Investors who have spent a long time with the markets will understand that it’s difficult to spot multibagger stocks. Often, the stock in the limelight fails to deliver. And yet, an under-the-radar stock delivers 10x or 20x returns. For stocks to make you a millionaire, investors need to be prepared to put in the work of scanning through an ocean of listed entities.
These types of stocks generally trade at a valuation gap. In other words, the larger markets are still unaware of the stock potential. On the other hand, stocks in the limelight generally trade at a fair market value or are overvalued.
The current market condition remains challenging with headwinds of geopolitical tension, inflation, and growth deceleration. However, it’s the best time to gradually accumulate stocks to make you a millionaire. Once sentiments reverse, undervalued stocks will surge higher and create value, delivering multibagger returns.
Leonardo DRS (DRS)
Leonardo DRS (NASDAQ:DRS) is not the name you would hear when talking about defense stocks. The emerging player has quietly moved higher by 84% in the last 12 months. DRS stock remains attractively valued and considering the industry tailwinds, I am bullish on the stock delivering multibagger returns.
As an overview, Leonardo DRS is a provider of defense electronic products and military support services. The key focus areas include advance sensing, network computing, and force protection. The company was formed after the merger of Rada Electronic and Leonardo DRS. Being a leading defense technology player, it’s likely that DRS’s order backlog will continue to trend higher.
For Q2 2023, Leonardo reported revenue of $628 million. Further, with an order backlog of $4.4 billion, clear cash flow is visible. Additionally, the company has a strong balance sheet. It’s positioning itself for organic as well as acquisition driven growth.
Aker BP ASA (AKRBF)
Aker BP ASA (OTCMKTS:AKRBF) stock has remained sideways in the last one year. This seems like a good opportunity to accumulate the 9.58% dividend yield stock that trades at a valuation gap.
Aker BP is among the best emerging names in the oil and gas space. By 2030, the stock is poised to deliver multibagger returns that’s backed by high-quality oil assets in the Norwegian Continental Shelf.
To put things into perspective, Aker BP has 1.86 billion barrels of oil equivalent as 2P reserves. Further, 2C contingent resources currently stand at 774 mmboe. With a strong reserve base, Aker BP is positioned to deliver sustained cash flows through 2030 and beyond.
Importantly, the company’s assets have a low break-even. Even with correction in oil price, Aker reported operating cash flow of $2.9 billion in Q2 2023. Therefore, if oil trades at $100 per barrel, Aker can potentially deliver $15 to $20 billion in annual operating cash flows. It’s not surprising that the company has an investment grade balance sheet with high financial flexibility.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) is among the lesser known EV stocks that’s been ignored by the market after a dismal stock performance. However, Polestar holds promise. In fact, the worst may be over in terms of stock downside.
Further, business developments are likely to be positive in 2024 and beyond. First, the company has strengthened its liquidity position with a cash buffer of $1 billion as of Q2 2023. Further, Polestar reported robust delivery growth of 50% on a year on year (YOY) basis for Q3 2023.
Deliveries growth will likely remain strong in 2024 backed by the launch of Polestar 5. The company is targeting the launch of Polestar 6 in 2026. Therefore, the attractive line-up makes inroads for Polestar for new markets, delivering growth that will accelerate.
Also, Polestar has initiated cost cutting measures in 2023. Reduction in cost coupled with operating leverage will translate into better EBITDA margin in 2024. This is a key trigger for PSNY stock upside.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.