Revealed: 3 Dirt-Cheap Value Stocks Trading Under $10

Looking for cheap stocks? Look no further than Crescent Point Energy Corp (TSX:CPG)(NYSE:CPG), Slate Office REIT (TSX:SOT.UN), and one other company.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

It’s been a tough few years for value investors, who have seen cheap stocks languish while their peers chase high flyers.

But many of the best value investors are convinced the investing method will have its day in the sun once again. Remember, value investing tends to outperform when overall stock market averages fall, and we really haven’t seen a bear market since 2011. When most stocks are falling, investors will want to get exposure to non-correlated parts of the market.

Let’s take a closer look at three of Canada’s cheapest value stocks — companies that offer a compelling reason to load up on their underpriced shares today.

Crescent Point Energy

Don’t get fooled by the recent run-up in its shares. Crescent Point Energy (TSX:CPG)(NYSE:CPG) is still one of the cheapest stocks in the energy sector, which is perhaps Canada’s cheapest sector. In fact, a few weeks ago I said Crescent Point could indeed be Canada’s cheapest stock.

Shares are up approximately 40% since I penned that article, and I think they have a whole lot more upside potential.

Crescent Point focuses on light sweet crude that is cheap to take out of the ground. This is a smart strategy no matter what the underlying energy market is up to, but it’s particularly cunning today. Fixed costs stay the same, while the price of oil is bumping up against US$65 per barrel. That’s a recovery of approximately 50% versus December lows.

Shares trade at approximately one-third of the value of the company’s reserves, which were valued at $13 per share back when crude was sitting at approximately US$55 per barrel. And if crude averages US$60 per barrel this year, Crescent Point could generate some $700-800 million in free cash flow. Not bad for a company with a $3.1 billion market cap today.

Air Transat

Transat A.T. (TSX:TRZ), which is a distant third in Canada’s airline pecking order, has seen recent poor results pull down its share price to ridiculously cheap levels. This should bode well for long-term buyers.

Like its competitors, Air Transat has been hurt by rising jet fuel prices. Hedging helps, but there’s only so much that can be done. The company’s recently concluded first quarter showed more of the same results, with a net loss of $0.96 per share excluding one-time items. Ouch.

But the future looks more rosy. The company is in the middle of an ambitious project to cut overhead. It is also expanding into the hotel market, which should be a more dependable income stream. It recently started construction on its first Mexican hotel. And the company has the balance sheet strength to weather this storm, with more than $600 million in cash.

Investors are buying shares for a price-to-book value ratio of just 0.4. It doesn’t get much cheaper than that.

Slate Office 

Slate Office REIT (TSX:SOT.UN) made headlines a few weeks ago when it announced a massive dividend cut. Distributions went from $0.75 per unit annually to $0.40. Shares dropped more than 10% on this news and haven’t recovered, trading at close to a 52-week low.

But investors who focused on the dividend cut missed that underlying results weren’t so bad. The company generated $0.79 per unit in funds from operations (FFO) in 2018, with even better results expected in 2019 as occupancy improves. That puts shares at just 7.6 times FFO. You won’t find many cheaper REITs on a price-to-FFO basis.

The company is also trading at a pretty significant discount to its net asset value. Slate Office pegs its value at $8.55 per share. As I write this, shares are trading hands at $6.02. That’s a 30% discount — one of the widest gaps in the Canadian REIT world.

And remember, investors are still collecting a 6.6% dividend while they wait for Slate Office shares to recover.

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 Nelson Smith has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »