4 company bargains under $4

Financial journalist and commentator on 3AW and Sky Business
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Sometimes good companies get a hammering from the market for a variety of reasons. It could be a disappointing earnings number or forecast, or a potential acquirer walks away with little explanation. But if the fundamentals of a company’s operations haven’t changed, you might be able to pick up a good quality stock at bargain-basement prices. Here are four shares under $4 that fit that bill.

Fortescue Metals Group (FMG, $3.95)
Market capitalisation: $12.3 billion
Estimated yield FY19: 5.6%, fully franked
Analysts’ consensus price target: $4.80 (Thomson Reuters)

This month, Fortescue Metals Group touched a two-year low of $3.52, meaning the iron ore heavyweight’s shares had lost 35% of their value since February. The rationale for the share price fall was straightforward: Fortescue produces lower-grade iron ore than its major peers. Fortescue ore thus attracts a price discount, and this discount has widened from the usual 10%–15% to levels around one-third, as Chinese steelmakers have been forced (by government edict) to prefer higher-grade iron ore, which is less polluting.

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