Undervalued Stocks: the best ones [2021]

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Published: March 24, 2021 by Andrew

Finding the best undervalued stocks has always been the goal of the greatest investors in history. The problem is not so much finding shares at the lowest levels, there are several of those, but understanding when a stock is really underestimated and when it is in crisis and it is better to stay away from it!

To define an undervalued stock, you need to start from a value that we can define as balanced for that stock, and this is where analysts often collide.

Many mathematical formulas are used to establish the price / earnings ratio and various other combinations of figures that can help us understand if a stock is undervalued but in reality there are “tricks” used by great traders, which are simpler and we will see them in the course of our guide.

We will also see how to invest in undervalued shares, indeed we start from a question that we are often asked:

How do you buy undervalued stocks?

  • You register with a CFD Broker such as eToro
  • You choose which undervalued stocks to bet on
  • At that point you decide how much to invest and buy the shares

Simple right? In fact, the difficulty lies in understanding when the shares are really undervalued, at which point it will be enough to use one of the best online trading platforms on the market, such as those indicated below:

Platform: etoro
Min. Deposit: 200€
License: Cysec
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    Platform: xtb
    Min. Deposit: 400€
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    Platform: iqoption
    Min. Deposit: 10€
    License: Cysec
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    Platform: ubrokers
    Min. Deposit: 250€
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    Min. Deposit: 100€
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    Platform: forextb
    Min. Deposit: 250€
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    Why buy undervalued stocks

    This is the eternal dilemma between Growth investing and Value investing, that is, on the investment based on the price and on the one based on the value of a stock.

    Many are enticed by the price, they see a stock on the rise and buy it in the hope that the upward trend will continue and bring a big profit.

    This can happen, there have been stocks that have risen for years but if the price is not supported by the value of the fundamentals, if there are no profits filling the company’s coffers, the trend is bound to collapse sooner or later, often with a thunderous drawdown.

    Conversely, undervalued stocks are those stocks that have solid fundamentals and good growth prospects but for various reasons don’t have a stock price that does them justice.

    When undervalued stocks grow, their potential is very high and they offer incredible profit opportunities, you just need to know how to choose and have the patience to wait.

    Just to give you an incentive as to why it is worth buying undervalued stocks, just know that Warren Buffett, the greatest trader and investor in history, is a fervent supporter of Value investing and often bets on undervalued stocks.

    How to buy undervalued stocks

    If you want to buy undervalued shares you can use the classic banks, with their expensive securities account, pay stamp duty and trading fees and make rather expensive investments.

    To save money, there are CFD Brokers, they are intermediaries who offer Contracts for Difference, they do not need a securities account, there is no stamp duty and no commissions are paid.

    In addition, CFD brokers allow both to aim upwards and downwards on a stock, another great advantage of these financial intermediaries.

    The safety factor is fundamental and we invite you to use only Brokers in possession of a regular license, preferably issued by CONSOB or CySEC.

    To safely buy undervalued shares you can take a look at these brokers, considered to be among the best on the market: eToro, ForexTB and Trade.com.

    eToro

    eToro is the online broker with the largest number of users in the world, over 10 million and its reliability is confirmed by a regular CONSOB license.

    Here are the main features of eToro:

    • Low spreads on CFDs of undervalued stocks
    • Free demo to practice virtual money
    • Perfect platform for beginners
    • Minimum deposit to be paid only if you are happy with the free Demo
    • No commission
    • No expense on the execution
    • Qualified assistance in Italian 24/7
    • Free registration
    • No fixed costs

    This Broker also distinguished itself for having patented an automatic investment system called Copy Trading.

    This system allows you to copy the market operations of the best traders in the world, chosen by you on eToro. The operation is automatic: Once you decide which traders to copy, the system will copy their operations back to your account.

    Try it in Demo and evaluate it without running any risks!

    Click here to access the free eToro Demo account

    ForexTB

    ForexTB has become so popular thanks to a Trading Course that it is becoming popular with investors.

    This ebook explains how investments and the most useful and profitable strategies work.

