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Low-priced stocks are always a darling for risk-averse investors who can’t afford to buy high-priced stocks. As it is, finding the right stock that matches all your criteria is not an easy task, especially given the current market conditions. However, it is even more difficult to zero in on one that offers great value but is trading cheap at the moment.
The most important thing is to let go of your fascination for the popular stocks that will willy-nilly attract investors. Although these stocks are sure to grab attention and are thus overbought, they are not at all cheap. So, if you want to make the most of your investment, it’s best to forget such stocks and instead focus on those beyond the conventional. You will probably not hear much about these stocks in the market, but they trade cheap and are definitely a worthy choice for value investors.
But why is value investing suddenly relevant now? Note that since the beginning of the year, issues like the slowdown in China and a plunge in oil prices were plaguing the market. Meanwhile, the uncertainties related to the Federal Reserve’s rate hike also contributed to the market fluctuations. One of the latest issues that shook the global market was Britain’s exit from the European Union.
Brexit – Was It All Bad?
Britain’s decision shocked the world and led to a massive decline in stock prices. Brexit, however, created an opportunity for investors to find cheap stocks easily, leveraging the present market scenario.
But all stocks that are presently trading cheap may not be a good choice. While many would now appear to be lucrative investments, they may easily lack the potential to outperform the market in the long run. So, the stock price is not the only concern; you will also need to evaluate the company’s performance history, financials and value.
Why You Should Consider Value Investing Now
Investing in value stocks is probably the best option right now, seeing that they are both safe and profitable. This is a strategy by which investors select a stock that is trading lower than its fair value or true value, and thus has compelling prospects.
Value stocks have a tendency of showing steady growth and solid price momentum. They may appear to be undervalued on one metric, but not on another. Value investors are usually attracted to these stocks because of their low price/earnings or P/Es, impressive outlook, decent dividend payment history and high returns among other factors.
How We Pick the Stocks
We have used our latest style score system to choose five stocks that have a good performance record and may therefore prove to be a good choice for value investors.
Our Value Style Score highlights all valuation metrics and represents them as one score that warns investors against ‘value traps’ and helps them to find stocks that are actually trading cheap.
Meanwhile, when the Zacks Rank indicates a “Strong Buy” or even a “Buy” (Zacks Rank #1 or #2), it translates into an upward trend in the stock’s earnings estimates.
Hence, stocks with a Value Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or #2, offer the best opportunities in the value investing space.
Following are the five stocks, each with a favorable Zacks Rank and high value score. We have also considered the P/E – an important factor for recognizing value stocks. All of these five stocks have P/E less than 14.
EnerSys engages in manufacturing, marketing and distribution of various industrial batteries including motive power, reserve power, aerospace and defense applications. The company also develops battery chargers and accessories, power equipment and outdoor cabinet enclosures. Moreover, it provides support services for clients.
EnerSys sports a Zacks Rank #1 and a Value Style Score of ‘A.’ The stock has a P/E ratio of 13.82. The company’s expected 3–5 year EPS growth rate is 13%.
Nippon Telegraph and Telephone Corp.
Nippon Telegraph & Telephone provides a variety of telecommunications services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales and other services. The company offers both local and long-distance telephone services within Japan.
This Zacks Rank #1 stock currently has a Value Style Score of ‘A.’ The stock’s P/E ratio is 13.19. The expected 3–5 year EPS growth rate of the company is 20.65%.
PharMerica Corporation
PharMerica Corporation is an institutional pharmacy services provider which offers quality customer service and innovative pharmacy solutions to institutional customers and patients in long-term care settings. PharMerica is a public company formed through the combination of the institutional pharmacy business of national healthcare services company Kindred Healthcare, Inc. and pharmaceutical services company AmerisourceBergen Corp. . The combination led to the formation of an industry-leading U.S. provider of institutional pharmacy services in terms of annual revenues.
Presently, PharMerica Corporation sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 12.40. The company’s expected 3–5 year EPS growth rate is 13.62%.
Dean Foods Company
Based in Dallas, TX, Dean Foods is a leading processor and distributor of milk and other dairy products in the U.S. It is also a leading manufacturer of various specialty food products. The company enjoys a leading position in the food and beverage industry backed by its strong portfolio of brands, which offer it a competitive advantage over its peers.
