After a tumultuous first quarter, investors can be forgiven for looking for a reprieve from market volatility.
Real Money Columnist Paul Price, who focuses on finding undervalued stocks with established business models may have some answers.
“Many subscribers have been clamoring for a new list of my very favorite, high confidence stocks for the remainder of 2022 and beyond," Price wrote recently on Real Money. “Each of the 10 are down meaningfully from their trailing 52-week peaks. Every one offers excellent upside potential, which I consider well-defined and relatively predictable.”
Well-defined and predictable are important watchwords though. Buying undervalued stocks isn’t the same thing as just grabbing at numbers that start falling. You need to be able to articulate why the market has overlooked this asset.
Price’s biggest pick is American Woodmark (AMWD). This stock meets several of Price’s overall criteria: It is a company with strong fundamentals, backed up by healthy numbers such as earnings per share and overall revenue. Yet the company’s share price has not reflected this strength. At the time Price wrote his piece, AMWD was trading more than 50% below its high point.
When a stock dips like that, investors can take their analysis in many directions. Falling share price might reflect a struggling business model. Or it might reflect flawed market analysis. If the company is still strong, but the share price has dipped, there’s an opportunity for investors to get in while the asset is undervalued… because eventually other investors will catch up.
In fact, this is a trend across Price’s trading picks.
Among other top picks that are down sharply from their highs are Children’s Palace (PLCE) and Qurate Retail (QRTEA).
Overall “the portfolio covers a variety of industry groups and includes both smaller and large-cap companies. Forward multiples of these firms are so low, compared with their own historically average levels that takeover bids or ‘going private’ offers could easily be forthcoming.”
Another notable pick on the list is FedEx (FDX) which Price says could see gains of 50% or more if it regresses to its mean valuation.
Read on in Price’s space at Real Money to see the rest of his picks and analysis.
