing
Brief Overview of Value Investing:
Value investing is about minimizing risk.
Ben Graham created value investing because of his painful experiences losing money in the Great Depression.
Graham's losses in the 1929 crash led him to hone his investment techniques. These techniques sought to profit in stocks while minimizing downside risk.
Graham also stressed the importance of always having a margin of safety in one's investments. This meant only buying into a stock at a price that is well below a conservative valuation of the business.
More on Value Investing here
How to use this newsletter:
How much would you pay for an experienced portfolio manager to filter the market of thousands of stocks and find the hidden gems?
My aim is to deliver solid content that makes you money. I hope you’ll consider subscribing. The first 100 Paid Subscribers get a 25% discount.
This newsletter will be published four times a month and recommend four to five stocks in each newsletter. The goal would be to assemble a portfolio of undervalued stocks.
I suggest holding these stocks for a year. This allows time for the market to discover these undervalued gems.
The stocks that have appreciated should be held beyond a year, so they can be recorded as long term gains for tax purposes. The stocks showing a loss should be sold before one year and recorded as a short term loss. This is the most beneficial strategy to minimize taxes. (Not tax advice).
Overview of the Current Market:
This is an expensive market.
The stock market is at all time highs fueled by unprecedented stimulus from the Federal government of at least $3T. The following stocks are very undervalued in an overvalued market. However, they don’t meet Ben Graham’s strict definition of value.
Recent Examples:
Michael’s Stores: $MIK
I wrote about Michael’s as a great contrarian play when Big Short famed Investor, Michael Bury disclosed a stake. It was a $3 Stock back in May. Here’s what I wrote:
Michael's is another contrarian play. Hard to resist since with nearly $2 in earnings and a $3 share price, its obviously undervalued. Full post here
The company is being bought out at $21 per share.
This is what we want - attractive companies that are undervalued and too cheap to ignore. A few big winners is all it takes. However, not all recommendations will turn out this good.
Current Recommendations:
WW International (Weight Watchers) $WW
Meredith Corp: $MDP
Quest Dianostic: $DGX
Vector Group: $VGR
Deluxe Corp: $DLX
Weight Watchers: Symbol: $WW
WW International Inc., formerly Weight Watchers International, Inc., is a global wellness company. The Company offers commercial weight management program. Its services and products include digital offerings provided through its websites, mobile sites and applications, workshops conducted by the Company and its franchisees, consumer products sold direct to consumers, licensed and endorsed products sold in retail channels, and publications.
Price as of 4/2: $31.80
EPS 2021: $1.82
EPS: 2022: $2.18
5 YEAR P/E Range (5-46)
Current P/E: 18
Cash Flow: $2.46
Comments: Excluding the Oprah jump, the stock is trading where it was in 2016. A below market multiple for a solid business and healthy cash flows.
The market seems to be ignoring that millions of people have put on weight during the pandemic. Too cheap to ignore.
Technical Overview: A move above $41 would very bullish and there is little resistance before the stock reaches $60
Meredith Corp $MDP
Meredith Corporation is a media and marketing services company. The Company operates two business segments: national media and local media. Its national media segment includes national consumer media brands delivered through multiple media platforms, including print magazines, digital and mobile media, brand licensing activities, database-related activities, affinity marketing, and business-to-business marketing products and services.
Price as of 4/2: $30.09
2021: $4.64
2022: $4.19
P/E: 7
Cash Flow $8.68
Return on Equity: 22%
Debt: 768%
Earnings: 5/14
Comments: Trading at the same level as a decade ago. Steady cash flows and high return on equity. Not thrilled with the debt level.
Technical Overview: The stock has had a nice run from the lows. Expect it to consolidate here before moving higher.
Quest Diagnostics: $DGX
Quest Diagnostics Incorporated is a provider of diagnostic information services. The Company operates through two businesses: Diagnostic Information Services and Diagnostic Solutions. The Diagnostic Information Services business develops and delivers diagnostic testing information and services, providing insights that empower and enable a range of customers, including patients, clinicians, hospitals, integrated delivery networks (IDNs), health plans, employers and accountable care organizations (ACOs).
4/2 Price: $129.44
2021: $11.02
2022: $7.98
P/E Range (10-22)
P/E: 12
Return on Equity: 25%
Comments: The company trades at a discount to the p/e of the S&P 500 yet has a tremendous Return on Equity and stable cash flows. Which is why they announced a stock buyback of $1B.
Earnings: 4/22
Vector Group: $VGR
Vector Group Ltd. is a holding company. The Company is engaged in the manufacture and sale of cigarettes in the United States through its Liggett Group LLC (Liggett) and Vector Tobacco Inc. (Vector Tobacco) subsidiaries, and the real estate business through its New Valley LLC subsidiary, which is seeking to acquire or invest in additional real estate properties or projects. The Company’s segments include Tobacco, E-Cigarettes and Real Estate.
4/2 Price: $14.12
2021: .89
2022: .87
P/E Range (9-42)
P/E: 15
Yield: 5.7%
Earnings: 5/8
Comments: The stock hasn’t done much since 2014, yet the business is healthy and cash flows are strong. Plus, you get a healthy 5.75% yield while you wait for the stock to appreciate.
Technical Overview: If the stock can trade above $15, there is little resistance until $17-$18
Deluxe Corp: $DLX
Deluxe Corporation provides technology-enabled solutions to enterprises, small businesses and financial institutions. The Company's segments include Payments, Cloud Solutions, Promotional Solutions and Checks. Payments segment includes its treasury management solutions, including remittance and lockbox processing, remote deposit capture, receivables management, in addition to payroll and disbursement services, including Deluxe Payment Exchange and fraud and security services.
4/2 Price: $42.34
2021: $4.95
2022: $5.28
P/E Range (3-15)
P/E: 8
Return on Equity: 39%'
Yield: 2.8%
Earnings: 5/7
Comments: Three years ago, the stock was in the 80’s and now its back in the 40’s. Low P/E with high return on equity. Too cheap to ignore.
Technical Overview: A nice run from the mid 20’s area. Not much resistance until $50
Summary:
How much would you pay for an experienced portfolio manager to filter the market of thousands of stocks and find the hidden gems?
My aim is to deliver solid content that makes you money. I hope you’ll consider subscribing. The first 100 Paid Subscribers get a 25% discount.
Best,
The Frugal Prof
