Even amid the hype about overvaluation, you can still find some deals. Let’s dig in.
Amid endless calls about overvaluation and ridiculous bullishness, I find anomalies and opportunities literally every day that I think can work themselves higher.
The too-expensive rap obscures literally dozens of big-name stocks that can ignite, just like Nucor (NUE) , the steelmaker, and Walmart (WMT) , the retailer — two that I have said over and over again could take off in a heartbeat.
So, rather than argue the point that there’s no value here, let me show you what I mean when it comes to opportunities that are available right now for the taking.
Let’s start with Ford Motor (F) , which is at $13 and change, down almost two points from its high. Wednesday we learned from the consumer price index data that used cars may be peaking. That could either be because of demand destruction or because newer cars are now available.
Ford’s biggest problem is that it can’t make all of the cars and trucks it needs because of a lack of semiconductors, particularly the really inexpensive kind. I think that shortage, ever so slowly, is alleviating itself and a look at the stock of Micron (MU) , which has been a disaster of late, confirms that decision. Ford is just too cheap to ignore.
Now let’s switch to growth. The stock of PayPal (PYPL) , which I just bought for my charitable trust, is at $275, down $35 points from its high. You usually can’t a quality growth company’s stock this low, but management talked about an issue with the eBay (EBAY) separation that could hurt earnings this quarter. I say that’s well into the stock price, so why not pick some up at this incredible discount to where the stock was.
Not that long ago, NortonLifeLock (NLOK) , the personal anti-cyber-theft company traded at $28, up from about $23 on raised guidance. It quickly slipped back to $24, when we heard that it might overpay for an acquisition in Germany of a similar company that would make the run in the stock seem silly and take it to overvalued range.
Now the deal’s terms got announced and they were much more favorable and accretive, yet it is still two dollars below where it was when it announced what its earnings would be. That’s a real opportunity.
We had American Eagle Outfitters (AEO) on “Mad Money” not that long ago and the company has reported consistently the best same store sales of the mall based retailers. In the interim, there are many mall retailers that have been incredibly strong, including companies that aren’t even a fraction of the quality of American Eagle, companies like Victoria’s Secret (VSCO) or Bath & Body Works (BBWI) . This quality company is down 10% from its high even as Matthew Boss, the JP Morgan analyst who nailed Victoria’s Secret and Bath & Body Works before they took off thinks that American Eagle is incredibly attractive here.
Six months ago, with nary a possibility of major orders for the Boeing (BA) 737 MAX or its wide-bodied planes, Boeing’s stock hit $278. Since then Boeing reported a big upside surprise as well as a very strong July in orders and deliveries and it is testing the 737 for the Chinese aviation regulatory agency and could be on the verge of certification. Yet the stock trades to points lower than where it was six months ago. That makes no sense to me.
Finally how about Pioneer (PXD) or Devon (DVN) . These are two oil companies with religion, the religion of returning capital to shareholders rather than overreaching and spending more than they have. They have both instituted delicious variable dividends, with Pioneer’s, if all goes well, equal to a stunning 8% when the base dividend is included. The White House has asked OPEC to pump more to lower the price of oil. I think that’s a fool’s errand. Oil’s down a bit an ideal time to pick up a quality oil company that cares about the environment enough to try to lower its footprint. Either Devon or Pioneer will do.
Yes, the entire market may be historically overvalued, but not against interest rates and on any given day there are real bargains.
I just gave you six of them.
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