Markets are heading higher again. Bargain stocks are difficult to find. But if you dig deep, there are fantastic companies trading at deep discounts.
The two stocks below are known for their high quality. Due to short-term pressures, shares trade at a 40% discount. If you’re looking for cheap stocks, keep reading.
This is a monopoly
Everyone wants to own a monopoly. These businesses earn high returns for extended periods because they possess permanent competitive advantages.
Enbridge is a pipeline company. Pipelines are like toll roads. That is, they’re great for making money. If fossil fuel producers want to ship their output quickly and safely, they often need to go through Enbridge.
The best part is that pipelines are incredibly expensive to build. We’re talking millions of dollars per kilometer. You also need to get permits and regulatory clearance that could take years, or even decades. All of this works to reduce the availability of pipelines. Canada has had a pipeline shortage for a long time.
Pipeline stocks have benefited from this supply shortage. As the biggest pipeline operator in North America, Enbridge has taken a lion’s share of the profits. Fossil fuel producers need to get their production to market, and all too often, Enbridge is the only game in town.
Due to the COVID-19 pandemic, energy prices have fallen dramatically. Oil prices are one-third lower since the year began, putting the pressure on Enbridge’s customer base. In turn, that’s sent ENB stock down 40% from its all-time highs.
Once the pandemic eases, conditions should normalize quickly. While that may take a year or two, in the meantime, you can keep yourself content with the 8% dividend, staying patient until the discount narrows.
This stock is too cheap
Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) is another company hit hard by the COVID-19 crisis, but long term, should escape without too much permanent damage.
As its name suggests, Brookfield Property owns real estate. This isn’t just any real estate — it’s some of the best property in the world, like First Canadian Place in Toronto and Canary Wharf in London.
The coronavirus pandemic has impacted rental receipts, especially as companies shifted to work-from-home setups and retailers dealt with government lockdown orders. That’ll impact the short-term value of the properties, but if you have a long-term mindset, you can take advantage.
Right now, Brookfield Property stock trades at a 40% discount to its underlying value. If the world returned to normal suddenly, you could almost double your money with this stock.
Of course, the world isn’t returning to normal anytime soon. It could be several years, but that won’t stop shares from advancing in anticipation.
Right now, the surge is still to come. Investors remain sour on businesses directly impacted by COVID-19. But like Enbridge, Brookfield Property has a healthy dividend, standing at 6.5%. You can lock in the discount and stay patient for the rise.
If you want more cheap stocks....
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
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.
The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Brookfield Property Partners LP. Fool contributor Ryan Vanzo has no position in any stocks mentioned.