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Value Investors Should Aim High

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  • (0:45) - Quarantine Discoveries: Safe Stock Plays
  • (6:50) - Finding Cheap Stocks With Growth
  • (11:20) - Tracey’s Top Stock Picks
  • (26:30) - Episode Roundup: BGS, XOM, TPR, ANF, URBN, PVH, M, TLYS, KSS, HIBB, DKS, FL, CHH, BMO
  • Podcast@Zacks.com

 

Welcome to Episode #254 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Value investing is often thought of a the “boring” strategy.

Investors only get to buy cheap, slow growth companies.

But value investors shouldn’t settle for slow growth. It’s possible to find value stocks that also have strong growth.

The combination of value and growth is rare, but that’s what makes it a powerful combination.

Value investors should aim high. Don’t settle.

Screening for Value and Growth Stocks

How do you find stocks that have both value and growth?

The PEG ratio is a powerful tool for value investors. It combines both a low P/E ratio and growth.

A PEG ratio under 1.0 usually indicates a company has value.

Additionally, adding the Zacks Ranks of #1 (Strong Buy) and #2 (Buy), the two top Zacks Ranks, to a screen should produce companies where the analysts are raising their earnings estimates.

Using just those two fundamentals, the screen produced 95 stocks.

5 Stocks with Low PEG Ratios

1.       Exxon Mobil Corp. (XOM - Free Report) has rallied nearly 50% this year as crude and natural gas prices have risen but it’s still cheap with a forward P/E of just 12.5 and a PEG ratio of 0.7. Investors also get a juicy dividend yielding 5.6%.

2.       Tapestry (TPR - Free Report) , the parent company of Coach, Kate Spade and Stuart Weitzman, is expected to grow revenue by 11.6% this fiscal year and another 4.3% next fiscal year as luxury good demand remains strong on the economic reopening. It has a PEG of just 0.9.

3.       Manpower Group (MAN - Free Report) is in the talent business. When the global economy heats up, so does Manpower Group’s business. Earnings are expected to rise 93% in 2021 and another 21% in 2022. Yet it trades with a PEG ratio of just 0.65.

4.       Choice Hotel International (CHH - Free Report) has two hot luxury brands in Ascend and Cambria, which are seeing a lot of growth. While earnings are expected to rebound in 2021, up 77% off the coronavirus hit year of 2020, they are also expected to jump another 20% in 2022. It has a PEG ratio of 0.99.

5.       Bank of Montreal (BMO - Free Report) is a $67 billion market cap Canadian bank. It is expected to grow its revenue by 8.3% this year. While shares are up 37% this year, it is still cheap with a PEG ratio of 0.7. Shareholders are rewarded with a dividend, currently yielding 3.2%.

What else should you know about screening for value stocks that also have growth?

Listen to this week’s podcast to find out.

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