Undervalued Stocks and Unusual Options Activity: Investor Opportunities in August 2024

Undercovered Dozen: Evergy, Navitas Semiconductor, Whirlpool And More

Newmont Corporation and Teck Resources are highlighted as a pair trade in the Industrials space. The 'Undercovered' Dozen series aims to highlight undercovered stocks on our platform for you to have another source for idea generation. This time around, we're looking at ideas published from June 28th - July 11th. Take a look at what these undercovered stocks and ideas might hold for you. And please join the conversation below to share what you think: are any of these worth following up on? Throughout the last year, there has been a lot of movement through the industrials sector, with gold prices driving upward and copper volatility in particular. The sector provides a unique investment opportunity, specifically among two competitors, as the landscape of the industry gathers speculation. We believe there is a window of opportunity to capitalize on the upside potential from the market discounting Newmont Corporation (NEM) and the potential underperformance of Teck Resources Limited (TECK). We propose 130% long exposure to Newmont Corporation and 50% short exposure in Teck Resources as gold price forecasts suggest significant top line upside for Newmont Corporation, while maintaining higher growth potential through exposure in copper and the company is liquid, providing more investment opportunity to scale operations or increase total production. Navitas Semiconductor Corporation's (NVTS) share price has been declining despite increasing revenues and the suitability of its power chips for AI data centers. The company specializes in gallium nitride ("GaN") technology for power devices used in data centers, smartphones, and more, with potential for growth in high-demand markets. Near-term weakness in electric vehicles and solar markets could impact Navitas' revenue growth and stock performance. The most important risk appears to be connected to the revenue exposure to China in case trade tensions with the U.S. escalate after November's elections. This thesis aims to show how it could suffer further, implying it is not a buy, but, first, I elaborate on how it could benefit from the proliferation of super-smart apps as more of its chips find their way into the power supplies of data centers specializing in hosting AI workloads. Chimera Investment Corporation (CIM) preferreds Chimera Investment Corporation PFD SER B (CIM.PR.B) and Chimera Investment Corporation 8% PFD CUM SER D (CIM.PR.D) look quite appealing as a means of generating very high dividend income, as they have current yields in excess of 11% and are well covered by both assets and cash flows. When fixed income instruments yield over 10% it is usually due to abnormally high risk, but the nature of the high yield here came about in a different fashion. These are supposed to yield 8% and I believe they have the risk level that would be appropriate for an 8% dividend preferred. However, due to the unique environment and the specific wording of these preferreds as they were issued, they are now yielding over 11%. As such, I believe buying CIM preferreds today gets investors a highly favorable reward-to-risk ratio. There's no doubt that technology is fueling economic growth. Not surprisingly, it also has generated outsized gains in 2023, year-to-date, and especially in the past month. Before the dip in recent days, (XLK) outperformed the S&P by almost 11% on a one-month basis per Seeking Alpha. According to Truist's Chief Market Strategist, Keith Lerner, this was the most extreme level of outperformance relative to the market since 2002. Now, I don't think the sector is in a bubble yet. But it probably isn't a bad time to think about more indirect ways to benefit from the artificial intelligence revolution as a means of hedging risk. One of my favorite ways to do so is through the utilities (XLU) sector. This is because increased investment from electric utilities to meet higher loads could accelerate earnings growth for AI and the larger tech sector. As a value-oriented investor, my goal tends to be to find quality utilities with valuations that don't yet reflect this reality. I believe I have found just that with Evergy, Inc. (EVRG), a large-cap publicly traded utility serving 1.7 million electric customers in Kansas and Missouri as of last year. Cool Company Ltd. (CLCO) is appealing for its yield and participation in a rapidly growing industry. However, concerns are valid due to the risks of an over-supplied LNG shipping sector. I expect this oversupplied condition to exist through 2026 due to a massive influx of new vessels and export supply lagging this growth. Regulatory risk in the export sector could extend this time frame and the retirement of older vessels will soften the oversupplied condition. Cool Company's balance sheet is stress tested in this article to determine the stability of its 14% yield. I believe CLCO will be able to maintain this dividend through market weakness and if the company is able to negotiate medium-term contracts to bridge over the 2025-2026 years, a significant portion of the company's risk will be mitigated. ClearBridge MLP and Midstream TR Fund Inc. (CTR) is one of the few remaining closed-end funds focusing on midstream energy companies, but it will not last long. The fund has a strong performance history and has outperformed the market over the past five months on a total return basis. The fund has also been preparing