    The course is free, download it now from the link below:

    Download the ForexTB Trading Course for free

    ForexTB has a regular CySEC license, valid at European level and also offers two free and very different trading platforms: Metatrader 4 and the Web platform.

    Here are the main features of this Broker:

    • Free registration
    • Free demo
    • Metatrader platform4
    • Web platform
    • Very competitive spreads
    • Free Trading Signals

    Trade.com

    Trade.com is a reliable broker, authorized by CONSOB and with a minimum deposit threshold of only 100 euros.

    Thanks to an excellent Trading Course, this Broker has achieved considerable popularity.

    The course is a pdf that explains the basics of technical analysis in a very simple and clear way. It is also free, download it now from the link below:

    Download the Trading Course for free by clicking here

    The main features of Trade.com are:

    • Metatrader platform4
    • Web platform
    • Free registration
    • Free demo
    • Very competitive spreads
    • Free Trading Course
    • Minimum deposit of 100 euros
    trade

    How to find undervalued stocks

    Now that we know how to buy undervalued stocks we just have to find it right?

    There are no universal parameters that identify an undervalued stock, we generally rely on the studies of Benjamin Graham, Warren Buffett’s mentor and father of Value investing to make an estimate.

    His technique is based on taking a range of values as a reference, if we are talking about a long-term investment they are the historical high and low of the stock, so as to see where the price is now.

    But this method is not enough and below we show you the 4 steps to follow to find undervalued stocks:

    1. We need to understand why a stock is undervalued
    2. Better to invest in companies and sectors that you know
    3. The main financial parameters must be analysed
    4. It takes a lot of patience

    Understand why a stock is undervalued

    Before investing we need to understand why the share price of a particular stock is underestimated.

    Are there any reasons related to the sector? To the financial results? Failure to achieve a goal? Is there a new competitor? Is the market in crisis?

    In short, it is necessary to understand if the price will be able to recover and if the situation is definitive.

    News tends to influence stock prices and some sectors are cyclical, even these factors need to be considered to invest in stocks successfully.

    Investing in sectors we know

    This is a general rule and doesn’t just apply to undervalued stocks.

    Investing in sectors we know is an advantage, it helps us understand if a stock can really recover or if, for example, the entire sector is in crisis.

    Analyze the financial parameters

    Some trading parameters and indicators are essential to understand whether the share price of a company is undervalued or not.

    The main ones are:

    • The Price / Earnings Ratio (P / E) which is obtained by dividing the current price of the stock by the annual earnings.
    • The Ratio between Price and Equity (P / B) which is calculated by dividing the current price by the equity per share.
    • Then there is the P / E ratio and earnings growth (PEG), calculated by dividing the P / E ratio by the expected growth rate for a certain period of time (typically 5 years).
    • ROE (Return On Equity) is the company’s net profit as a percentage of the risk capital.
    • Ratio between debt and risk capital, calculated by dividing the total debt of the company by the risk capital.
    • Finally, there is the liquidity rate, which measures the relationship between assets and liabilities.

    Patience is the virtue of the strong

    Investing in undervalued stocks is not a sprint but a marathon and it takes patience.

    Prices do not go up when we decide, sometimes it takes months, so you have to be patient to get consistent profits from this trading strategy.

    Undervalued Stocks 2021

    Let’s see now some of the undervalued stocks of 2021, they are just indications based on the situation at the time of writing this guide: In trading everything is constantly changing.

    Royal Dutch Shell

    Royal Dutch Shell, known as Shell, is a multinational company operating in the oil and energy sector.

    Following the collapse in demand for fuels, the stock has lost value, so it must be carefully evaluated.

    Click here for Royal Dutch Shell real-time quotation

    EasyJet

    EasyJet is a British airline famous for low-cost services.

    The global pandemic has drastically reduced air travel and the stock price has plummeted.

    Click here for EasyJet real-time pricing

    Carnival

    Carnival Corporation & plc is a global cruise and tourism travel company.

    The group includes the following brands: Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard.

