With U.S. stocks trading near record highs, low-priced stocks have been hard to come by. Only 15 of the S&P 500 constituents have a share price below $20. The story is similar in the mid-cap space where only 25 S&P 400 stocks can be had for less than an Andrew Jackson bill.
This means that investors that prefer lower-priced shares have to work a bit harder these days to find quality names that fit the budget. Here we showcase three stocks under $20 that have good fundamentals, good technicals, or both.
What Does Viavi Solutions Do?
Viavi Solutions (NASDAQ:VIAV) is a communications company formerly known as JDS Uniphase. Since the former Nasdaq highflier spun-off its optical networking business Lumentum Holdings, it has performed well but not nearly as well as Lumentum. So, why buy Viavi instead of Lumentum?
For starters, Viavi is an undervalued play on the 5G networking buildout which is expected to gain steam in the post-pandemic economy. As more telecom carriers launch their 5G networks in the back half of the year, demand will be strong for the test equipment that is used in the field to enable and measure 5G service. This is Viavi's core business.
Another growth catalyst is the Optical Specialty Products (OSP) business which offers anti-counterfeiting solutions that assure the authenticity of currencies and certain high-value documents. It is seeing solid demand from government and corporate customers that want to protect their banknotes, documents, and products using Viavi's optically variable pigment (OVP) technology. The pigment creates a color-shifting effect on banknotes to combat the use of funny money in over 100 countries.
This higher margin segment was a strong contributor to earnings in the most recent quarter and will likely remain so. And in combination with the large 5G testing opportunity, Viavi's below industry 21x forward earnings multiple has significant room for expansion.
Is it a Good Time to Buy International Game Technology Stock?
International Game Technology (NYSE:IGT) has climbed higher along with other casino-related reopening plays but at $17.80 has a ways to go to revisit its all-time high near $50.
The London-based maker of slots machines and lottery systems is expected to get a near-term boost from the recent sale of its Italian gaming business. In December 2020, IGT announced that it is selling its consumer gaming equipment, digital gaming, and sports betting divisions to Apollo Global Management for $1.1 billion. Shedding the business will not only provide relief from overbearing regulatory scrutiny but improve profit margins absent the burden of notoriously high Italian taxes.
In addition, a better bottom-line performance is expected to be generated by a renaissance in the core gaming business. And while the gaming business tends to be volatile, IGT's lottery business provides steady recurring revenue from its Aurora lottery management system and TouchPoints self-service terminals and wagering apps. This has been the company's main revenue source during the pandemic but is expected to play more of a supporting role as casinos re-open and electronic gaming equipment sales resume.
A pair of bullish chart patterns are also in IGT's favor. On April 23rd, when the stock closed at $16.57, a bottom triangle formed pointing to a possible run to the low $20's by June 2021. On the same day, a continuation wedge suggested the same. IGT has since moved decidedly higher but a sizeable jackpot remains for traders that pull the lever here.
What is a Good Lithium Stock?
Speaking of bullish chart patterns, Livent (NYSE:LTHM) has a double bottom formation developing on the daily chart. The stock has twice found support around the $16 level and looks poised to reverse to a new uptrend. If the classic pattern plays out as expected, Livent could rally to the $22.90 to $23.70 range over the next several weeks.
Aside from the favorable technicals, the Philadelphia-based lithium technology company has the makings of a winner based on its fundamental merits. Although the rise of the electric vehicle industry has only recently put lithium battery companies in the spotlight, Livent has been finding a use for lithium for decades. It worked with the U.S. government in the 1940's to develop lithium applications before it began supplying the element to Sony in the 1990's for lithium-ion batteries used in camcorders.
Today, Livent's most promising growth opportunity is battery-powered electric vehicles which will be the transportation mode of the future for passenger and commercial customers alike. The company's seven manufacturing sites around the world are expected to be a major source of battery-grade lithium hydroxide as global auto manufacturers seek the input to fulfill their EV ambitions. And with Livent generating more than 80% of its revenue outside North America, it will truly be a beneficiary of global demand. At the same time its low-cost profile compared to competitors should make for some healthy, multiyear profit growth as the EV story plays out.
Featured Article: What is meant by a buy rating?7 Undervalued Stocks That Deserve More Attention
With the Dow Jones Industrial Average (DJIA) hitting new highs seemingly every day, it may seem like the wrong time to be looking at undervalued stocks. Or is it?
From cannabis to cryptocurrencies, and let’s not forget electric vehicles the market seems to be blowing bubbles wherever you look. And that’s why now may be exactly the right time to zig while the market is sagging. And that means looking for undervalued stocks.
But finding undervalued stocks is subjective. Some analysts use specific fundamental metrics. Others use technical analysis.
However, the general idea is that you’re looking for stocks that are trading below their fair value.
In some cases, these may be stocks whose financials are stronger than other stocks in their sector, but it’s trading at a lower price. In other cases, a company may have potential that is not reflected in its stock price. Put another way, undervalued stocks are stocks that have room to grow. That’s why they deserve a place in your portfolio.
And that’s why we’ve put together this special presentation on stocks that are undervalued right at this time. An investment in these companies is likely to be rewarded because the stocks are moving under the radar from the broader market.
View the "7 Undervalued Stocks That Deserve More Attention"
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