It can be hard to find a good retail bargain for less than twenty bucks these days. The same goes for retail investors shopping for stocks. Apache (NASDAQ: APA), ICICI Bank (NYSE: IBN), and America Movil (NYSE: AMX) fit the bill. With the markets hovering around record highs there is limited "low hanging fruit" to pluck for bigger gains.
Finding the next round of winners in this market may involve looking outside of the usual places (technology, e-commerce, etc.) and in areas like energy, banking, and telecommunications. Companies with exposure to higher growth emerging markets should also be considered.
Here we look at a few stocks that are a bit outside the box but appear to be priced for significant gains based on favorable dynamics in their respective industries and markets.
Is Apache a Good Energy Rebound Play?
Investors that buy into leading oil and natural gas producer Apache (NASDAQ:APA) here may be getting in close to rock bottom. Like other energy players, Apache went into a deep funk in 2020 when revenue was expected to have fallen around 35%.
But as the oil market stages a comeback, Apache is in a solid position for a sharp rebound of its own. Its diverse global asset base of reserves and drilling prospects are top notch with key oil and gas operations in the U.S., U.K., South America, and Egypt.
The biggest growth driver, however, is Apache's domestic presence in the Permian Basin which is home the some of the industry's highest internal rates of return. Apache owns nearly 3 million acres in the region which accounts for more than half of its oil reserves and production.
As energy demand improves in 2021, Apache's top line growth forecast of 16% would be the best it has been since 2017. And while Apache's $8.2 billion long-term debt balance is a major concern, an improvement in cash flow and operating expenses could get the ball rolling on debt reduction—and open up growth channels that are presently limited by its debt burden.
The Street's opinions on Apache are all over the map but have trended more favorably in recent weeks alongside an improved oil market outlook. Since the start of the new year Apache (~$17 per share) has received a pair of upgrades to 'buy' and multiple target prices in the $20 to $24 range.
What is a Good Way to Invest in India?
Switching gears from one value sector to another, ICICI Bank (NYSE:IBN) is another stock set to benefit from a rotation into under loved cyclical names. As India's second largest bank, it also positioned to grow alongside growth in one of the world's most compelling emerging economies.
Last month the International Monetary Fund (IMF) projected the Indian economy to expand 11.5% this year which would make it the world's only major economy to grow at a double-digit pace in 2021. The densely populated country's transition from severe lockdown measures to gradual restriction and reopening policies has gone well. Supportive fiscal and monetary policies are also reinvigorating economic activity there.
ICICI serves retail and corporate customers through its wide lineup of banking products and services which include lending, insurance, asset management, and investment banking. While ICICI's main growth engine is its domestic market, it also has growth potential in its international operations in the U.S., U.K., Canada, China, and elsewhere.
ICICI's earnings per share are forecast to double in 2021 driven by higher net interest income (NIM) as it transitions its funding to lower cost deposits. Higher demand for loans from both retail and commercial customers (especially underserved rural customers and small businesses) along with increased adoption of digital banking are also expected to pay dividends.
All four sell-side analysts that cover ICICI have 'buy' ratings on the stock. Earlier this month, Morgan Stanley reiterated its 'buy' on the emerging bank and offered a price target that equates to roughly 30% upside from here.
Is America Movil Stock a Buy?
Another company exposed to emerging market growth is America Movil (NYSE:AMX). As Latin America's largest wireless communications carrier, it is the dominant player south of the border with a subscriber base that spans 25 countries.
America Movil's biggest growth opportunities lie in its home market of Mexico as well as in Brazil. Together these markets account for more than half of its subscriber base. These oil and resource rich countries have been hit hard by the pandemic, but the growth opportunities in wireless remain intact.
Analysts are expecting earnings per share (EPS) to surge more than 90% in 2021 and reach the highest level since 2013 amid a resumption of its 4.5G and 5G network deployments. As consumers worldwide continue to clamor for high-speed internet service to power their mobile and at-home devices, America Movil should see its customer base continue to grow—and with it, its financial performance.
With a forward P/E ratio of approximately 12x and a 2.7% dividend yield America Movil is one of the best value plays in not only the telecom space but emerging markets as a whole.
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