3 cheap ASX 200 shares for value investors

The bear market has created many value investing opportunities for investors, with near term increases in share prices very likely. Here are 3 ASX 200 shares that fit the bill.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The irrational bear market has thrown investors many false dawns over the past 2 months. We have had many false starts and bear rallies, all traps for new players. Nonetheless it has created some of the most extraordinary value investing opportunities in my lifetime. Many companies that are almost totally unaffected by the pandemic have seen share prices slashed in blind panic. 

For example, the Evolution Mining Ltd (ASX: EVN) share price has rocketed up ~60% since its low point on 16 March. IDP Education Ltd (ASX: IEL) is a company that is marginally impacted. Yet after being over sold dramatically, the IDP share price has risen by 41.4% since 23 March. Lastly, the mighty Afterpay Ltd (ASX: APT) share price has risen by 350.6% from its low point on 23 March.

These are not normal returns, just as these are not normal times. However, there are still opportunities in the S&P/ASX 200 Index (INDEXASX: XJO). The 3 ASX 200 shares below are set to see a significant rebound as restrictions start to relax. 

Value investing opportunities

Santos Ltd (ASX: STO) has shown itself to be a well managed company with a strong chance of emerging from the oil crisis as a productivity leader. The Santos share price has already risen by ~79% from its low point on 19 March. Yet its price-to-earnings (P/E) ratio is still 6 points lower than its 10-year average P/E at 9.9.

The Santos share price still has a way to rise. By my calculations it needs to rise another 61% to meet average 10 year P/E levels. That doesn't factor in the huge productivity gains the company has made over the past 2 months. This is a prime candidate for value investing.

The Bank of Queensland Limited (ASX: BOQ) share price has dropped by 33% year to date, giving it a P/E ratio of 7.7. This is 3 points lower than the 10-year average. To get back to this level, the bank's share price will need to rise by 51%.

The bank also has good dividend stability of ~95% despite the present deferral. At the current price, the trailing 12-month dividend yield is 13.4%, placing the company as one of the better paying dividend shares. I believe this bank is a good candidate for value investing. Its share price is likely to see a jump over the next 3 – 6 months as the pandemic eases.

The BHP Group Ltd (ASX: BHP) share price has risen 25% from its low point on 16 March. It has another ~17% before equalling its 10-year P/E ratio. However, I don't think the market has fairly valued the company's future earnings.

BHP has 4 things in its favour. First, the low Australian dollar increases the value of every tonne of product sold in USD. Second, the iron ore market has withstood the impacts of COVID-19. Third, BHP is the third largest producer of copper, a commodity soon to see a price increase.

Lastly, the company has no exposure to aluminium, unlike mining stablemate Rio Tinto Limited (ASX: RIO). Aluminium is likely to see further price falls without high car manufacturing volumes. 

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Shares to Watch

asx share price rebound represented by wooden blocks spelling rebound with coins on top
⏸️ Shares to Watch

Could the Zip (ASX:Z1P) share price make a comeback in 2021? 

The Zip (ASX: Z1P) share price struggled to outperform in the second half of 2020. Could 2021 be a better…

Read more »

⏸️ Shares to Watch

What next for the a2 Milk (ASX:A2M) share price?

Could you call the A2 Milk Company Ltd (ASX: A2M) share price a cheap growth stock after it slumped to…

Read more »

⏸️ Shares to Watch

What's in store for the Afterpay (ASX:APT) share price in 2021? 

The Afterpay (ASX: APT) share price has surged more than 275% in 2020. Here's a little of what investors can…

Read more »

wondering about asx share price represented by man surrounded by question marks
⏸️ Shares to Watch

Is the Zip (ASX:Z1P) share price a buy yet?

The Zip Co Ltd (ASX: Z1P) share price continues to underperform despite an exciting capital raising. Could it finally be…

Read more »

questioning whether asx share price is a buy represented by man in red shirt scratching his head
⏸️ Shares to Watch

Should you buy the Appen (ASX:APX) share price dip?

Could the Appen Ltd (ASX: APX) share price be a buying opportunity after its recent selloff? We take a look…

Read more »

Share Fallers

Why this broker thinks it's time to buy Qantas (ASX:QAN) shares

As state borders re-open to domestic tourism, this broker thinks it could be time to start buying Qantas Airways Limited…

Read more »

wondering about asx share price represented by man surrounded by question marks
⏸️ Shares to Watch

Could this be why the Zip (ASX:Z1P) share price is underperforming?

Could this be why the Zip Co Ltd (ASX: Z1P) share price is down 50% from its August highs and…

Read more »

Hands grabbing for high rung on a ladder pointing to the sky
⏸️ Shares to Watch

The Rhipe (ASX:RHP) share price has jumped 8% today. Here's why.

The Rhipe Ltd (ASX: RHP) share price has popped 8.59% after announcing its first quarter FY21 update. Here's the run…

Read more »