This past year has been a very good one for the North American markets. The TSX and the Dow Jones have both climbed around 20% thus far in 2019.
It has generally been a good year for investors, as many stocks had impressive performances, although beating the market hasn’t been impossible as there have been some standouts this year, including my pick for 2019, AltaGas Ltd (TSX:ALA).
What happened in 2018
AltaGas was coming off a horrible year in 2018 that saw its share price collapse, losing 52% of its value. The company’s acquisition of WGL Holdings hadn’t gone as smoothly as expected, and acquisition-related costs were weighing its quarterly results down.
AltaGas spun off its Canadian operations into a separate stock offering that now trades under AltaGas Canada (TSX:ACI). The original AltaGas stock would focus more on U.S. operations in light of the WGL acquisition. Late in the year, the company also slashed its massive 16% dividend yield.
Overall, it was a busy 2018 for the company, and there were many reasons for investors to be bearish on the stock, from poor quarterly results to the company switching gears to the U.S. and dividend investors being disappointed with the payouts being cut.
This year has been a much stronger one for the company
The year 2019 has been a completely different story for AltaGas. Year to date, its shares have climbed more than 43.4% as we head into the last month of the year.
For investors who bought shares of the company at the beginning of the year, the stock’s dividend payments will add another 6.9% before 2019 is over, giving investors a total return of more than 50% for the year.
While things can still change in the last month of the year, the stock doesn’t have earnings coming up; unless there’s another big market collapse similar to that of one year ago, it’s unlikely that the stock’s impressive returns will change significantly.
One of the reasons the stock has done so well is that it’s been able to avoid bad press and also hasn’t had any disastrous quarters. The stock was a solid value buy heading into 2019, trading well below its book value despite it still being a strong business with a lot of recurring income.
It had seen a lot of selling in 2018, and its low price gave it a good chance to attract value investors looking for some quality stocks to invest in, which is exactly what we witnessed at the beginning of 2019.
Is it still a good buy heading in 2020?
AltaGas still looks undervalued, as it’s still below book value and trading at a very modest five times earnings. There’s definitely a lot of room for the stock to continue to climb even further.
While it’s not my top pick for 2020, it may not be a bad idea for investors to continue to hold the stock into the new year. Now that there’s a bit more bullishness behind the stock, it could have an easier time building on its strong performance in 2019.