for an upcoming merger and recently bought out some of its investors. The merger creates some opportunities for near-term gains if you stick with the fund for two months as the fund is currently trading at a massive discount to net asset value, so the merger can unlock some value. uniQure N.V. (QURE) just recently reported results from its phase 1/2 study using AMT-130 for the treatment of patients with Huntington's Disease [HD]. This was interim 24-month data that showed patients given this gene therapy were able to show an 80% slowing of disease progression compared to external control with respect to a highly important rating scale used to measure disease. This positive interim data caused the stock price to trade higher by 50% premarket. If this catalyst was just released, then why should investors still consider an investment opportunity here? Aside from the fact that it still has a market cap of only around $200 million, the newly released results from this phase 1/2 study leads to several other catalysts for investors to look forward to, and the global Huntington's Disease market is projected to reach $1.21 billion by 2032. Whirlpool Corporation (WHR) has been in the rumor news recently that it may be acquired. Even if the acquisition is not on the table, the company is at a decent price where it is worth taking a risk on the long-term outlook. The First of Long Island Corporation (FLIC) is a bank with nearly 100 years of history and is headquartered in Melville, New York. Management expects a bottom in the net interest margin and potential growth with a reduction in the Fed Funds Rate, making FLIC a buy at its current price below $10 per share. K92 Mining Inc. (OTCQX:KNTNF) (KNT:CA) receives a "Buy" rating for its shares due to strong financial results and production growth and a positive outlook for gold. Operations show improved production and costs and get support by a record bullish sentiment in the gold market. Inovio Pharmaceuticals, Inc. (INO) is on track to file its BLA for INO-3107 in the latter half of 2024. INO-3107 has little in the way of pipeline support. Expect significant dilution as Inovio proceeds with its BLA and anticipated approval and launch of INO-3107.

6 Most Undervalued Stocks To Buy In August 2024

The P/E ratio of the S&P 500 is almost 29, and on the rise. That's nearly double the index's historic median of 15. This is a sign investors are eager to own stocks, and hopeful that large-caps continue their recent strength. The enthusiasm is not being applied uniformly, however. Investors are enamored with artificial intelligence (AI) and other trending growth sectors, leaving many other options overlooked. Dozens of companies with mundane business models or those facing temporary headwinds are trading at bargain prices as a result. There are advantages to buying stocks that are undervalued right now. Two big ones are downside protection and long-term upside potential. If those characteristics fit your investing strategy, join me to review six large-cap undervalued stocks that have upbeat outlooks and promising valuation metrics. How We Chose These Undervalued Stocks Several metrics can indicate undervaluation, including the PEG ratio and related earnings multiples like price-to-earnings and price-to-sales. Since each highlights a slightly different view of the business, they're best used in combination. We relied on three screening metrics to surface undervalued stocks: PEG ratio below 2, forward PE ratio less than 20 and target price upside above 16%. Those screens produced dozens of options, so we limited the list to the top 10 in terms of market capitalization. We then removed competing businesses. Specifically, Disney (DIS), Alibaba (BABA) and Pfizer (PFE) fit the screening criteria but were excluded because they overlap with Comcast (CMCSA), PDD Holdings (PDD) and Johnson & Johnson (JNJ), respectively. The resulting list is a sector-diversified group of potentially undervalued large-caps. The smallest company in the group has a respectable market cap of $116 billion. If you are in the market for smaller companies, see our list of small-cap value stocks. You might also want to review the best value stocks for 2024. 6 Top Undervalued Stocks To Buy In August 2024 The table below includes the six biggest and most interesting undervalued stocks right now, based on PEG ratio, forward PE ratio and price target upside, as described. All but PDD pay a dividend and four pay yields above 2%. The metrics below come from corporate reporting, Tradingview.com and Stockanalysis.com. Johnson & Johnson makes and sells a range of health care products, including medicines, therapies and medical equipment. Customers include wholesalers, hospitals, clinics and retailers. Why JNJ Stock Is A Top Choice The positives for JNJ include a solid portfolio with multiple market-leading products, a proven product development practice, strong free cash flow performance, healthy balance sheet and a regularly increasing dividend. Despite those appealing qualities, the JNJ stock price is down more than 6% since January. A primary issue for investors is the legal trouble surrounding JNJ's talc powder. Tens of thousands of lawsuits allege JNJ's baby powder contains cancer-causing asbestos. For years, JNJ has attempted to limit its exposure to these claims by moving the liability into a subsidiary and then bankrupting it. Cancer victims recently tried to block the bankruptcy, but a federal judge ruled in favor of JNJ. This does not clear the path for the pharma