Overlooked Opportunities—The Best Kind…

I’m dispatching today from Porto, Portugal.

And let me say right from the outset that I love this city.

This is my kinda place.

Though I live in Lisbon, Porto is nicer.

Period.

The Douro River that bisects the city is so picturesque. The string of bridges that leap across the river are ridiculously photogenic. And the old part of the city where I’m holed up for a few days—called Ribeira, Portuguese for riverside—is a cobblestoned reflection of everything Americans love about Old World Europe.

I’m up here in northern Portugal on assignment for International Living, touring the region for an upcoming cover story on a part of Portugal that, from my perspective as a resident of this country, doesn’t get nearly the love it deserves.

But that’s just the lead-in to a different story I want to tell you today: The story of the under-loved and the overlooked.

I’ve thrived in the world of under-loved and overlooked.

It’s where I have found some of the very best investments I’ve ever made.

I’ve used this example before, but it fits today’s theme well. Back in 1994, I opened my first overseas brokerage account, going back and forth over fax and email with a broker at a now-defunct Auckland, New Zealand firm called Ord Minnett Securities.

I opened that account so that I could play the rise of the Chinese consumer by snapping up shares of two kiwi companies that I suspected were about to see some very robust growth in Asia: a beer company called Lion Nathan, and a maker of whitegoods called Fisher & Paykel Appliances.

In 1994, when tech stocks were all the rage, a beer company and a maker of dishwashers and washing machines were about as sexy as a can of white paint. Both were so under-loved and overlooked that the broker who opened that account for me sent me a message telling me, “Mate, we have a sell rating on those stocks.”

I thanked him for the heads-up, but bought them anyway…

Only to see them soar in value over the years.

Lion Nathan was snapped up at a big premium to my original purchase price in a buyout by Japanese beer giant Kirin Holdings. Meanwhile, Fisher & Paykel distributed a huge stream of dividends and special payments, and spun out a healthcare division, and all of that combined was worth more than my original investment. And then in 2012, Chinese appliance behemoth Haier bought all of Fisher & Paykel, again at a huge premium to my cost.

The under-loved and overlooked were, in fact, darlings.

And that’s the bigger story: The stock market is stacked with under-loved and overlooked darlings.

Investors get so hung up on the stories of the moment—the Teslas, the AI stocks, etc.—that they allow the stocks of fantastic companies to fall to under-loved levels.

These aren’t necessarily recommendations, but I feel I need to give you some “for examples” to really flesh out what I mean…

So, for example:

Pfizer. One of the most important pharma companies in the world.

Sure, Pfizer has had its issues, but there’s no reason that Pfizer should be trading at such a low price that its dividend yield is 6.5%. This is a stock that historically yields between 2.5% and 4%, so today’s fat yield is a huge opportunity.

Fifteen years ago, Pfizer paid quarterly dividends of 16 cents per share. Today’s, the payout is 42 cents per share, and there have been no cuts in the intervening years, just consistent dividend increases.

Under-loved.

Or consider Devon Energy. Again, yes, Devon has had its issues, and the oil- and gas-exploration industry is the quintessential boom-bust industry. But the world’s need for fossil fuels is not going away anytime soon.

Moreover, Devon is one of the best-run companies in the industry. The company’s dividend payments make these under-loved shares even sweeter to own. The company has a fixed dividend (currently 88 cents per share) that yields 2.5% per year.

But Devon also regularly kicks in a variable dividend component that is essentially based on performance, meaning excess profits tied to oil and gas prices. For 2024, those variable payments added another 57 cents to Devon’s dividend, meaning Devon’s yield is more than 4%.

Meanwhile, Devon’s current price/earnings ratio, the metric Wall Street primarily uses to value companies, is just under 6.5. Historically, that’s been closer to 16.

Clearly, Devon is under-loved.

Again, I’m not telling you to rush out and buy Pfizer and Devon. Everyone’s risk profile is different. And I don’t typically use Field Notes to recommend specific stocks.

Instead, I want to point out that the best opportunities very often lie in the under-loved and overlooked. Because at some point, the investment community looks around and realizes that under-loved and overlooked stocks have real value… and that’s when the love shines through.

So, as 2025 begins, make it a point to go in search of the under-loved and overlooked. Guaranteed you will find some great opportunities for income and capital gains.

Oh, and visit Porto. You’ll be happy you did that, too.