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Analyst Blog

Investors have been erring on the side of caution as the stock market has been fairly tricky so far in 2015. Concerns surrounding China’s economic crisis, Fed’s rate hike timing and the slump in oil prices have dealt a heavy blow to the equilibrium of global markets, with all major indices taking a beating. Notably, the S&P 500 and Dow Jones Industrial Average have declined about 3.5% and 6%, respectively, year-to-date.

Further, these adverse factors that triggered the recent market turmoil may even thwart a turnaround, which is usually witnessed in the fourth quarter.

Don’t Panic Just Yet

Nevertheless, instead of fretting over the macro concerns, investors would do well being mindful of the current market scenario. This would make it feasible for them to work out strategies to not only minimize losses but also book profits in the fourth quarter.

Given the stock market’s current correction mode, one such approach would be investing in value stocks that have been outperforming the market against the present odds and have also been trading at cheap valuations. Disorderly periods like this provide some of the finest buying opportunities, and investors could capitalize from market corrections and beaten-down markets to procure quality value stocks at economical rates.

Even Warren Buffett had once said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down." 

5 Cheap Stocks That Braved the Downfall

Notwithstanding a long list of apprehensions, there have been few stocks that have had a great run, so far this year.

We screened stocks that have rallied an impressive 20% or more year-to-date, and also flaunt a solid Zacks Rank. Moreover, a P/E below 17 and PEG ratio of less than 1 exemplify their cheap valuations. Further, to make sure that the stocks are reliable value bargains, we picked those that sport a Value Style Score of ‘A’ or ‘B’ as per our new style score system.

Below, we have listed five cheap stocks with excellent prospects that have held ground in spite of the recent chaos:

Trinseo SA (TSE - Snapshot Report): This Zacks Rank #1 (Strong Buy) company manufactures and markets various emulsion polymers and plastics. Trinseo is set to benefit from its incessant efforts to control costs. The company is particularly focused on its Performance Materials segment as it expects to sustain its performance and generate healthy returns in 2016 as well. The growth drivers include continued positive mix shift and higher volumes in rubber as well as modest volume growth at Performance Plastics.

Value Score: A
Increase in share price (YTD): 63%
P/E: 5.34
PEG Ratio: 0.85
Change in Full-Year Estimate Revision (over 60-days): 15%
This year’s expected EPS growth rate: 2,535.6%

Tesoro Corporation (TSO - Analyst Report): Flaunting a Zacks Rank #1, this company is one the largest independent oil refiners in the U.S. A major advantage for Tesoro is the scale and diversification benefits offered by the six refineries it owns. Moreover, being a buyer of crude, Tesoro’s profits have been on the rise because of the fall in input cost. Further, with oil prices anticipated to remain weak throughout 2015, the near-term prospects look bright for the refiner as well.

Value Score: A
Increase in share price (YTD): 41%
P/E: 8.09
PEG Ratio: 0.55
Change in Full-Year Estimate Revision (over 60-days): 41.9%
This year’s expected EPS growth rate: 82%

Express Inc. (EXPR - Snapshot Report): Express is a specialty retailer of women's and men's apparel in the U.S. This Zacks Rank #1 company operates retail outlets in high-traffic shopping malls, lifestyle centers and street locations across the U.S. It also sells its products through its e-commerce website, Further, with the holiday season approaching, Express should likely see increases in revenues and earnings for the quarter.

Value Score: A
Increase in share price (YTD): 24.1%
P/E: 12.85
PEG Ratio: 0.86
Change in Full-Year Estimate Revision (over 60-days): 14.2%
This year’s expected EPS growth rate: 69.4%

JetBlue Airways Corporation (JBLU - Analyst Report): Based in Long Island City, NY, JetBlue is a passenger carrier that focuses on providing high-quality customer service. This low-fare carrier operates primarily on point-to-point routes. Continuous route expansion, higher codesharing agreements and innovative service launches will likely continue to act as catalysts for this Zacks Rank #1 company.

Value Score: B
Increase in share price (YTD): 67%
P/E: 14.01
PEG Ratio: 0.29
Change in Full-Year Estimate Revision (over 60-days): 2.7%
This year’s expected EPS growth rate: 167.5%

Alaska Air Group, Inc. (ALK): Seattle-based Alaska Air Group provides passengers and cargo air transportation services primarily in the U.S. Recently, this Zacks Rank #2 (Buy) company entered a codeshare deal and frequent flier partnership to enhance connectivity between Europe and the U.S.

Value Score: A
Increase in share price (YTD): 35.4%
P/E: 12.68
PEG Ratio: 0.82
Change in Full-Year Estimate Revision (over 60-days): 2.3%
This year’s expected EPS growth rate: 51.4%

Best Buys

Though the current market presents considerable investment challenges, it also bears opportunities for smart investors who can manage to stay afloat in such frivolous conditions.

The abovementioned stocks have escalated to fame with striking performances and are currently trading cheap, thereby holding greater promises for the future. Now’s the time to take advantage of these trend-beating stocks, which have proved their incredible resilience in an appallingly tricky market. So, what are you waiting for, eh?

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