    As in the case of EasyJet, cruises have also suffered a severe blow due to Covid-19, so the title has lost value.

    Click here for Carnival's real-time listing

    AstraZeneca

    AstraZeneca is an Anglo-Swedish biopharmaceutical company operating in scientific research, development and marketing of drugs for various diseases.

    It recently became famous for putting one of the first coronavirus vaccines on the market but some supply and vaccination coverage problems have caused the stock to fluctuate.

    Click here for AstraZeneca real-time quotation

    Alibaba

    Alibaba Group is a giant Chinese multinational that coordinates a number of very active e-commerce portals in China and internationally.

    The company also manages payment platforms and other services related to electronic commerce.

    The stock is fresh off the market and the share price is likely very underestimated.

    Click here for Alibaba real-time quotation

    Undervalued American Stocks

    Even among the US stocks, by far the most traded in the world, you can find interesting undervalued or presumed stocks, below we show you some examples.

    Coca Cola

    Coca Cola Company is one of the largest producers and distributors of soft drinks worldwide.

    According to some analysts, the share price does not reflect the real value of the company, which is why it is on this list.

    Click here for the Coca Cola quote in real time

    Intel

    Intel Corporation is a US multinational company founded in 1968 with headquarters in Santa Clara.

    As in the case of Coca Cola, compared to the value of fundamentals, Intel is also considered an undervalued stock.

    Click here for Intel's real-time listing

    Boeing

    Boeing is a US aviation industry producing aircraft for both civil and military use.

    This company had a very problematic 2020, both due to the decrease in commercial flights and the consequent collapse in demand for aircraft and maintenance, and due to some technical problems with its aircraft.

    Click here for the real-time Boeing quote

    General Electric

    General Electric Company is a US multinational, founded in 1892, active in the field of energy technology and services.

    The share price of this American giant is currently underestimated, especially if we compare it with the historical performance of the stock.

    Click here for General Electric's real-time quotation

    Undervalued Italian Stocks

    For the more nationalistic, we have found some undervalued stocks that are part of the FTSE Mib index, which could prove to be profitable, but you need to arm yourself with a lot of patience.

    Telecom Italia

    Telecom Italia SpA is a historic Italian company that operates in the fixed and mobile telecommunications sector in Italy and abroad.

    The price is close to all-time lows and analysts believe the stock is very underestimated.

    Click here for the Telecom Italia quotation in real time

    Leonardo

    Leonardo Spa is an Italian company that deals with helicopters, spacecraft, defense systems and security systems both in Italy and in other countries.

    Compared to the fundamentals, even this title, for sector analysts, is undervalued.

    Click here for the Leonardo quotation in real time

    Unicredit

    UniCredit is an international banking group with headquarters in Milan and branches in 18 other countries around the world.

    This stock has been included among the most attractive undervalued stocks in Italy, because the share price does not seem to do justice to the real value of the banking group.

    Click here for Unicredit quotation in real time

    Conclusions

    In this guide we have explained what undervalued stocks are, why they should be bought, how to find these stocks, how to identify them and how to invest.

    Not only that, we’ve also included a list of undervalued stocks that can be great long-term investments.

    undervalued stocks

    If you want to look for undervalued stocks or evaluate the ones we have proposed, you need a trading platform, preferably offered by a broker without commissions such as those listed in this article.

    But before trading on real markets, do some tests on the Demo account, without risking anything, so as to practice with the platform and optimize your strategy.

    Here are the links of the free Demo accounts:

    Why buy undervalued stocks?

    Because if they are really underestimated, the stock price will tend to rise, generating profits for investors.

    How to find undervalued stocks?

    First of all by evaluating the current price compared to the historical trend and then following the 4 steps we have described in this guide.

    What are the best undervalued stocks of 2021?

    These are the stocks that have suffered temporary damage from the global pandemic, but have the finances to bounce back. In the guide you will find the best ones.

    How to buy undervalued stocks?

    With CFD brokers like eToro, which allow you to buy undervalued shares safely and without paying commissions.

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