3 Cheap Stocks Set to Double in the Next Bear Market
Recently, my articles have largely spotlighted stocks promising both growth and value. It’s my conviction that these types of stocks are poised for impressive gains. Amidst Wall Street’s preoccupation with trending sectors, several niche companies remain overlooked. This has led to the rise of cheap stocks for bear market if one arises.
These under-the-radar companies haven’t seen their valuations bounce back significantly post the sell-offs from the past two years. Consequently, they still hover at a relatively deflated valuation. Despite this, their fundamental value has steadily expanded. Even as numerous economists suggest an impending recession, these attractively priced stocks bear minimal downside risk due to their current undervalued status.
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Mondi (MONDY)
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Mondi (OTCMKTS:MONDY) specializes in sustainable packaging and paper products, with operations in more than 30 countries.
The company’s stock is down significantly from its peak of $60 and is now testing peak-pandemic lows at $30. That’s despite the fact that Mondi has been growing its revenue and earnings consistently over the past decade. Gurufocus notes that the 3-year revenue growth rate has been almost 8% here, while its 3-year EBITDA growth is at 8.6%. Sure, this growth could moderate in the coming months if headwinds get tougher, but that’s already priced in at this range. This makes it one of those cheap stocks for bear market.
In its latest reported quarter, the company reported a revenue of 2.2 billion euros, up 19% year-over-year, and net profit of 292 million euros, up 43% year-over-year. Further long-term growth is likely considering the sustainable packaging market is anticipated to grow at a 10.3% CAGR through 2030, reaching $737.6 billion. Mondi is well-positioned to benefit from this growing demand for eco-friendly packaging solutions, especially in the e-commerce and food sectors.
Southwest Airlines (LUV)
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Southwest Airlines (NYSE:LUV) stands as another stock where recession-related concerns are already reflected in its current price.
Nevertheless, Southwest Airlines hasn’t been idle. It has embarked on several initiatives to bolster its liquidity and operational performance. The company has bounced back to profitability and has begun reducing the debt incurred during the pandemic.
In addition, the airline has been recording a steady improvement in passenger traffic and load factor in recent months. The recent surge in travel demand could further catalyze this recovery.
Taking all these factors into account, Southwest Airlines presents a solid investment opportunity for the long-term investor. With its shares currently trading at a 13 earnings multiple, there is limited room for further losses. While it may not deliver 100% returns anytime soon, Gurufocus predicts a fair value of $75 by 2025.
China Yuchai International Limited (CYD)
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China Yuchai International Limited (NYSE:CYD) is a leading manufacturer and distributor of diesel engines and related products in China. The company operates through two segments: Yuchai, which produces diesel engines for various vehicles and equipment; and HL Global Enterprises, which engages in hospitality and property development.
China Yuchai is a great bet on China’s reopening, and despite the fears about diesel engines, it’s too much of a bargain to ignore. CYD’s forward price-to-earnings ratio sits at just 8.62 while sales growth is expected to remain strong at double digits through 2026. Profitability is also strong here, and analysts expect EPS to grow 50% year-over-year this year and almost 30% next year.
There’s little coverage of this stock on Wall Street, but as The Value Pendulum from SeekingAlpha points out, it is very undervalued when you take heavy-duty truck sales and its net cash position into account.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
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