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Devon Energy Corp (DVN), AK Steel Holding Corporation (AKS): Two Undervalued Stocks to Invest In

During the recession, U.S. vehicle sales completely tanked and AK Steel Holding Corporation (NYSE:AKS) felt the pinch, but the automotive industry has since rebounded. Currently, vehicle sales in the U.S. are on pace to break 15 million in units and aren’t looking to slow down. Low-interest financing and pent-up demand will continue to drive sales upward in the years ahead. The rise in automotive sales should increase demand for AK Steel Holding Corporation (NYSE:AKS) products and improve its earnings.

On a different note, AKS has improved its cost position, which had previously caused profitability issues. It’s taken sizable chunks out of its health-care and retirement costs, which will make AKS more competitive with its steel producing rivals.

The steel industry is cyclical and will see improvements as the global economy improves. When demand is strong and steel prices improve, AK Steel Holding Corporation (NYSE:AKS) earnings can climb dramatically over a few quarters — boosting the stock price quickly.

Bottom line
Both of these stocks have large risks and partially depend on having the global economic recovery create demand and improve commodity prices. Both appear to be undervalued but have certainly arrived at lower stock prices for a reason. If you’re bullish on a continued global recovery, these could be two stocks to buy now. It may take years to pay off, but both could reward patient investors.

The article 2 Undervalued Stocks to Invest In originally appeared on Fool.com is written by Daniel Miller.

Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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