Since the Civil War, United States has been in a recessionary period once every 10 years. In February 2020, the United States was pushed into a recession due to the lockdowns caused by the COVID-19 pandemic. There was a quick sell off in the stock market during February-March timeframe, and the stock market took a U-turn after that. The S&P 500 index was at 768.54 points on March 20, 2009, it was at 3,221.22 points on December 20, 2019, and it is was at 3,690 points on December 23, 2020. The stock market has seen unprecedented growth despite high unemployment, and struggling main street. With trillions of dollars injected into the US economy by the Federal Reserve (monetary stimulus) and US Government (fiscal stimulus), it is fair to say that we are in uncharted territory. In this week’s blog post, I will talk about 5 stocks that I am invested in or will stay on my radar going in 2021.
Since I do not want to fall victim to commitment and consistency bias, I want to put it out there that I can change my views anytime; As John Maynard Keynes said, ““When the facts change, I change my mind – what do you do, sir?” The intrinsic value calculated below is only a rough estimate. Now, let’s look at these 10 stocks in alphabetical order:
Current Price: $27.95/share (as of 12/23/2020)
Intrinsic Value: $43/share (DCF analysis using 3% growth in Free Cash Flow (FCF) every year for the first 10 years, then 2% growth of FCF into perpetuity, and 10% discount rate)
Itochu is a Japanese Trading company. The ordinary shares (Ticker Symbol: ITOCF) are fairly illiquid, and as a value investor, I am happy with this as it doesn’t bring unnecessary volatility in my portfolio. The ADR shares (Ticker Symbol: ITOCY) are more liquid, but investors need to pay fees associated with owning an ADR.
Industry: Oil and Gas Integrated
Current Price: $84.36/share (as of 12/22/2020)
Intrinsic Value: $80/share (DCF analysis using 2% growth in Free Cash Flow (FCF) every year for the first 10 years, then 3% growth of FCF into perpetuity, and 10% discount rate)
Industry: Oil and Gas Midstream
Current Price: $27.18/share (as of 12/24/2020)
Intrinsic Value: N/A. (Unable to value the business using DCF analysis due to the nature of MLP. Stock Analysis video below)
Sector: Basic Materials
Industry: Other Industrial Metals and Mining
Current Price: $64.63/share (as of 12/22/2020)
Intrinsic Value: $49/share (DCF analysis using 5% growth in Free Cash Flow (FCF) every year for the first 10 years, then 2% growth of FCF into perpetuity, and 10% discount rate)
Current Price: $46.57/share (as of 12/23/2020)
Intrinsic Value: $50/share (DCF analysis using 3% growth in Free Cash Flow (FCF) every year for the first 10 years, then 3% growth of FCF into perpetuity, and 10% discount rate)
Hope you learned a little and found this blog post helpful. We talked about 5 stocks to look for in 2021. The 5 stocks are: ITOCF, CVX, PSXP, BHP, and INTC. As always, you can sign up for our free mailing list here. Like us on our Facebook page here. Subscribe to our YouTube channel. Thank you!
Superior North LLC’s content is for educational purposes only. The calculators, videos, recommendations, and general investment ideas are not to be actioned with real money. Vyom Joshi is not a professional money manager or a financial advisor. Contact a professional and certified financial advisor before making any financial decisions. Please review the Disclaimer and Terms and Conditions.