company, but it eliminates one roadblock. JNJ also recently agreed to pay $700 million to settle complaints by state attorneys general. Full resolution of the talc liabilities would likely win back investor support for JNJ. PDD Holdings operates e-commerce websites Temu and Pinduoduo. Competitors include Alibaba and JD.com (JD). PDD has Chinese roots but moved its headquarters to Ireland in 2023. Why PDD Stock Is A Top Choice PDD has a track record of innovating to engage customers and drive new business. One example is Temu's social media campaign that encouraged consumers to band together for large orders that would qualify for bulk discounts. Pinduoduo also recruited farmers to supply fresh produce for sale to consumers, bypassing middlemen to enable lower prices. The company's creative strategies and impressive growth record have some comparing it to a young Amazon. That prospect combined with PDD's reasonable valuation metrics makes this stock worth a look. Comcast provides broadband and wireless connectivity services to residences and businesses plus film and television content, streaming entertainment and theme park experiences through its NBCUniversal subsidiary. Why CMCSA Stock Is A Top Choice Comcast delivered record revenue, adjusted Ebitda and adjusted EPS in 2021, 2022 and 2023. The company then produced consensus-beating revenue and EPS in the first quarter of 2024. Even so, the media company's stock is down more than 13% for the year. Investors have been spooked by a downward trend in cable subscribers and Peacock's ongoing adjusted Ebitda losses. The Peacock streaming business is growing quickly in subscribers and engagement, but it will continue to consume Comcast's cash in the short term. Investors who can handle that headwind will benefit from Comcast's predictable broadband business, ability to produce free cash flow, ample dividend yield of 3.3% and heavy share repurchase activity. ConocoPhillips is an explorer, producer and transporter of oil, natural gas and natural gas liquids. The company owns unconventional and conventional reservoirs. Unconventional resources use extraction methods like fracking or directional drilling, which are more modern and complex than vertical wells. Why COP Stock Is A Top Choice In November 2023, J.P.Morgan analysts predicted a supply-demand gap in energy beyond 2025 -- a fancy way of saying energy prices will go up and remain high. Key factors are geo-political unrest in Russia and the Middle East plus rising demand in the U.S. Rising oil prices benefit COP. The predicted trend hasn't played out in a linear way, as prices year-to-date have been up and down. But an increase since early-June has not been mimicked by COP stock as it has been historically. This could mean upside for COP later this year. Analysts expect COP to deliver EPS of $8.93 in 2024, versus $8.77 in the prior year. Anheuser-Busch InBev produces, markets and distributes 500 brands of beer and other beverages. Key brands in the portfolio include Budweiser, Corona, Stella Artois, Michelob Ultra and Skol. Market segments include the Americas, Europe, Middle East, Africa and Asia Pacific. Why BUD Stock Is A Top Choice BUD enjoys leading market share within its brand portfolio plus global distribution. Those qualities combined with operational excellence can deliver a nice stream of growing cash flows and profits. Anheuser-Bush InBev appears to be on that path. In 2024, the beverage company delivered Ebitda growth of 7% to $19.98 million on a volume decline of 1.7%. One factor in the decline was a major U.S. boycott of Bud Light that began in 2023, the impact of which still lingers. The strategic direction of the company involves digital transformation to streamline orders from retailers and consumers, deleveraging and advancing sustainability goals. UPS provides transportation and related services in the U.S. and around the world. Why UPS Stock Is A Top Choice 2023 was a challenging year for UPS. Delivery volumes fell short of expectations and the threat of a strike by the Teamsters prompted some customers to switch to other providers. UPS executives, led by CEO Carol Tome, are confident the troubled days are behind. In March 2024, the company published aggressive three-year targets for revenue, consolidated adjusted operating margin and free cash flow. Should UPS meet those targets, which include double-digit revenue and cash flow growth, the stock is a good value at today's price. Importantly, UPS has a track record of operational improvements under Tome's "better not bigger" and "better and bolder" strategies. The company has also invested in automation to reduce costs and made inroads in higher-margin health care delivery. If you don't find the appreciation upside compelling, there's one more consideration. UPS pays the highest dividend yield on this list, a generous 4.8%. Bottom Line Undervalued stocks offer downside protection and long-term upside potential in one package. Many undervalued companies, including five on this list, also pay out a nice dividend -- meaning you get paid to wait for that upside to materialize. Read Next

Time to Kill? Buy These 3 Unusually Active Call Options

