Amcor Limited and Beach Energy Limited: Bargain prices for frugal investors

Use value investing to look for bargains on future growth and earnings.

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Do you like shopping for bargains? Do you wait until things are on sale before even going to the store? Do you scour the web looking for a better buy, a bigger discount?

Then, that's the same style you need for value investing. Still, we have to be choosy in what we are considering to buy. Something cheap could stay cheap, yet if it has good intrinsic value, eventually the price will rise to and even exceed that value.

Peter Lynch, the famous former fund manager and author of the investing book, One Up On Wall Street, said it this way-

Often, there is no correlation between the success of a company's operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock.

I have two stocks that are good quality companies at bargain levels compared to their long-term value.

—    The packaging company Amcor Limited (ASX: AMC) has grown its underlying net profit steadily over the past five years and some analyst forecasts have earnings rising over an average 10% annually for the next two years. It has spun off part of its business into Orora Ltd (ASX: ORA) and now can focus on its core businesses for better performance.

It offers a good 3.9% dividend yield unfranked and its $10.27 share price has a price/earnings ratio of 15- in the middle of it past PE average range. Compared to its forecast growth, it's not priced at a premium, and closer to a true bargain level. Sometimes businesses in boring industries don't attract a lot of attention, but that's great for value investors like you and me.

—   Beach Energy Limited (ASX: BPT), a mid-cap $2.2 billion oil and gas company, has greatly increased its oil production levels over the past two years, thanks to discovering more oil than originally projected. From its Cooper Basin location, it can use existing pipelines and facilities to on-sell its gas to major energy producers like Santos Ltd (ASX: STO) and Origin Energy Limited (ASX: ORG), for export at their respective LNG project plants in QLD.

Recently, it announced it will begin working with Woodside Petroleum Limited (ASX: WPL) at its exploration and development site in Tanzania, as the oil giant has bought in for a 70% stake of the project. With these big connections, Beach Energy could become a much bigger player itself in the future. It has a 2.2% yield and a PE of 8.5, which is at the bottom of its past average PE range.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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