7 Undervalued Stocks in an Overvalued Market

Posted on Friday, July 9th, 2021 by MarketBeat Staff
7 Undervalued Stocks in an Overvalued MarketIn June 2021 the investment firm, Bespoke Investments made this ominous pronouncement: “Investors simultaneously think the market is overvalued, but likely to keep climbing.”

This statement was meant to be a warning to investors. However, investors have shown that they can be very resilient even as the major indices continue to reach new highs.

So it would seem strange to be looking at a list of undervalued stocks. But looking at undervalued stocks is a form of value investing. And in 2021, investors are shifting between growth and value investing on a monthly, if not weekly basis.

An undervalued stock is one that is considered to be trading below its fair value. However, there’s no singular right way to identify undervalued stocks. Some investors prefer to look at fundamental metrics. Others will look for technical signals.

The one common element of all undervalued stocks is that they are stocks that have room to grow. That’s something that all investors can get behind. And in this special presentation, we’ll take a look at seven stocks that are showing signs of being undervalued at this time.

#1 - Quest Diagnostics (NYSE:DGX)

Quest Diagnostics logo

The first stock on this list is Quest Diagnostics (NYSE: DGX) which is up 10.88% in 2021. One way to look at undervalued stocks is to compare their price-to-earnings (P/E) ratio to others in its sector. Currently, Quest Diagnostics has a P/E of 10.18 which is significantly lower than the average P/E ratio of 22.9 for the entire Healthcare sector.

Quest was a pandemic winner because it could provide Covid-19 testing. However, that is far from the company’s sole source of revenue. Quest is also involved in providing diagnostic testing that is used to determine custom therapies. This is a growing field that is likely to have a resurgence as doctor-patient interactions return to something more normal.

That’s because Quest is well seeded as a partner with hospitals and health care networks. And its range is expanding. In 2020, Quest acquired Mid America Clinical Laboratories, one of its largest acquisitions ever. This also expanded the company’s service coverage into another state.

About Quest Diagnostics
Quest Diagnostics, Inc engages in the provision of diagnostic testing, information and services. It operates through the Diagnostic Information Services (DIS) and All Other segments. The DIS segment offers diagnostic information services to patients, clinicians, hospitals, health plans, and employers.Read More 

Current Price: $143.04
Consensus Rating: Buy
Ratings Breakdown: 4 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $148.86 (4.1% Upside)



#2 - ViacomCBS (NASDAQ:VIAC)

ViacomCBS logo

ViacomCBS (NASDAQ:VIAC) may best be remembered for getting caught up in the Archegos Capital Management margin call. Shares of VIAC stock plunged more than 60% from the March high. But this is an example of a good stock that has been unfairly oversold. It appears that the decline in revenue from its legacy broadcast/cable TV services is priced into the stock. This leaves investors free to focus on three significant catalysts for the stock.

First, VIAC stock has a P/E ratio of 9.97 which makes it objectively undervalued compared to its sector which has a median P/E or around 19.8. And analysts project the stock could have an upside of around 14%.

Second,  the company has entered the streaming wars with two services. Paramount+ is the company’s subscription service. Analysts are estimating the company may have up 70 million customers within three years. And the company also offers PlutoTV which is an ad-supported platform.

Third, as consolidation becomes the new watch word for this sector, ViacomCBS could be setting up as an attractive takeover target.

About ViacomCBS
ViacomCBS Inc operates as a media and entertainment company worldwide. The company operates through TV Entertainment, Cable Networks, and Filmed Entertainment segments. The TV Entertainment segment distributes a schedule of news and public affairs broadcasts, and sports and entertainment programming; acquires or develops, and schedules programming on the CBS Television Network that includes primetime comedies and dramas, reality, specials, kids' programs, daytime dramas, game shows, and late night programs; produces or distributes talk shows, court shows, game shows, and newsmagazines; owns and operates 29 broadcast television stations; and operates CBS Sports Network, a 24/7 cable program service that provides college sports and related content, as well as streaming and cable subscription services.Read More 

