Value investors have had a tough time lately. The days of easily picking up "$10 bills for $5" (as Warren Buffett would put it) during the GFC are well and truly a distant memory and with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) close to record highs, value opportunities are getting harder and harder to come by.
But never fear! As long as there are emotional reactions in the stock market (which there are), there will always be value opportunities to be had.
Here are two such options that might be good contrarian picks this week.
Metcash Limited (ASX: MTS)
The Metcash share price is down 9.5% today after the retailer released its full-year results. Although Metcash posted revenue growth of 1.8%, underlying earnings were down 3%. Even though this was only a slight miss, Metcash shares have been punished and are trading at $2.84 (down from Friday's close of $3.15). This could be a buying opportunity, as this seems to be a more temporary problem than a structural issue. Goldman Sachs seems to think so – the investment bank has a $3.30 price target for Metcash shares. Metcash is offering a fully-franked dividend yield of 4.74% at this price, so it could also be a good opportunity to pick up some MTS shares for income investors.
AMP Limited (ASX: AMP)
Although AMP was one of my value picks last week, I feel it's worth another look as the AMP share price has since sunk even lower, hitting an all-time low of $2.03 before slightly recovering and is now trading for around the $2.06 mark. Although AMP shares are still a risky bet at the current time, I am fairly certain that this savage sell-off has been driven by the emotional hatred and disgust at the company's past conduct as well as fundamental value going forward. Whenever emotions get involved in stock prices, it tends to lead to irrationality and so value investors should at least take a look at AMP. The company's new CEO Francesco de Ferrari has promised to turn things around and restore the battered brand to its former glory. Whether this can occur is unclear, but AMP (in my opinion) is getting interesting at these prices.
Foolish Takeaway
Warren Buffett likes to say that the best time to buy is "when there's blood on the streets". I'm not sure if there's blood at the moment, but there's definitely a lot of red ink going around these two stocks. Maybe it's time to take a look.
