You don’t get to be an investment titan like Warren Buffett without having a packed locker of wise words and nuggets of brilliant advice. But speaking as a share picker who loves to dig out those stocks offering supreme value, his belief that you should “be fearful when others are greedy and greedy when others are fearful” resonates particularly strongly with me.
Risk appetite might be returning to financial markets, but there’s a galaxy of great stocks that continue to fall, shares that I believe have been sold off unfairly. And many of these recent sinkers look too cheap to be true, at least in my opinion.
Matinee idol
Take Cineworld Group (LSE: CINE) as an example. This is a share that continues to lose value (down another 6% over the past month alone) as investors fret over the size of the company’s debt pile, built up on the back of titanic acquisitions in North America in recent years.
A more modest performance for the global box office, amid a thinner slate of crowd-pulling blockbusters, has hurt investor appetite for the share too. But more fool the bears, I say. The coming decade is jam-packed with the sort of CGI-heavy, superhero-jammed, family-friendly flicks that draw moviegoers in their droves. A quick glance at Disney’s release schedule alone, which is currently packed with around 20 blockbusters a year through to 2023, gives me as an owner of Cineworld stock a lot to be excited about. Cinema admissions in the UK rose to two-decade highs of 177m in 2018, Deloitte data shows, an ascent that was built on movies like this.
That share price weakness I spoke of leaves the cinema chain dealing on a mega-low forward P/E ratio of 8.8 times, not to mention a whopping 6.6% corresponding dividend yield. I think it’s too good to pass at these levels.
One for the growth hunters!
Georgia Healthcare Group (LSE: GHG) is another firm that has fallen massively out of favour with equity investors of late. It’s now trading at its cheapest since its IPO in November 2015 and was recently dealing around 125p per share. And I believe market-makers are failing to notice the brilliant long-term profits opportunities here.
The company operates hospitals and clinics, offers pharmacy services and provides health insurance to tens of thousands of Georgian citizens. And it is rapidly expanding, to extend its dominance of the country’s healthcare market. It saw revenues and EBITDA leap 14% and 12% respectively in the third quarter, and I expect to see both its top and bottom lines continuing to balloon amid strong economic growth and a steadily-expanding population.
The 28% fall in Georgia Healthcare’s share price over the past month now leaves it trading on a rock-bottom forward P/E ratio of 9.3 times. And for growth investors in particular, I think it’s too good to miss at current prices (City analysts expect profits to explode 48% in 2020 and 26% in 2021).