Canadian investors are searching for undervalued stocks that have the potential to deliver massive gains in 2021 and beyond.
Why Crescent Point Energy stock looks cheap
Crescent Point Energy (TSX:CPG)(NYSE:CPG) went from $47 per share in 2014 to below $1 at the lowest point of the 2020 market crash. Since then, the stock has enjoyed a nice bounce, and more gains should be on the way.
Crescent Point went through the painful process of selling non-core assets in recent years to reduce debt and stabilize the business. Most of the heavy lifting is now done, and the company’s balance sheet is in decent shape. In fact, Crescent Point, which was one of Canada’s most aggressive buyers of assets in its heyday, is once again making strategic acquisitions.
Oil prices staged a strong rebound in Q4 2020 and the momentum continues. Analysts originally expected oil to average US$50 per barrel this year. That’s likely to be a conservative view with WTI holding above US$60 right now and pundits calling for a run to US$75 in the coming months.
Crescent Point reported solid 2020 results. The company generated $122 million in excess cash flow last year, helping it reduce debt. Crescent Point expects to generate $600 million in excess cash flow this year if WTI oil averages US$60 per barrel.
The stock trades near $4.50 at the time of writing. Volatility should be expected, but Crescent Point has significant upside potential as the oil market recovers.
Why B2Gold could soar
B2Gold (TSX:BTO)(NYSE:BTG) is a low-cost gold miner with operations in Mali, Namibia, and the Philippines.
The company just announced strong production results for Q1 2021, putting the miner on track to meet its guidance of 970,000 to 1.03 million ounces this year. All-in sustaining costs are expected to be US$870-910 per ounce.
The board doubled the dividend in Q3 2020 to US$0.04 per share. The annualized distribution of US$0.16 provides a yield of 3.2% at the time of writing.
Gold fell from above US$2,000 per ounce last August to below US$1,700 in March. The metal has subsequently moved higher, recently trading near US$1,780 per ounce. Additional upside is expected if U.S. treasury yields continue to pull back.
The U.S. dollar showed some strength in Q1 but could fall in the coming months if the U.S. economy rebounds at a faster pace than anticipated. Coming into 2021, some analysts expected the dollar index to slide as much as 20%. Gold is priced in American dollars, so a drop in the value of the dollar index is often viewed as positive for gold. The yellow metal might also benefit from inflation fears in the coming months. Major U.S. consumer goods companies are already announcing price hikes to offset rising input costs.
B2Gold traded as high as $9.75 per share last August. At the time of writing, investors can pick up the stock for $6.20 and collect a decent yield while they wait for the next upswing in the gold market.
If gold takes a new run at US$2,000 per ounce, this stock could hit $10 per share.
The bottom line
Crescent Point Energy and B2Gold appear undervalued today and could deliver massive gains for investors through the end of 2021 and into next year.
The Canadian market has a number of top stocks that currently fly under the radar and trade for less than $10 per share. These stocks can be volatile but also offer a shot at huge returns.
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 Andrew Walker has no position in any stock mentioned.