The new year has already seen unlikely stocks picking up huge gains. From AMC to GameStop over the border, to Cineplex and BlackBerry closer to home, momentum abounds. But does this mean that Canadian investors should start getting in on highly risky speculative plays? Or is there a less volatile way to play value stocks? Let’s explore three value picks together that could beef up a portfolio with less capital risk.
Blending gold, tech, and healthcare
Looking through gold stocks throws up a lot of good ideas. However, after last year’s gold bull run, not all of these stocks are still good value for money. Kinross Gold (TSX:K)(NYSE:KGC) bucks that trend. This is an attractively valued pick that nevertheless blends a bunch of quality indicators. A solid all-rounder, Kinross has seen earnings growth break the 500% mark in the last 12 months.
Annual growth in the same area is likely to be a more quotidian 20%. That said, though, five-year returns are estimated to be in the 250% range. Beyond Canada and the U.S., Kinross is also active in South America and the Russian Federation. For a diversified play on the safe-haven asset of gold, Kinross ticks a lot of boxes while selling at around 30% of its estimated fair value.
Photon Control (TSX:PHO) may not be a familiar name to a lot of Canadian portfolio holders. However, it’s potentially one of the best overlooked stocks on the TSX for several reasons. It’s not just its ticker that’s appetizing: Photon Control can boast a price tag that’s around half its estimated future cash flow value. Revenue from its optical sensors and systems is also expected to grow 13.5% annually over the next one to three years.
Notably, Photon Control is a low volatility play, with its share price exhibiting less movement than 75% of the TSX in the last three months. Despite this, Photon Control is looking all set to deliver on five-year shareholder returns of 225%. A price to book of 3.6 may look a little steep compared with the market. However, when you factor in the electronics industry average of 6.6, Photon Control is a play for strong peer-relative value.
Long-term gains and less risk
If ever there were a good time to pack healthcare stocks in a TSX portfolio, it’s now. But why does Viemed Healthcare fit the bill in particular? Aside from the applicability of its respiratory and oxygen related systems, Viemed boasts a P/E of 11.8 times earnings compared with the healthcare average of around 30. And despite growing its earnings by 238% in 12 months, Viemed is still capable of 75% upside.
These three stocks were hand-picked so that they can be held in a single portfolio without industrial overlap. However, investors should – as always – check their exposure to any one sector before adding to a portfolio. That said, these three names could be used in concert either to start a fresh basket of TSX stocks, built around a strict value strategy, or for a little “growth at a reasonable price” seasoning in an established portfolio.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Viemed Healthcare Inc. The Motley Fool recommends BlackBerry, BlackBerry, and Photon Control Inc.