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3 Value Stocks for Smart Investors

Everyone loves a good bargain, whether it be at the local store or, for smart investors, on Wall Street. And though we are well into a secular bull market that has lasted practically since the depths of the Great Recession in early 2009, there are still a few value stocks lying around for those who know where to look.

We asked a few of our Foolish investing contributors for their top value picks today. Below are key details on Cenovus Energy (NYSE: CVE), Crestwood Equity Partners (NYSE: CEQP), and Mylan (NASDAQ: MYL).

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Canadian value

Sean O'Reilly (Cenovus Energy): Finding value eight years into a bull market is no easy task. With the Dow Jones Industrial Average having crossed 23,000 for the first time, there just aren't as many "cheap" stocks as there used to be. Fortunately, if one knows where to look, there are still stocks to be found trading below their intrinsic value. Cenovus Energy is just such an investment.

Cenovus became an independent entity when Encana Corporation split itself into two companies. Based in Calgary, Alberta, Cenovus was the part of Encana's business focused on oil and gas production. However, with a market capitalization of $11.65 billion, it is no mere spinoff. Since becoming a separate company, it has sought to expand its operations.

All the more impressive, it has done so amid one of the worst downturns in the oil sector in decades. Many oil companies have focused on survival in recent years. Not so for Cenovus, which made the dramatic move to acquire the Canadian assets, including oil-sands operations, of ConocoPhillips for $13.3 billion. The acquisition was completed in May 2017, and as icing on the cake, it brought with it organic expansion opportunities in the Deep Basin of western Canada.

Recent results have been exceptional. The company's newly acquired assets helped it generate over 1.2 billion Canadian dollars in cash from operating activities in the second quarter of 2017. Aided by cost savings, its operating margin expanded 44% over the same period last year to reach CA$778 million.

Value investors will find Cenovus particularly attractive, with shares currently changing hands at 0.86 times tangible book value. As a kicker, the company's dividend yields shareholders a cool 1.68%. Fueled by its growth initiatives, Cenovus Energy is a reliable addition to any value-focused investment portfolio.

Ridiculously cheap even though it's on the upswing

Matt DiLallo (Crestwood Equity Partners): Pipeline and processing MLP (master limited partnership) Crestwood Equity Partners has been severely beaten down during the oil-market downturn. Investors punished it for reducing its distribution when market conditions worsened, though it needed to do that so it could generate excess cash to pay down debt and finance growth projects. However, those moves are starting to pay off, something that most investors haven't yet realized.

These days smart investors who are looking ahead have an opportunity to pick up Crestwood Equity Partners at a crazy-cheap valuation. One way to measure that is by looking at distributable cash flow (DCF), which the company expects will come in between $210 million and $230 million this year. When we divide that into Crestwood's $1.7 billion market cap, we get a price-to-DCF multiple of fewer than eight, which is well below the mid-teens multiple of most rivals.

Typically, a company trades that cheaply because it's experiencing financial issues. However, that's no longer the case with Crestwood; it has improved its leverage ratio from an elevated 4.75 at the end of 2015 to a more comfortable 4.0 last quarter. Meanwhile, it has several fully financed growth projects underway, which should add an incremental $75 million to DCF over the next two years, and position the company to start growing its distribution by the second half of next year. That growth could be just the catalyst to help revert Crestwood's valuation closer to its peer-group average -- which is why smart investors should consider taking advantage of the current discount before it goes away.

A drug stock priced at a discount

Keith Speights (Mylan): While several drugmakers have taken heat for making questionable price hikes, Mylan really got a black eye last year from its big price increases for the EpiPen auto-injector. That controversy contributed to Mylan stock falling nearly 30% last year, and the downward trend continued for much of 2017.

But Mylan recently received good news that served as a shot in the arm to its stock. The U.S. Food and Drug Administration approved the company's generic versions of multiple-sclerosis drug Copaxone. Teva Pharmaceuticals (NYSE: TEVA) had faced generic rivals for the 20 mg dose of the drug, but hoped to stave off the competition with its 40 mg dose. Mylan, though, now has a green light from the FDA and is launching generic versions for both doses of Copaxone.

The approval sent Mylan stock soaring around 20%, making up for the decline from earlier in the year. However, the stock is still priced at a discount, with shares trading at a little over seven times expected earnings.

There are several reasons for investors to like the long-term prospects for Mylan. The company stands to benefit, like many other drugmakers, from growing global demand for drugs driven largely by an aging population. Mylan is in position to do especially well. The company ranks No. 6 in worldwide prescription volume and No. 2 in the critical North American market. It also is well-diversified, with six blockbuster specialty therapeutic franchises, plus a strong roster of generic and over-the-counter products.

Smart investors realize that their greatest asset is a long-term perspective. Mylan appears poised to be a great performer over the long run.

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Keith Speights has no position in any of the stocks mentioned. Matthew DiLallo owns shares of ConocoPhillips. Sean O'Reilly has no position in any of the stocks mentioned. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.