We follow an approach to investing that focuses on broadly diversified investments in undervalued stocks for their long-term appreciation potential, explains John Buckingham, money manager, value investing specialist and editor of The Prudent Speculator.
We buy only those stocks we find to be undervalued along several lines relative to their own trading history, those of their peers or that of the market in general.
Walt Disney (DIS) operates one of the largest diversified media companies in the U.S., is a global leader in producing branded family entertainment, and owns what we believe is one of the best intellectual property portfolios in the world.
With the summer in full swing for much of the country, we think Disney is poised to benefit from a populous eager to get out and about. Both domestic parks (Disneyland and Disney World) are now open and these fixed-cost assets have significant potential for profitability as traffic accelerates.
The company also staged the first major Hollywood premiere in the pandemic era with Cruella bringing in $21.3 million over Memorial Day weekend. The film is also available for $29.99 on Disney+ with Premier Access.
The dividend remains paused as Disney continues to invest in Disney+ and other direct-to-consumer offerings including Hotstar, Hulu and ESPN+, platforms that are well-positioned to handle the transforming media landscape. The shares are off more than 10% from their peak, affording another chance to pick up a one-of-a-kind name.
Digital Realty Trust (DLR) is an owner and manager of technology-related real estate, with 285+ data centers located throughout the U.S. and England, along with Europe, South America, Africa, Asia and Australia.
With data centers in 47 metro markets, DLR offers customers a robust global ecosystem that utilizes more than 1,000 telecom providers, ISPs, content providers and enterprises to provide carrier-neutral interconnection facilities.
The company provides its broad customer base with multi-cloud connectivity and flexible bandwidth. DLR reported a solid Q1, with FFO (Funds from Operations) $1.67 per share (vs. $1.56 est.) and a diversified order book on customer type and geography.
We think that DLR offers lower-volatility growth potential, while kicking out a solid 3.1% yield. We continue to like DLR’s global footprint, stable business and strong balance sheet. The company has no major debt due until 2024, while the weighted average maturity is in 2027 with a cost of 2.6%.
Volkswagen AG (VWAGY) is the second largest car manufacturer in the world. The group’s family of brands cover the spectrum from inexpensive SEAT and Skoda, to mid-level Volkswagen, high-end Porsche and Bentley, and supercar manufacturers Lamborghini and Bugatti.
The company’s operations are well-integrated, frequently sharing platforms, engines and research. VW was quick to pivot away from combustion engines as a result of its diesel emissions cheating scandal in 2015, for which the company was heavily penalized and ultimately forced to take on electric vehicle (EV) projects more quickly than originally planned.
We believe that Volkswagen is #2 behind Tesla (TSLA) in electric vehicle development, with a solid chance to overtake Elon Musk’s carmaker.
Bankrolled by enormous profits at Porsche and with strong EV urgency thanks to the expansion of European congestion and clean-air rules, earnings are expected to rebound from 2020’s 1.78 euros per VWAGY share to more than 2.70 euros of EPS in 2021, and 3.40 euros in 2023. With investors clamoring for often profitless stocks in the space, we would opt for a value-priced EV leader.