A substantial gap between price and value can make up for a lot of other negatives. Just two years ago the consumer discretionary sector was out-of-favour with investors due to poor retail spending data and a number of major companies were languishing. Examples included JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN). Fast forward two years and the share prices of these two major retailers are up 78% and 68% respectively.
Currently, the mining services sector is home to many beaten-up stocks and is one place where there could potentially be a number of opportunities but there are also other major companies which have been underperforming recently too.
Seven Group Holdings Ltd (ASX: SVW) is exposed to the troubled mining sector and also to the media sector via its investment in Seven West Media Ltd (ASX: SWM). The company has a market cap of $2.7 billion and while it has bounced back from its one-year low, it is still down nearly 20% in the past 12 months.
Worleyparsons Limited (ASX: WOR) is exposed to a broad spectrum of commodity and energy markets. The stock has lost 42% of its value in the past 52-weeks, but still boasts a market cap of $3.7 billion and a significant pipeline of work.
Tatts Group Limited (ASX: TTS) is best known for its operation of lotteries and wagering services across many states and territories in Australia. The $4.1 billion company has defensive characteristics which should arguably be appealing to conservative investors given the current lofty stock market, despite this Tatts’ share price is trading near its 52-week low.
Westfield Group (ASX: WDC) may only have registered a decline of 5% in the past 12 months, however at $10.30 the stock is a long way from its 52-week high of $12.55. The upcoming planned restructuring has caused some concerns amongst investors which is likely putting pressure on Westfield’s share price and could offer a rare opportunity to purchase stock in this leading $21.3 billion property company at a depressed price.
As stated at the start, a knocked-down share price alone is not enough – there are always plenty of “cheap” businesses out there. What matters is finding companies that are trading at a price which offers a meaningful discount to an investor’s assessed value.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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