The current context of the stock market is anything but stable and, for this, the conflict between Russia and Ukraine has contributed a lot, together with a rise in inflation and an increase in interest rates. If we add to this that the effects of the pandemic are still being felt in the world economy, it is easy to understand the instability that exists in the stock market.
But while uncertainty appears to dominate the economic outlook, there are ways to achieve above-market returns. According to the online broker Freedom Finance Europe, with a presence in Portugal, for this you have to make specific decisions and take risks, in addition to always bearing in mind that you do not have to put all your eggs in the same basket, since “one portfolio One institution A financial company must combine all types of assets, from stocks, for the generation of stable income, to undervalued bonds with high earnings potential”. It is precisely in the latter -in undervalued titles- where the potential resides that you must seek to exploit at the present time, with a view to increasing the possibility of profits.
What are undervalued stocks?
As its name indicates, undervalued assets (from the original term in English undervalued assets) are shares available in the market with a value lower than its real value. Taking into account that one of the most important maxims, when it comes to investing, advises investors to buy low and sell high, it is not surprising that these undervalued shares are highly appreciated, given the potential that, in principle, they close. It is said in principle, because the stock market is very volatile and, as such, risk is a constant. Even so, when the analysis of these securities is carried out by financial experts, who conclude that they are even undervalued stocks, it makes sense, according to Freedom Finance Europe, that “investors looking to increase their capital add shares of some of these companies”. to their wallets.”
How much should I invest in this type of stock?
As mentioned above, investing in undervalued securities carries risks, just like most stock market investments. Therefore, the investment volume should vary mainly according to the investor’s profile. In the case of a conservative investor, Freedom Finance Europe considers that “it is sufficient to partially add these assets to a portfolio”. If investors are looking for the highest possible return, then “they can build an aggressive growth portfolio,” advises the broker, who has prepared a portfolio of undervalued stocks for 2022.
In which companies should I invest?
According to the experts at Freedom Finance Europe, these are some of the companies whose shares are currently undervalued, with a potential appreciation of up to 135%, which makes them good investment options:
Advanced Micro Devices (AMD)
Advanced Micro Devices is an American multinational semiconductor company that develops computer processors and related technology. In February this year, the acquisition of Xilinx was completed, increasing the company’s earnings and free cash flow. Shortly after, in April, it made a second acquisition, this time of the company Pensa, with the aim of accelerating its presence in the cloud, enterprise and peripheral application markets. More acquisitions are planned, aimed at fueling AMD’s revenue growth, and investors are likely to underestimate its revenue and earnings potential. On the other hand, the launch of new products, still during this year, is expected to have an impact not only on current customers, but also increase the company’s ability to attract new consumers, helping to increase its value in the market.
Astra Space (ASTR)
As a private US space company, Astra Space first succeeded in getting its Astra 0007 rocket off the ground from Kodiak, Alaska, USA, and into orbit in November 2021. The market welcomed this feat with a 42% rise in share price. This year in March, the company managed to repeat the feat, but missing a launch in the previous month pushed its price down. However, Astra Space has many launches scheduled for 2022 and plans to move from the testing phase to the commercialization phase, so revenue is expected to pick up by the end of the year. The company has a net cash position estimated to last another two years, making it attractive to investors.
modern (mRNA)
It was mainly known for the development of the Spikevax vaccine against Covid-19, and it is to be hoped that the importance of this vaccine will not diminish in the future, quite the contrary. In fact, Moderna believes that the virus is advancing to an endemic phase and humanity will have to learn to live with it, which will always involve the use of vaccines. Currently, Moderna already has large orders for Spikevax for 2022 and 2023. On the other hand, the company is currently running 44 clinical research programs, of which an influenza vaccine and an HIV vaccine stand out. Successful launches are expected to increase the value of its shares.
GitLab (GTLB)
GitLab is a development platform focused on the open source Git system, which is crucial code for building the next generation of applications. It therefore has a high potential for further growth, considering that GitLab’s market opportunity in the DevOps market is around 40 billion dollars.
Rivian Automotive (RIVN)
Rivian produced 2,553 electric vehicles in the first quarter of 2022 and plans to increase production by the end of the year. Their partnership with Amazon provides a competitive advantage as it ensures stable cash flow for the business and increases trust in the brand. Rivian is trading at a low valuation of just 5.3 times its future order book, so the only major obstacle to the company’s success is the current supply chain disruption.
Sibanye-Stillwater Limited (SBSW)
Headquartered in South Africa, the multinational Sibanye-Stillwater is the world’s largest primary producer of platinum, the second largest producer of palladium and the third largest producer of gold. Anyone wanting to hedge against currency volatility could look at platinum and quickly realize the metal is holding at 2016 levels due to weak global vehicle production. But threats to Russian exports or renewed investor demand could wipe out the surplus. Sibanye-Stillwater shares are extremely undervalued compared to the market and its peers. Its dividend yield is 8%. The company also benefits from a strong cash position and good debt levels, and has plans to reduce capital expenditures in the coming years.
We work (WE)
WeWork is a provider of coworking spaces, including physical and virtual shared spaces. The company expanded greatly financially, prioritizing growth over profitability and stability, and was on the verge of collapse. But it does have an interesting product that has proven surprisingly resilient in the post-pandemic period. The current capitalization of around $4.4 billion offers growth potential. If, at any point, the company manages to reach more than 90% utilization, the stock can increase several times its current price.
According to Freedom Finance Europe, betting on shares of these seven companies can bring high profits to the investor, however, the brokerage emphasizes that this option “involves a high risk.” As such, she advises the investor to protect against loss “through diversification.” And, what is more important, “study to better understand the characteristics of the different sectors and their impact on companies”.
Source: Observadora
