2 undervalued stocks to boost your wealth

All investors who buy shares are aiming to boost their wealth. Yes the first two rules are don’t lose money and the second rule is… you guessed it, the same as the first, however at the end of the day the aim of the game is to make money.

With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) looking set to take another crack at breaking through the 5,500 point level, the bull market could soon be stampeding its way towards 6,000!

While a rising tide may lift all boats, investors know that eventually a correction will come and overvalued stocks will be in strife. Look no further that the 30% plunge in the share price of Navitas Limited (ASX: NVT) to see what can happen to a stock when the multiple it trades on gets out of hand. With that in mind, owning stocks that deserve to be going higher is the key.

Here are two stocks to consider.

The share price of Dick Smith Holdings Ltd (ASX: DSH) has struggled ever since it listed in December last year and has underperformed the index by 17%. Although there are still a number of headwinds facing the retail sector including a soft outlook for consumer discretionary spending, the weakness in share price may have created an opportunity for long-term investors to buy this stock at an attractive price.

Premier Investments Limited (ASX: PMV) – although Premier can also be classified as a retailer, I haven’t picked it for the same reasons as Dick Smith. Rather, Premier is sitting on a pile of cash and is run by the clever and patient billionaire Solomon Lew. What’s enticing about Premier is how Lew will utilise this cash balance and the high probability that he will make a value accretive acquisition.

One more stock you really must know

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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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