3 Stocks Under $30 for the Long-Term Investor
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This week the S&P 500 crossed the 4,000 mark for the first time ever capping a remarkable run. Just over a year ago, the index was flirting with the 2,000 level at the depths of its COVID-19 plunge.
With U.S. stocks trading at record levels there aren't many low-priced large and mid-cap stocks left for investors. There are, however, still a few intriguing names out there that may fit the bill for long-term investors.
Is General Electric Stock Undervalued?
General Electric (NYSE:GE) stock has recovered nicely along with the broader market but at $13.35 per share remains well off its glory days of 2001 when it peaked above $50. Granted, GE is not the company it was 20 years ago, but it appears to be on track to restore its reputation as an American icon.
Since the onset of the pandemic, GE has been in cost-cutting and cash-preservation mode like most industrial companies. But after managing to be profitable in 2020, it can now focus on some of its key growth opportunities.
No longer simply a manufacturer of light bulbs and other electrical products, GE operates a well-diversified model these days. It's health care business has benefitted from demand for COVID-19 products, but longer-term should continue to grow as the world's population ages and its product set expands.
Another positive development is the turnaround in the troubled Power division. The business has turned profitable and exited the year with an $80 billion order backlog thanks to strong demand for gas turbines. The Renewable Energy division is not yet profitable but given the expected boom in clean energy spending, wind turbine sales should soon drive sustainable profit growth. The aircraft engine business may also be on the rise due to improving demand from commercial airliners and the military.
Still, the most compelling (and less talked about) aspect of the company's transformation is that the GE of the future will derive about half of its revenue from services. General Electric is on the comeback trail. Patient investors willing to go along for the ride may be rewarded with some outsized returns over the next few years.
What is a Good Oil and Gas Stock?
The energy sector is out of the gates fast in 2021, but there is one name that may have plenty of gas in the tank. Devon Energy (NYSE:DVN) is an oil and gas producer that used to trade above $100 per share. Now trading in the $20's, the stock is a cheap way to play the turnaround in the energy cycle.
Devon Energy owns a portfolio of quality, onshore oil and gas assets in the U.S. and Canada. It operates on the lower cost end of the spectrum. This year the company plans to crank out as much as 300,000 barrels of oil per day as global demand returns. If the global supply side of the equation doesn't weigh on pricing, higher oil prices should drive strong profitability relative to peers.
Looking past this year, Devon Energy should also derive growth from its recent acquisition of WPX Energy. Its Oklahoma-based neighbor owns attractive oil and gas assets in the Permian and Williston Basins and is expected to produce significant cost synergies.
Devon Energy's low-cost production profile and solid balance sheet give it a competitive advantage over other E&P plays in the region. It now owns some of the most attractive acreages in the shale-rich Delaware Basin and has the scale to compete with the big dogs. The mid cap stock is on pace to return to the large-cap ranks so it probably won't be trading below $30 for much longer.
Is Mattel Stock a Buy?
Mattel (NASDAQ:MAT) is another low-priced stock that is worthy of a long-term buy and hold. The classic toy manufacturer's shares go for about the price of a Hot Wheels action set at around $20. The stock has already doubled off its pandemic bottom but may have the wheels to double again and drive past its 2013 peak of $48.48.
As the company behind legendary toy brands like Fisher-Price, Barbie, and American Girl, Mattel also sells toys based on popular children's movies like Cars and Toy Story. And speaking of movies, Mattel is in the filmmaking business these days. Rather than simply piggybacking off popular Disney films, the company is seizing an opportunity to generate higher toy sales by developing its own media offerings.
The subtle, but astute move may pay big dividends over time as Mattel's original content gains traction with audiences and becomes more engrained in pop culture. Movies, tv shows, and digital games are powerful mediums these days and can drive complementary sales of all sorts of products. Just ask Disney.
Mattel is partnering with the likes of Sony, Paramount, and Warner Brother to produce its own films. It is also developing cartoon programs that can be viewed on Netflix. The company's venture into the media space has been well received by the market so far but it still very much in the early stages.
No longer just a toy company, Mattel's dolls, cars, action figures, and even board games are coming to life on screens everywhere. As this storyboard plays out, the Mattel franchise could soar in value.