Everyone loves a bargain, except investors, who seem to think that the falling share price is a reason to sell a stock or avoid adding it to their portfolio.
While that’s obviously not true for everyone, since value investors look for good businesses that have been defeated, it is a prevailing opinion that informs the investment decisions of many. Fear of catching the proverbial “falling knife” prevents many investors from buying good companies that are temporarily out of luck.
Below are three actions that, while not offering a one-by-one purchase agreement for their price, still present a great opportunity to get into good business that is currently for sale.
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Altria
A company like the tobacco giant Altria (NYSE: MO) it is often isolated by economic fluctuations, giving it considerable pricing power even in the midst of a secular decline in its industry.
The Marlboro parent company’s first-quarter earnings report showed a 16% increase in the volume of shipments as smokers accumulated cigarettes in the first part of the health crisis. Even with the world collapsing around them, smokers want to smoke.
However, Altria has also been investing heavily in cigarette alternatives, especially in the train wreck that has become Juul e-cigarettes, but also a marijuana producer. Cronos Group and oral nicotine delivery systems.
CEO William Gifford told analysts last quarter: “We believe that oral tobacco will play a significant role in the transition of adult tobacco users from cigarettes and that our unrivaled portfolio will play a leading role in that transition.”
Right now it represents a perfect place for investors to take an interest in the tobacco leader. The stock is down 25% from recent highs, which has helped boost its dividend yield to a whopping 8.5% with little risk of the payout being cut. Altria reaffirmed its support for the dividend through the pandemic, and with a 38% increase in earnings in the last quarter, it should have the means to continue returning value to shareholders.
ExxonMobil
Depressed world economies weigh on oil and gas producers everywhere, and ExxonMobil (NYSE: XOM) As a result, it has not escaped the pessimistic outlook that has been established in the industry.
Although oil prices have recovered to over $ 40 per barrel, liquid natural gas remains at record lows below $ 2 per million BTU. Demand continues to be a problem for both, and is causing producers to archive projects they have previously seen as drivers of their future growth.
Exxon reduced capital expenditures for the year by 30%, but only on short-cycle investments in the Permian basin. Deepwater resources, such as those off the Guyana coast with which it is developing HessAnalysts see this project as particularly well positioned to win in the next rising cycle.
While Exxon’s shares have recovered 55% from the lows it reached in March, it is still trading 40% below last September’s price, giving smart investors the opportunity to step in to this global giant. energy at a low price.
Only lower-cost projects will move forward until demand recovers, but by then there will be a shortfall in supply, and prices will need to rise to achieve balance. That means Exxon’s discounted price today, coupled with a dividend now yielding 7.5%, makes it a bargain.
People’s United Financial
With strong exposure to the northeast, regional bank leader People’s United Financial (NASDAQ: PBCT) It has seen how the coronavirus pandemic has reduced its share price due to its concentration in the commercial real estate market. Moody’s He says it is among the highest-rated US banks, even if it has declined some over the years.
The financial institution has also been a kind of rare entity in the banking sector, having entered a wave of acquisitions, buying three banks since 2018: First Connecticut Bancorp, BSB Bancorp and United Financial Bancorp. In the process, he added about $ 13 billion in assets to his balance sheet, and some think he could be in the market for more.
However, its accelerated growth, driven by the repeal of some provisions of the Dodd-Frank Act, could make it the target of a larger financial institution that wants greater exposure to the Northeast market. Moody’s says People’s United “benefits from good basic deposit financing, resulting in little reliance on wholesale financing.”
The regional bank’s shares are down 30% this year, and while not likely to be a fast-growing stock, it has a well-covered dividend yield of 6.1% a year, making People’s United Financial a good one. long-term action for income -loving investors.
