Value stocks are a great way to get rich and stay rich. From Warren Buffett to Seth Klarman, value investors have shown that their strategies can produce market-beating results for decades at a time.
In a bull market, value stocks can be hard to find. Over the past few years, many classic value stocks have actually become quite expensive.
If you want to find high-upside value stocks with low-risk profiles, you need to dig deep. We did the digging for you and found three value stocks with exciting futures.
Trust the story
On the surface, Boardwalk REIT (TSX:BEI.UN) doesn’t seem that impressive. Over the last five years, shares have lost 25% of their value. The dividend is just 2.5%, significantly less than most of its peers. The stock’s recent underperformance has forced the market to apply a dirt cheap valuation to the company. That’s a mistake.
Boardwalk converted to its current REIT structure in 2004. Over the next 15 years, shareholders experienced annual returns of more than 10%, handily beating the market with less volatility. Sure, shares have underperformed in recent years, but over the long-term, this company has a proven track record of producing double-digit returns.
Over the last 15 years, it was possible to generate annual returns of 15% or more with Boardwalk stock. The trick is simple: use a buy-and-hold strategy, purchasing more shares during times of weakness. Now trading at a significant discount to its net asset value of $62 per share, this is the exact time to double-down on this high quality stock.
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Grab this discount
Africa Oil Corp (TSX:AOI) isn’t a company many investors have heard of, but you likely know some of its partners: Exxon Mobil, Chevron, and CNOOC.
Rather than operating its own projects, Africa Oil has taken the “portfolio approach” — owning minority interests in several opportunities across multiple geographies. For example, the company has a 35% interest in Africa Energy, a 25% interest in Impact Oil & Gas, and a 19% interest in Eco-Atlantic Oil & Gas.
The main investors for most of its projects are multi-billion dollar oil giants such as the ones listed above. As the largest investors in each project, these giants are also in charge of operations. That’s a huge advantage given these companies are well-known as some of the most efficient capital allocators in the business.
The current value of Africa Oil’s assets, some of which are publicly traded, is currently $190 million. The company also has $485 million in net cash, resulting in a net asset value of $675 million. The current market cap is just $575 million, representing a quick 17% in upside. The discount may not last for long, however.
Take a chance
Sometimes great value investments require a bit of risk. The potential payoff could make that extra risk an easy bet. That’s the case with SNC-Lavalin Group Inc (TSX:SNC).
This stock is either worth significantly more or significantly less than the current trading price. From 1995 to 2018, shares increased in price by more than 2,000%. This company knows how to grow and deliver value to shareholders. But since the start of 2019, shares have fallen by 60%.
Earlier this year, the company took a big one-time loss on a major project. It was also caught up in a political scandal. Most likely, conditions will return to business as usual. On a normalized basis, shares look to have 50-100% upside.
There’s uncertainty to the political situation, but more likely than not, a settlement will be reached, imposing a limited one-time cost.
For patient investors willing to wait out the controversy, SNC-Lavalin is the ideal turnaround pick.
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 Ryan Vanzo has no position in any stocks mentioned.