Finding undervalued stocks is an investor and trader’s goal! Buy low and sell high, that is how we make a profit in the market no matter how you look at it and we are going to look at the top 3 undervalued stocks that traders should consider for their 2020-2021 portfolios.
These three companies are our stock ideas based on what we suspect will happen in the near future with the economy and recent events that have occurred.
When it comes to undervalued stocks right now, we have to consider a few criteria. The first is the definition, which is a stock that is on the market for a price well below it’s expected intrinsic value. The only difficulty with that statement is that the market price you see is the price that the stock is worth because that is what people are willing to pay for it. We should define it as what the potential of the stock price is in the coming months or years based on their future projected growth through sales and innovation, along with recent events.
Top Undervalued Companies
The first company is VMware.
A tech company, a software company to be exact. (Ticker: VMW). A majority shareholder of the company is Dell Technologies. VMware produces software used by x86 and x86-64 computers to amplify the operating systems being able to be run by one host computer to multiple operating systems. There is continued innovation in the company that is expected to continue bettering the software and increasing capacity. To add to that they have many other tech giants in the industry looking to take on the software to increase their business capacity like Oracle.
From a technical standpoint, the stock has yet to rally with a lot of other tech companies to prior highs and still has a lot of potential to the upside. The stock saw a big dip from the $165 area it was holding before COVID and nearly recovered the rally but has seen some sustained range-like movement. There is potential for the earnings report coming up at the end of August to see a good quarter and a good 2021 as a lot of businesses look to come back with VMware software. The downside volume looks weak so the $135 support area looks to be a nice trampoline for the sustained move higher. We could be in for the $200 area with economic recovery.
The second company is Bank of America.
There is a lot of fear around the financial companies in the US with all the stimulus coming out and the super low rates which is one of the main ways banks make money. Lending and borrowing and taking the difference in rates. However, this is one of the largest banks in the US. The second largest after JPMorgan to be exact. It is a very secure bank that has a very low probability of going bust. The bank got beat up hard throughout the COVID drop. However, all the stimulus checks are coming through BAC and the bank is being supported by the Fed.
From a technical perspective, BAC has not yet recovered from the drop and it has a long way to go to get near those levels. With the earnings beat just recently and the continued Federal Reserve support, BAC has a lot of potential to the upside with the new stimulus check. BAC was down nearly 50% off its highs into the COVID lows. Now only down 25% from those highs, there is potential for another 30% gain should the economy start recovering more rapidly.
The third company is American Express.
The final company here is American Express (AXP), the credit card company you all know. This is one of the big three credit card companies in the US along with Visa and Mastercard. Throughout COVID the market price declined drastically, people were no longer using the card. Not to mention that this is a huge corporate card provider and when everything shutdown expenses dropped drastically which killed the companies gains. There is huge potential for the return of the market price. As we see the economy reopening, new companies coming up and the consumer spending expected to ramp up in 2021 we will see pop back into the $140 area on the stock.
From a technical perspective, we have dropped 50% from the highs to the COVID lows and now up about 50%, with another 35% to go to get to that all-time high again. It may not happen that easily, we need to see more buyers come in and more consumers start spending. Along with flight, a lot of the charges are used for travel on AXP. We have a near term resistance at the $116 where we could see some stalling, however, we do have a lot of upside potential through the level.
Final thoughts:
These are just ideas based on TPA analysis, these are not investment recommendations. All financial market transactions are done at your own discretion and risk. TRADEPRO Academy is not responsible for any gains or losses. These stocks have a lot of potentials as the economy continues to recover and the markets continue to rebound in the next few years. The three stocks are what we think are some of the better undervalued stocks right now and for 2020.
If you want to join with us in our live trading room, Check This Out.
If you prefer to trade more passively, check out our newsletter, trade ideas and live analysis in the Elite Trader package here > for Free News Update Click here.
The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.