Maybe it's just me but this past work week seemed unusually drawn out. Of course, it doesn't help that we're in the dog days of summer, entering the four busiest vacation weeks between June and September. Nobody wants to be working right now but I digress. Speaking of unusual, Friday I tend to write about unusual options activity. Today, I'm zoned in on the nine call options from Thursday's trading with DTEs of more than 365 days. These are opportunities for anyone with time to kill and looking for long-duration call options. Of the nine (see below), here are the three I'd bet on. Oracle (ORCL) announced a collaboration Tuesday with Palantir that certifies its Foundry Platform and Artificial Intelligence Platform on the OCI (Oracle Cloud Infrastructure) distributed cloud infrastructure. "The collaboration aims to meet the growing demands for regulatory compliance, performance, and security in AI deployments. With this move, customers are expected to effectively scale their AI operations while adhering to sovereignty and security requirements," stated Oracle's press release. Oracle needed some good news after Elon Musk's xAI dropped its estimated $10 billion Oracle cloud expansion to support its supercomputer used to train xAI's Grok 2 AI chatbot. For Palantir, it means it gains access to a significant customer base that it can tap for new business on these two platforms. I remain bullish about Palantir's future with or without Oracle. Collaboration is icing on the cake. The company continues to generate greater revenue from its top 20 clients -- something like $55 million per customer, or $1.1 billion -- the Oracle collaboration should help bump that figure higher in 2024 and beyond. As for the Dec. 18/2026 $32 call, it has 890 days to expiration, nearly 2.5 years from now. The $9.75 ask price is a down payment of 30.5% is high, but your opportunity to make money selling the option provides a good early exit strategy. With a delta of 0.65812, you can double your money if it appreciates by $14.81 (54%) by December 2026. I'd say the odds are good that it's trading above $41.75 by Christmas 2026. Nu Holdings Nu Holdings (NU) is the parent company of Nubank, one of the world's largest digital banks, with more than 100 million customers in Brazil, Mexico, and Colombia. By customers, it is the fourth-largest in Latin America. In addition to providing digital banking, it also offers credit cards, personal loans, investments, and life insurance. Honestly, I wish we had something like this in Canada. Berkshire Hathaway (BRK.B) owns 2.2% of the company. Its $1.4 billion stake in the company accounts for just 0.3% of Berkshire's $410 billion equity portfolio. If it's good enough for Warren Buffett, it shouldn't be a problem for most buy-and-hold investors. Sure, operating in Latin America presents some risks not found in the U.S., but the growth of digital banking down there remains significant. It's a gamechanger for millions of average people. And here's the best part: it made $379 million in Q1 2024 from $2.7 billion in revenue. NU stock had four unusually active call options expiring on Jan. 16/2026, 554 days from now, with strike prices ranging from $12 to $20. The $17 call had a Vol/OI ratio of 95.36 with a whopping volume of 25,176. Nu's 30-day average options volume is 54,771, so that one call accounted for nearly 50% of its volume Thursday. Of the four, the $20 strike had the lowest closing ask price of $1.15, a downpayment of 5.8%. The highest was the $12 in-the-money call at $4.10, or a 34% down payment. In terms of the net price paid, the $12 call is the lowest, followed by the $15, $17, and $20. Assuming the share price appreciates by 15% in the next 12 months and another 7.5% in the six months after that, the share price at expiration would be $16.38, making the $12 call the only one worth exercising your right to buy. For this reason, I like the $12 call the best in this situation. Nike Poor old Nike (NKE). It can't seem to find its footing. Its shares are down nearly 31% in 2024 and 15% over the past five years, suggesting it might be time for CEO John Donahoe to step aside for someone younger who can breathe some life into the company. Donahoe is 63, he joined the board in 2014, becoming CEO in January 2020. The average age of the 14-person board is nearly 61. The election cycle currently underway in the U.S. should be a reminder to all investors that old doesn't necessarily equate to good when it comes to boards and management. Also, I would say 14 people is about two, too many board members. On June 28, it reported Q4 2024 results. Sales are falling, losing market share, and in 2025 it expects sales to decline mid-single digits compared to the analyst call for a 1% gain. "Nike's been under pressure for a couple of years now. I certainly think they have an opportunity now that the valuation's been reset extremely low to start getting some sponsorship, but it's just not going to happen today or this week," AlJazeera reported comments from Art Hogan, chief market strategist at B Riley Wealth. Although Nike's in the middle of a $2 billion cost-cutting plan, it isn't costs that are hurting its share price, it's forgetting to "Just Do It." I have confidence that it can get its business back on the rails over the next 18 months. For this reason, the Jan. 16/2026 $140 call looks appealing. The ask price is just a down payment of 0.7%. Based on a delta of 0.07736, it needs to appreciate by $12.41 (17%) for you to double your money by selling before expiration. The last time Nike stock traded at $85.80 (yesterday's closing price of $73.39 plus $12.41) before its 2024 collapse was September 2022. Before that it was May 2020. I think its shares could jump by 17% in one day with the right CEO hire to replace Donahoe. The risk/reward on this call seems stacked in your favor. On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.