Investors now need to focus on companies that represent value and security, as the market crashes in 2021. In this regard, companies in the oil and gas sector that are actually making a profit in this environment should be highly sought after. Unfortunately, this certainly doesn’t seem to be one of my unique value picks in Canada’s energy sector.
Altagas Ltd. (TSX: ALA) Currently, I have an interesting value proposition as a deep value play. Valuations are very high in other sectors, so value investors are encouraged to consider this contrarian option now. Finding already cheap companies that can add value in the bear market makes it easier to overcome the market crash.
My view of the oil and gas sector, especially Canada’s energy sector, remains completely bearish. That said, I think there are pockets of deep value. Therefore, in my view, Altagas should at least be on the investor’s value watch list.
Altagas has recovered significantly from the 52-week lows of the March pandemic. This is primarily due to its superiority to the industry average fundamentals, which is the main investment treatise for this stock. I think fundamentals are more important than ever, especially in fields such as energy.
Value investors looking at this sector will only look at the safest and highest quality companies. Therefore, Altagas is the company that should be put in this bucket.
Altagas’ current valuations look cheap compared to strong earnings. This company trades about 15 times more profit. Indeed, today’s stock trading at these levels is cheap, given the valuation of so many stocks in other sectors that are valued at higher multiples compared to sales.
In addition, Altagas’ dividend yield is reasonable and sustainable at around 5.3%. This dividend is fully covered (dividend payout ratio is approximately 80%) and there is reliable free cash flow to support this dividend in the long term.
In addition, Altagas’s price-to-book value ratio continues to decline, demonstrating great value at these levels.
Growth forecast is bullish
In addition to its strong fundamentals, Altagas also has significant growth potential compared to its peers.According to fellow Fool contributor Christopher Liu, Altagas Revenue growth This revenue growth is expected to come from strong core performance, in addition to improved commodity prices next year.
The fact that Altagas also raised dividends is also bullish for income investors. The quality of dividends in this sector has been questioned. However, companies like Altagas seem to have strong dividends, despite falling commodity prices. This also facilitates treatises for income investors.
Whether you are an income investor or a value investor, Altagas looks very cheap at these levels. When trading below book value, a rebound of at least 15% is expected for the company to return to a realistic valuation. If commodity prices recover further, Altagas shares could rise much significantly.
In any case, this is a stock that has been beaten too much and the amount of downsides left may be limited. Altagas is a great choice for anyone looking to diversify into a little more energy.
Speaking of other great stocks to fight the market crash …
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Stupid contributor Chris Macdonald There are no positions in any of the listed stocks. Motley Fool recommends ALTAGAS LTD.
Fight the 2021 market crash with this incredibly cheap dividend stock!
https://www.fool.ca/2021/01/04/combat-a-2021-market-crash-with-this-incredibly-cheap-dividend-stock/ Fight the 2021 market crash with this incredibly cheap dividend stock!