The last few weeks have seen a very volatile stock market. This created an opportunity to purchase these three of his winners at bargain prices.
Although it has rebounded slightly in recent trading days, the stock market is still far from its all-time highs. Additionally, some of the blue-chip stocks that were sold remain depressed. This is despite a high-quality business that should generate returns that will reward investors for years to come.
Rather than lamenting the lack of recovery, investors should not miss the opportunity to buy. In this article, each of her three Motley Fool contributors shares one of their favorite undervalued stocks that are worth buying. This also includes special circumstances opportunities. albertsons companies (ACI 1.10%)streaming reader Roku (Roku -10.29%)and battered bank stocks live oak bankshare (LOB -3.21%).
This video streamer is down but not yet
Eric Volkman (Roku): Sentiment toward Roku, the video streaming device maker and platform operator, has cooled significantly as it battles with major retailers. The company's stock price fell off a cliff in mid-February, and it's basically been in the doldrums ever since.
It's not difficult to understand why. There were hot rumors circulating at the time. walmart (WMT -0.08%) is looking to acquire smart TV maker Vizio, deepening its already close relationship with a business partner. The rumored deal was confirmed just a few days later. Cue the expanded Roku slide.
What Roku watchers are most concerned about is Vizio's SmartCast TV operating system (OS), which rivals Roku's OS. The main concern is that Walmart, with its vast financial resources, will pour money into Smartcast and try to steal market share from Roku. This can be a real threat to its survival, since the latter company is always hungry for advertising revenue through its OS.
I think this fear is greatly exaggerated. Of the two, Roku is by far the dominant TV OS player, with an active user base of 80 million users (as of the end of 2023), more than four times the size of Vizio.
Additionally, Walmart said in a press release regarding the deal with Vizio that owning Vizio will “allow us to connect and serve our customers in new ways, including innovative television, in-home entertainment and media experiences.” This makes it seem like Walmart is thinking of his Vizio more as a next-generation advertising channel than with the goal of topping the TV platform.
Meanwhile, as streaming services continue to proliferate, running perhaps the most successful platform-agnostic OS will make Roku an increasingly attractive destination for advertisers. The streaming era is still in its infancy, and as it matures, this company will continue to be one of its more important pillars.
Everyone still needs to eat
chuck saletta (Albertsons): If there's one thing the stock market often suffers from, it's uncertainty. In the case of major grocery chain Albertsons, the uncertainty centers on whether regulators will give permission to fellow supermarket operators. kroger (KR -0.75%) Complete the planned acquisition of Albertsons.
But if you step back from the headlines and look at the business as a whole, that uncertainty looks more like a storm in a teapot than a fundamental concern about Albertsons' future. If Albertsons remained independent, its stock would trade at just eight times the company's expected earnings.
Couple that with the fact that analysts expect the company's profits to grow by around 8% per year over the next five years, and this looks downright cheap.
Conversely, if Kroger is allowed to complete the deal, Albertsons shareholders will receive approximately $27.25 per share. Albertsons stock has recently traded at $20.32, so the deal could yield as much as 34%.
Of course, if the deal goes through, the purchase price will be reduced slightly depending on the number of stores sold.
At the end of the day, the worst-case scenario appears to be that Albertsons shareholders still own a solid business that currently trades at what it's worth. After all, everyone still has to eat, and this fact holds true no matter how this particular takeover attempt ends up.
remember the big picture
jason hall (Live Oak Bank Share): Banks may be a concern as an investment destination. When the economy is strong (as it is now), banks can be very profitable. But if the economy worsens (as so many investors continue to predict), things could deteriorate quickly. That's certainly contributed to the sharp decline in Live Oak's stock price in recent months.
Considering the company's recent quarterly results (which didn't show much growth for what is essentially a growth-focused bank), the stock price is down more than 25% so far this year. .
This is where smart investors can take advantage of market turmoil and short-termism to find good long-term investments. Live Oak's business is lending to small and medium-sized businesses. And in the current environment, management is sticking to that strategy. This means we will focus on high-quality, low-risk borrowers in industries we know well, with strong profitability metrics and long-term growth potential.
So while the market is very focused on this quarter's and next quarter's performance, as well as short-term economic concerns, Live Oak is building a business that can deliver for decades to come.
And you can currently buy the stock at a bargain price, with a price-to-earnings ratio of approximately 17 times and a book value of 1.6 times. With a market cap of around $1.5 billion and assets under $12 billion, investors looking for a long-term investment should seriously consider buying Live Oak at these prices.