Current Price: $40.84
Consensus Rating: Hold
Ratings Breakdown: 8 Buy Ratings, 9 Hold Ratings, 4 Sell Ratings.
Consensus Price Target: $47.45 (16.2% Upside)



#3 - Appian Corporation (NASDAQ:APPN)

Appian logo

If you like to look for undervalued stocks in the tech sector, consider Appian Corporation (NASDAQ:APPN). Appian enables its client companies to automate coding across applications and websites. This need for low-code automation is seeing exponential growth

This makes APPN stock a good choice for investors who like to skate to where the puck is heading.  In fact, company management is guiding for revenue growth of 39% to 40%. That would be the fastest growth in the company’s history.

APPN stock has been caught up in a couple of short squeeze events, and short interest on the stock is around 17%. Still, there isn’t much evidence that the company is directly in the sights of the Wallstreetbets band of investors.

Appian is not yet profitable, but a look at the company’s price-to-sales ratio suggests the stock is expensive. Still, if the company hits its growth projections it will play nicely with a three-year cloud subscription renewal rate of 98%.

About Appian
Appian Corporation provides low-code automation platform in the United States and internationally. The company's platform automates the creation of forms, workflows, data structures, reports, and other software elements that are needed to be manually coded. The company also offers professional and customer support services.Read More 

Current Price: $113.93
Consensus Rating: Hold
Ratings Breakdown: 1 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $113.75 (0.2% Downside)



#4 - Okta (NASDAQ:OKTA)

Okta logo

Sticking in the tech sector, the next undervalued stock we’re recommending is Okta (NASDAQ: OKTA). The company is carving out a distinct niche in the growing cybersecurity sector. Specifically, Okta provides an identity management platform for enterprises as well as small- and medium-sized businesses, universities, non-profits, and government agencies.

While many market trends come and go quickly, the move towards cybersecurity will be one that will have staying power for at least the next several years. Experts have predicted that the number of cyberattacks increased by 300% in the last year.

The company was a pandemic winner as the transition to remote work became a necessity. Okta’s products allowed employees to work safely from home. From the onset of the pandemic until the end of 2020, OKTA stock soared approximately 137%.

But the stock has dropped in value as investors continue to shift out of tech stocks. There was certainly nothing in the company’s most recent earnings report that suggests the company’s performance is going to drop off.

About Okta
Okta, Inc provides identity management platform for enterprises, small and medium-sized businesses, universities, non-profits, and government agencies in the United States and internationally. The company offers Okta Identity Cloud, a platform that offers a suite of products to manage and secure identities, such as Universal Directory, a cloud-based system of record to store and secure user, application, and device profiles for an organization; and Single Sign-On that enables users to access their applications in the cloud or on-premise from various devices with a single entry of their user credentials.Read More 

Current Price: $245.58
Consensus Rating: Buy
Ratings Breakdown: 13 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $275.00 (12.0% Upside)



#5 - Advanced Micro Devices (NASDAQ:AMD)

Advanced Micro Devices logo

Last year, shares of Advanced Micro Devices (NASDAQ: AMD) soared over 68%. However, in 2021, it’s been a different story. AMD stock is down 2%, but a recent rally is suggesting that it may be time to jump on the stock.

The semiconductor sector is notoriously cyclical, but it is in what appears to be a lengthy bull cycle. And AMD is well positioned in this sector with its focus on manufacturing embedded and semi-custom semiconductors for computing and graphics applications.

The company is not immune from disruptions due to the global chip shortage. The company was already operating at full capacity prior to the pandemic. Simply put, the company can’t keep up with current demand. However, few companies offer the quality of semiconductors at the scale of Advanced Micro Devices. And that means that they’ll be willing to wait.

That also means that patient investors can buy AMD shares at a discount today and watch as they grow in value.

