While it might seem like right now is an easy time to find value stocks, there are quite a few factors an investor should consider before putting their hard-earned cash into any given stock. Value stocks aren’t just cheap stocks with some good earnings reports or a strong potential upside in fair value price.
Value stocks go one step further, and aren’t just priced low, but also lower than other companies in the same industry, yet with strong fundamentals.
With that in mind, there are a few companies out there right now that fit into this category. Telus Corp. (TSX: T)(NYSE: TU), Royal Bank of Canada (TSX: RY)(NYSE: RY) and Westshore Terminals Investment Corp. (TSX: WTE) are three companies I would consider adding to my portfolio.
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Telus
Analysts are pretty confident in the future of Telus. While the company might not be the mega giant of Rogers Communications or BTE, it does have one strength: its focus on wireless. Unlike the United States, however, there just isn’t the competition, which leaves plenty of opportunity for growth for the next decade at least.
With the fibre-to-home builout already underway, Telus should take advantage of 5G before its peers, leaving many consumers to choose Telus before other telecommunications industries.
While the stock is slightly undervalued at the moment, analysts project a potential upside of 35% over the next year, with very little chance of it sinking any lower than its current share price of $48 as of writing.
Royal Bank
Things might be difficult for Royal Bank in the short term, but that leaves some great opportunities for long-term investors. The stock is currently trading 10% below fair value, with a potential upside of 20% in the next 12 months. Similar to Telus, this bank also isn’t expected to drop much lower even during the recession.
That’s because Royal Bank has set itself up for such a downturn, bringing in revenue from its United States expansion and the wealth and commercial management sector. Although the bank is quite exposed to a housing industry ripe for a downturn, Royal Bank remains confident that it will come out the other side relatively unscathed. Analysts expect Royal Bank to continue dominating the banking industry for some time.
Westshore Terminals
While the first two stocks here might be familiar, investors might not be so familiar with Westshore Terminals, yet Westshore deals with a product analysts believe will continue being in demand for a least the next decade: coal.
Westshore operates a coal storage and loading terminal in British Columbia, deriving most of its revenue from the rates charged for loading coal onto ships that take it away from there. The stock is 14% undervalued as of writing, with analysts projecting a potential upside of 33% over the next year.
Again, analysts don’t see the stock going much lower, as those companies that use coal need coal. Having a product that’s a proven necessity means that even during a recession, Westshore should continue pumping out strong revenue.
