It can be hard to find a good retail bargain for less than twenty bucks these days. The same goes for retail investors shopping for stocks. Apache (NASDAQ: APA), ICICI Bank (NYSE: IBN), and America Movil (NYSE: AMX) fit the bill. With the markets hovering around record highs there is limited “low hanging fruit” to pluck for bigger gains.
Finding the next round of winners in this market may involve looking outside of the usual places (technology, e-commerce, etc.) and in areas like energy, banking, and telecommunications. Companies with exposure to higher growth emerging markets should also be considered.
Here we look at a few stocks that are a bit outside the box but appear to be priced for significant gains based on favorable dynamics in their respective industries and markets.
Is Apache a Good Energy Rebound Play?
Investors that buy into leading oil and natural gas producer Apache (NASDAQ:APA) here may be getting in close to rock bottom. Like other energy players, Apache went into a deep funk in 2020 when revenue was expected to have fallen around 35%.
But as the oil market stages a comeback, Apache is in a solid position for a sharp rebound of its own. Its diverse global asset base of reserves and drilling prospects are top notch with key oil and gas operations in the U.S., U.K., South America, and Egypt.
The biggest growth driver, however, is Apache’s domestic presence in the Permian Basin which is home the some of the industry’s highest internal rates of return. Apache owns nearly 3 million acres in the region which accounts for more than half of its oil reserves and production.
As energy demand improves in 2021, Apache’s top line growth forecast of 16% would be the best it has been since 2017. And while Apache’s $8.2 billion long-term debt balance is a major concern, an improvement in cash flow and operating expenses could get the ball rolling on debt reduction—and open up growth channels that are presently limited by its debt burden.
The Street’s opinions on Apache are all over the map but have trended more favorably in recent weeks alongside an improved oil market outlook. Since the start of the new year Apache (~$17 per share) has received a pair of upgrades to ‘buy’ and multiple target prices in the $20 to $24 range.
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