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Spreadsheet
This week, we look at three tried-and-true names, two Canadian and one American deep value stocks, and one that has fallen out of fashion. All stocks have their ups and downs, but only a handful consistently perform over time.
Megatech suffered a brutal 2022, with names like Meta, Alphabet and Amazon plunging by a third or a half from their peaks. However, one name over the past 12 months has limited its losses and bounced off its lows. That deep value stock is Apple. Twice, Apple has dipped below $130 in this time frame and twice it has topped $170. Apple remains one of the most powerful brands in the world and its army of customers is loyal like no other. AAPL stock pays a 0.6% dividend yield, has a 1.28 beta (some volatility here) and trades at 25.67x PE, which is halfway between its valuation range of the past year between roughly 20x and 30x. Yes, the PE could be lower, considering 24.09x is Apple’s five-year average.
Also, one could argue that Apple shares should be falling after it reported an EPS miss last week of $1.88 vs. the expected $1.94, and $2.10 a year ago. Further, the company reported a 5.5% decline in revenues, based on $117.15 billion in the last quarter. However, Apple did top estimates in its previous three quarters.
What happened? At the end of last year, a cloud hung over Apple because of production delays in China. However, this is temporary as China belatedly reopens post-Covid. Apple remains a cash flow machine, boasts consistently strong demand for its signature iPhones, and its services remain a steady source of revenues.
Apple shares recently rose above their 50- and 200-day moving averages of $138.89 and $147.80 respectively, so Apple has been on an upswing. Take advantage of any choppy days like Monday this week to peck away at this deep value stock. (Disclosure: I own shares.)
A stalwart on the TSX, CP stock enjoys a duopoly with CN in Canadian shipping. Both were pandemic winners, shipping all manner of goods during lockdowns, and they continue to thrive after Covid. CP stock just beat its last quarter and two of its previous three. CP is consistent and business is good. Last month, for example, CP shipped 2.29 million metric tonnes of grain, its most ever. Investing $500 million in new high-capacity cars is paying off.
However, CP shares have been trading around all-time highs above $100, so buy on any pullbacks of 5% or more. CP pays only a 0.72% dividend, but is safe at a 0.83 beta. The major purchase of Kansas City Southern will be accretive.
The most obscure name on this list is another deep value stock. Based in Winnipeg, NWC stock operates 118 Northern stores, which sells food and general goods, 26 convenience stores, five discount stores, a distributor of food across Alaska, and other assorted brick-and-mortar retail locations all in the Far North. Average daily volumes are only 90,000 shares, but NWC pays a hefty dividend yield of 4.22% (huge among the grocers) and safe based on a 21.88% payout ratio. NWC stock also offers a super-low beta of 0.62. It is safe and defensive. Performance is also consistent. The company has beaten or met its last four quarters. Its PE of 14.34x is in-line with this sector (with Empire trading at 12.87x and Metro close to 20x).
NWC offers a solid moat around its business, facing little competition serving the Far North. The stock bottomed last October 3 at $33.09 after declining from peaks of $46, but shares hav e been steadily climbing. The street targets $42, about $5 higher than current levels. Don’t expect dramatic moves in the share price, but do collect that dividend.
