7 Cheap Stocks For A Hot Market

Investors aren’t giving these companies enough credit. Buy the stocks before others catch on.

- Tom Petruno

In a market obsessed with sexy, fast -growing technology stocks, a better strategy may be to look for wallflowers. Wall Street’s rally this year has been led by tech’s most storied names, including Apple and Amazon.com. That has dimmed investors’ interest in many other firms, particularly those that are short on glamour or face challenges reinvigorating their growth.

We went looking for stocks that seemed cheaper than they deserved to be, and we came up with seven candidates. For the most part, the com panies are attempting to transform themselves in ways that they believe will result in faster growth.

The caveat is that business transformations don’t always succeed. That can make “cheap” stocks get a lot cheaper before they finally hit bottom—or just keep them languishing indefinitely. And even if the turnaround strategies succeed, all of our picks are more likely to offer a get-rich-slowly payoff than overnight riches. (Prices are as of May 31; price-earnings ratios are based on estimated year-ahead profits.)

CENOVUS ENERGY (SYMBOL CVE, $9) 

Market capitalization: $7.4 billion 

Annual sales: $10.4 billion 

Estimated earnings growth: this year, 203%; next year, 28% 

Price-earnings ratio: 26 

Dividend yield: 1.7%

Although energy stocks have recovered a bit from a nasty 18-month slide that started in the middle of 2014, the group remains depressed. And few stocks have been hit harder than Cenovus, which produces oil and gas, mostly from the tar sands of the Canadian province of Alberta. Its U.S.-traded shares have plummeted about 78% since 2012, so for bargain hunters willing to take on high risk, this is a stock worth considering.