About Advanced Micro Devices
Advanced Micro Devices, Inc engages in the provision of semiconductor businesses. It operates through the following segments: Computing & Graphics, and Enterprise, Embedded and Semi-Custom. The Computing and Graphics segment includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units, data center and professional GPUs and development services.Read More 

Current Price: $108.63
Consensus Rating: Buy
Ratings Breakdown: 20 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $107.36 (1.2% Downside)



#6 - Boeing (NYSE:BA)

The Boeing logo

In early 2019, the thought of Boeing (NYSE:BA) making a list of undervalued stocks would have been laughable. At that time BA stock was trading at $440.52. Then the company went through not one, but two, tragic airplane crashes in which the company’s software for its 737 MAX was being cited for several failures.

Then, just as the company was recovering from that, the Covid-19 pandemic grounded airlines. New orders were put off and there was less maintenance required for existing fleets. At one point in March 2021, you could buy shares of Boeing stock for under $100. If you did, you are relishing your good fortune.

But if you didn’t BA stock still looks like an undervalued play as the airline industry continues to recover. Analysts are becoming increasingly bullish on the company. The company’s fortunes will largely depend on having no more hiccups in 2021, but if the skies remain open for business, investors should be rewarded for their investment.

About The Boeing
The Boeing Co is an aerospace company, which engages in the manufacture of commercial jetliners and defense, space and security systems. It operates through the following segments: Commercial Airplanes; Defense, Space and Security; Global Services; and Boeing Capital. The Commercial Airplanes segment includes the development, production, and market of commercial jet aircraft and provides fleet support services, principally to the commercial airline industry worldwide.Read More 

Current Price: $225.34
Consensus Rating: Buy
Ratings Breakdown: 14 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $259.98 (15.4% Upside)



#7 - Snap-On (NYSE:SNA)

Snap-on logo

If you’re a fan of traditional value stocks, then we’ve saved the best for last. Snap-On (NYSE: SNA) is an example of a stock that might not have the sizzle of other stocks, but it simply gets the job done for dividend investors.  

The industrial product manufacturer has exposure to some of the hottest sectors including home repair, housing, OEM and aftermarket auto, and the tech sector. That’s a key reason why the stock has charged ahead over 68% in the last 12 months.

However, be advised that a broader look at the SNA stock chart shows that such growth is clearly the exception and not the norm. With that in mind, easy gains may be gone. But the company has a rock-solid balance sheet and a commitment to shareholder value.

The company has increased its dividend in each of the last 11 consecutive years and it has a three-year average dividend growth of over 58%. This is a buy-

About Snap-on
Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments.Read More 

Current Price: $219.22
Consensus Rating: Hold
Ratings Breakdown: 3 Buy Ratings, 2 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $190.80 (13.0% Downside)

 

The reopening-fueled rally that is taking place in the United States is certainly putting the strategy of looking for undervalued stocks to the test. However, even if you’re still bullish on the overall market, proper diversification suggests you should set aside a bit of your portfolio for value stocks.

In some cases, an undervalued stock pays out a nice dividend. In bull markets, the benefits of dividends can become unfashionable. But when markets are volatile, a dividend can boost a stocks total return which can allow many value stocks to more closely approximate growth stocks.

For investors that want the benefit of value stocks without selecting their own stocks, a value-focused exchange-traded fund (ETF) can be a compelling alternative. One of the best in 2021 is the Invesco S&P SmallCap 600 Pure Value ETF (NYSEARCA:RZV). The fund has delivered a 12-month return of over 117% and pays an annual dividend yield of 0.47%.

7 Stocks That Would Make Great Graduation Gifts

Graduations are often seen as an ending. But they also have the potential to be an exciting new beginning. We may be biased, but we believe an ideal way to launch your graduate into the world is by helping them begin their investing education. And one way to help them do that is by having them invest in what they know.

This current crop of graduates has never lived in a world without things like iPhones, the internet, and they were the generation that likely had smartphones when they were in high school. This is a generation that has embraced and demanded relentless technological innovation. And they have rewarded the companies that have delivered.

Now it’s time to reward them, and maybe yourself as well. In this special presentation, we’ll take a look at seven stocks that would make ideal graduation gifts. Each of these stocks has a lesson(s) for graduates to take throughout their lives and careers.

View the "7 Stocks That Would Make Great Graduation Gifts" Here.





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