With the S&P/ASX 200 (INDEXASX: XJO) index coming off a new eleven-year high set last week, finding under-priced shares in this market is definitely no mean feat. The only real hope for value-investors in this kind of euphoric market is to invest where price movements are showing emotion.
Here are two ASX stocks which have been beaten down this year but are now showing signs of value (in my opinion anyway).
AMP Limited (ASX: AMP)
Ah AMP… AMP shares hit an all-time low this morning of $1.77 after the company announced that its planned sell-off of its life insurance arm (AMP Life) won't be going ahead after the Reserve Bank of New Zealand blocked the sale, citing concerns that New Zealanders would be worse off. AMP in response announced it was suspending its interim dividend payout for H119. The shares are now down 15% from Friday's close.
I think this is a value opportunity. AMP (in my opinion) shouldn't have been paying a dividend anyway, at least until the business can properly restructure following the damaging Royal Commission last year. Additionally, at the company's last annual general meeting, shareholders made it clear they were not happy with the sale of AMP Life anyway. I think this is a classic 'emotional' reaction and won't damage the AMP business over the long-term if AMP can execute on its recovery plans.
South32 Ltd (ASX: S32)
Shares of this mining giant are approaching the 52-week low of $3, but without much cause (in my view). My guess is that galloping iron ore and gold prices have meant that 'other' miners like South32 have become collateral damage in the stampede. I think there is a lot to like about South32 though: for 1H19, earnings-per-share was up roughly 20% and production levels are also rising. South32 is trading on a price-to-earnings ratio of 8.6 and is currently yielding a dividend of 6.46% (grossed-up). In my view, this stock is seriously in the bargain bin and would make a great value play today.
Foolish takeaway
Both of these shares represent good value opportunities (in my opinion). On today's prices I would probably go with South32 because there is no doubt AMP is still a risky bet at this time, despite its price drops. But for any crazy brave investors out there, it might be worth a go.
