3 Dirt Cheap Stocks With Potential

The 2010s were a prosperous time, with the market continuing to gain on a robust economy. But then the COVID-19 coronavirus pandemic hit, causing the biggest stock market crash since the 1929 crash that kickstarted the Great Depression.

While some companies went out of business, others experienced historic market cap highs in the aftermath. With so many high-profile companies precariously overpriced, smart investors are seeking dirt cheap stocks with potential to grow.

This guide outlines three stocks that are deeply discounted relative to historic norms. These companies lost value in the coronavirus pandemic that they haven’t regained.

That doesn’t mean they’re slacking though – each of them has access to vast resources and brand recognition that should keep them in business. In fact, their low market values in 2020 could be a discount for those willing to take the risk.

1. Albertsons Companies Inc

Albertsons (NYSE:ACI) initially planned to hold its IPO in 2015, but it backed out citing a turbulent market. It seems almost counterintuitive to then launch the IPO in June 2020 amidst the most uncertain economy in generations.

Company CEO Vivek Sankaran barely had a year in the seat when it happened, although he has experience from PepsiCo. The IPO began at $16 and still hasn’t climbed back up to that price.

Bad news for IPO investors, but it’s great news for anyone looking to jump on board.

There’s good reason to think the second-largest grocery chain in the U.S. can survive, despite rising grocery prices and shrinking margins.

Much of this is because of the company’s early investment in grocery delivery and pickup, including a $300 million investment in food delivery service Plated.

It truly believes this is the key to providing convenience for its customers in a new way of shopping and eating.

Modern grocery shoppers need both value and convenience, and even restaurants around the country are offering pre-made meal kits.

The company has fresh meat, produce, and baked goods, and you won’t find any self-checkout lanes in its Safeway-branded stores.

This is because the company still prides itself in being part of the community while competitors like Walmart and Amazon’s Whole Foods push towards contactless automation.

Still, the large distribution network, along with a temporary helping hand from the National Guard in keeping store shelves stocked give investors confidence in Albertsons while competitor Kroger’s (NYSE:KR) investors try to offload their investment.

In fact, the company only barely became profitable in 2018, but home grocery and meal delivery are the keys to that profitability continuing, including $6.77 in profits for the second quarter of 2020.

2. CVS Health Corp

CVS Health (NYSE:CVS) peaked in 2015 on the tail of a flurry of announcements.

The company partnered with Target to take of its pharmacies and clinics, while acquiring Omnicare extended its reach into long-term care and assisted living facilities.

Unfortunately, both CVS and its biggest competitor Walgreens Boots Alliance Inc (NASDAQ:WBA) saw the industry struggle for the past five years since.

The company has been paying off debt and it outpaced the S&P 500 and Dow Jones in its recovery from the coronavirus pandemic, albeit just barely.

Sales declined over 25 percent year-over-year in the second quarter of 2020, although the company’s earnings estimates were raised in October based on a strong performance by the company.

Most analysts give CVS a composite rating of hold, given its forward P/E ratio of 8 and a PEG ratio of 1.43. The company is at the forefront of a healthcare revolution that’s likely to keep it afloat during a turbulent market in 2021.

It’s expanding from selling products and fulfilling subscriptions to telemedicine, delivery, and even virus testing from the parking lot, and this will be foundational to its future growth.

As the coronavirus pandemic picks up during the winter of 2020, interest in vaccinations for both the flu and COVID-19 are getting higher.

President Donald Trump contracting the virus and successfully recovering only fuels the desire for more Americans to get the vaccine.

The company’s large footprint could make it a central figure in the new world of telemedicine, and one can only wonder how it’ll pivot if cannabis or psilocybin is federally legalized.

3. Kirby Corporation

Kirby Corp (NYSE:KEX) is the biggest tank barge operator in the U.S., with shipping routes on the Mississippi River system, along with all coastal regions in the country.

It also provides aftermarket parts and services for engines, transmissions, and other gear used for industrial applications, like oilfield drilling and power generation.

This tied the century-old company directly to the oil industry as prices fell below zero during the pandemic shutdowns.

This caused savvy investors to short both oil and its transports through the troubled summer of 2020. The market cap shrank as revenues slowed, causing about a 20 percent loss year over year compared to 2019.

It wasn’t until late September 2020 that short interest stopped, and investors started looking at Kirby as a possible bargain buy. The company is still on pace to top $2 billion in sales for the year.

Several hedge funds are holding or buying KEX in the fourth quarter of 2020, with many trusting in the long-term viability of its transport.

While additive manufacturing may replace transport of finished goods, the bulk goods and liquids transported by Kirby will remain needed, even in a poor economy. In fact, many hedge funds are depending on the stock for a long-term investment.

Dirt Cheap Stocks with Potential: The Bottom Line

The end of 2020 is sure to be rough. Between a presidential election, the end of government-backed financial assistance, and rising geopolitical tensions, there may not be many safe places to invest your money.

While some companies are experiencing all-time highs, others are available at a deep discount compared to the general market.

Albertsons is at the forefront of how we shop for post-pandemic groceries and meals. CVS is expanding beyond prescriptions into telehealth and curbside vaccinations. Kirby is continuing to bring necessary goods through the country’s waterways. Each is a fundamental part of the economy that’s available for dirt cheap right now.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.