Play Your Trump Card With These 4 Stocks

Play your very own Trump card and profit from undervalued stocks such as Magna International Inc. (TSX:MG) (NYSE:MGA).

| More on:
Profit dial turned up to maximum

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Not too many months ago. headlines proclaimed that trade in North America was at risk, and President Donald Trump had little good to say about the trade relationship between Canada and the United States.

Fast-forward to the present day and these troubles seem far behind us, yet NAFTA anxieties have left their mark on several stocks, thereby creating a number of intriguing opportunities.

Let’s take a look at how you can play your very own Trump card and profit from a handful of undervalued stocks that are due to re-rate in the near future.

Shipping and Logistics

Most directly affected by trade rhetoric were companies that dealt in the movement of goods between Canada and the U.S. In this segment we will examine Algoma Central Corp. (TSX:ALC) and Logistec Corp. (TSX:LGT.A).

Small-cap Algoma operates shipping vessels that move dry and liquid materials throughout the Great Lakes. Increasingly, however, the company’s business is diversifying to include short-sea and cement carrier segments which have meaningfully contributed to revenues.

Algoma sports a growing dividend and steadily improving free cash flow. Trading around 10% above its 52-week low and with attractive valuation metrics, investors in the company get a healthy balance of growth and value with a 3% dividend, to boot.

Logistec’s business, by contrast, is concentrated in cargo handling facilities and environmental services. In 2018, the company made a couple of strategic acquisitions, which focused upon expanding its footprint in the U.S. Gulf Coast.

Also trading around 10% above its 52-week low, Logistec remains significantly more expensive on a relative basis than Algoma, as it is priced for stronger growth. Investors willing to pay a premium for the company’s future potential will collect a yield of a little less than 1% in the meantime.

Automotive parts and suppliers

The auto industry in North America is highly integrated, as parts routinely move across the border for assembly into finished products. The two companies that we will investigate here are heavyweight Magna International Inc. (TSX:MG) (NYSE:MGA) and lesser-known Exco Technologies Ltd. (TSX:XTC).

When it comes to auto parts, $20-billion Magna is impossible to ignore. Geographically speaking, approximately half of the company’s business relies upon North America and trade tension in its largest market weighed on the stock.

Now, Magna trades around 10% above its 52-week low at a price-to-earnings multiple of about 7 and a price-to-book ratio of nearly 1.5. With a consistently growing yield of roughly 3% and superb fundamentals, the company’s shares deserve a second look.

Exco, on the other hand, is a small-cap manufacturer for the die-cast, extrusion, and auto markets. Like Magna, a large portion of the company’s business relies upon industries in the North America.

In terms of valuation, Exco checks the same boxes as Magna, trading at inexpensive multiples and close to its 52-week low. The company offers dividend growth and currently yields almost 4%.

Bottom line

The aforementioned stocks have had their prices negatively affected by a series of circumstances that have largely resolved themselves at this point.

While cyclicality remains a concern in the sectors in which the companies discussed operate, these stocks have strong fundamentals and offer an attractive mix of growth, value, and income at their current valuations.

It might just be time to play your Trump card.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor James Watkins-Strand has no position in any of the stocks mentioned. The Motley Fool owns shares of EXCO TECH. Magna is a recommendation of Stock Advisor Canada.

More on Stocks for Beginners

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »

edit Safe pig, protect money
Stocks for Beginners

2 Safe TSX Stocks for Beginners to Buy in a Market Correction

These two TSX stocks are still solid long-term buys today, despite the recent market correction.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Stocks for Beginners

3 Real Estate Stocks to Buy for Terrified Investors

Motley Fool investors shouldn't be afraid of investing in real estate if they have a long-term growth strategy, but these…

Read more »

Value for money
Stocks for Beginners

Market Correction: A New List of Value Stocks Just for You

The 2022 stock market has been bearish, with tech stocks being the biggest losers. But tables are turning. It's time…

Read more »

Knowledge concept with quote written on wooden blocks
Stocks for Beginners

3 Reasons Why Inflation Impacts Canadian Stocks

Here are the three most common ways inflation impacts Canadian stocks, why they're selling off, and when you'll want to…

Read more »

Growth from coins
Stocks for Beginners

2 Growth Stocks New Investors Can Buy on the Dip Today

After the recent market correction, many growth stocks look cheap, making it a perfect time for stock market beginners to…

Read more »

Make a choice, path to success, sign
Stocks for Beginners

3 Reasons Cineplex Stock Is a Better Buy Than Air Canada

Although both Air Canada and Cineplex stock are ultra-cheap, here's why the entertainment company is a much better investment.

Read more »