Four Undervalued Companies that Saw Large Moves on Wednesday

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Not only were there are number of market moving stocks on Wednesday, but there were also several under and fairly valued stocks to trade higher. This was a day when Boeing, auto sales, and gun policy dominated the news. However, the following under-the-radar stocks also ticked higher, and present the potential to trade even higher.

Genworth Financial (NYSE: GNW)

Shares of Genworth Financial rallied higher by 8.86% on more than 3x its normal volume. The company unveiled a plan for its U.S. Mortgage Insurance operations that will cut its risk-to-capital ratio 12-15 basis points. The plan will decrease the need for financing and will allow the company to write new business. This particular segment has been closely watched over the last year, as some have feared that it could negatively impact the rest of its business. However, with this move the company will be better positioned and would be able to grow its other segments. Therefore, it’s worth watching now that this risk has been downsized.

Constellation Brands (NYSE: STZ)

After a 6.15% gain on Wednesday, shares of Constellation Brands have now rallied 8.5% over the last three days. The move higher was due to an initiation of coverage where Buckingham began its coverage with a “Buy” rating. The firm simply notes that its forward earnings valuation is much cheaper than its peers, and this news was enough to push shares higher. The stock itself has rallied higher by more than 85% during the last year and has continued to post strong fundamental growth. In terms of valuation the stock is cheap, therefore I suppose the move was appropriate as the stock was due for a breakout. Furthermore, I would continue to watch the stock for the reason of it being cheap and with the company continuing to expand and grow its business.

Cabela’s (NYSE: CAB)

Cabela’s rallied 6.14% following remarks from President Obama regarding gun control. Cabela’s is one of the larger gun vendors in the U.S., and shares had been under pressure since Q4 of last year due to school shootings and uncertainty. However, due to this uncertainty surrounding future regulations, consumers have been purchasing firearms at a rapid rate. Now, investors are preparing for a strong Q1 and believe that the upcoming year could be strong for the companies that benefit from strong gun sales. In regards to fundamentals, the stock is fairly priced, and looks as though it could trade higher in the coming weeks.

Cirrus Logic (NASDAQ: CRUS)

Like many iPhone suppliers, Cirrus Logic has been under heavy selling pressure since Apple’s downfall, and saw a significant decline in the first two trading sessions of the week. However, on Wednesday the stock rallied 5.62% as Apple rallied higher, as did other suppliers. This is a company that is seeing remarkable growth and is trading at just 7.83 times next year’s earnings. Therefore, the price weakness, combined with the recent rally, may make Cirrus Logic one iPhone component stock that you want to own over the next year.

Conclusion

Each of these companies rallied on Wednesday while the market ended mostly flat. What makes these stocks intriguing is that none are overvalued, but all have potential upside catalysts. Therefore, I suggest additional due diligence to determine if any might fit into your portfolio, because all may have more upside to come.


BrianNichols has no position in any stocks mentioned. The Motley Fool owns shares of Cirrus Logic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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