Currently, Dean Foods sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 11.79. The expected 3–5 year EPS growth rate of the company is 12%.
Sanmina Corporation is a provider of electronics contract manufacturing services. It focuses on engineering and fabricating complex components and offering complete end-to-end supply chain solutions to Original Equipment Manufacturers.
Sanmina currently sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 11.44. Its expected 3–5 year EPS growth rate is 17.50%.
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5 Cheap Value Stocks for Investors in July
Low-priced stocks are always a darling for risk-averse investors who can’t afford to buy high-priced stocks. As it is, finding the right stock that matches all your criteria is not an easy task, especially given the current market conditions. However, it is even more difficult to zero in on one that offers great value but is trading cheap at the moment.
The most important thing is to let go of your fascination for the popular stocks that will willy-nilly attract investors. Although these stocks are sure to grab attention and are thus overbought, they are not at all cheap. So, if you want to make the most of your investment, it’s best to forget such stocks and instead focus on those beyond the conventional. You will probably not hear much about these stocks in the market, but they trade cheap and are definitely a worthy choice for value investors.
But why is value investing suddenly relevant now? Note that since the beginning of the year, issues like the slowdown in China and a plunge in oil prices were plaguing the market. Meanwhile, the uncertainties related to the Federal Reserve’s rate hike also contributed to the market fluctuations. One of the latest issues that shook the global market was Britain’s exit from the European Union.
Brexit – Was It All Bad?
Britain’s decision shocked the world and led to a massive decline in stock prices. Brexit, however, created an opportunity for investors to find cheap stocks easily, leveraging the present market scenario.
But all stocks that are presently trading cheap may not be a good choice. While many would now appear to be lucrative investments, they may easily lack the potential to outperform the market in the long run. So, the stock price is not the only concern; you will also need to evaluate the company’s performance history, financials and value.
Why You Should Consider Value Investing Now
Investing in value stocks is probably the best option right now, seeing that they are both safe and profitable. This is a strategy by which investors select a stock that is trading lower than its fair value or true value, and thus has compelling prospects.
Value stocks have a tendency of showing steady growth and solid price momentum. They may appear to be undervalued on one metric, but not on another. Value investors are usually attracted to these stocks because of their low price/earnings or P/Es, impressive outlook, decent dividend payment history and high returns among other factors.
How We Pick the Stocks
We have used our latest style score system to choose five stocks that have a good performance record and may therefore prove to be a good choice for value investors.
Our Value Style Score highlights all valuation metrics and represents them as one score that warns investors against ‘value traps’ and helps them to find stocks that are actually trading cheap.
Meanwhile, when the Zacks Rank indicates a “Strong Buy” or even a “Buy” (Zacks Rank #1 or #2), it translates into an upward trend in the stock’s earnings estimates.
Hence, stocks with a Value Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or #2, offer the best opportunities in the value investing space.
Following are the five stocks, each with a favorable Zacks Rank and high value score. We have also considered the P/E – an important factor for recognizing value stocks. All of these five stocks have P/E less than 14.
Our Picks
EnerSys (ENS - Free Report)
EnerSys engages in manufacturing, marketing and distribution of various industrial batteries including motive power, reserve power, aerospace and defense applications. The company also develops battery chargers and accessories, power equipment and outdoor cabinet enclosures. Moreover, it provides support services for clients.
EnerSys sports a Zacks Rank #1 and a Value Style Score of ‘A.’ The stock has a P/E ratio of 13.82. The company’s expected 3–5 year EPS growth rate is 13%.
Nippon Telegraph and Telephone Corp.
Nippon Telegraph & Telephone provides a variety of telecommunications services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales and other services. The company offers both local and long-distance telephone services within Japan.
This Zacks Rank #1 stock currently has a Value Style Score of ‘A.’ The stock’s P/E ratio is 13.19. The expected 3–5 year EPS growth rate of the company is 20.65%.
PharMerica Corporation
PharMerica Corporation is an institutional pharmacy services provider which offers quality customer service and innovative pharmacy solutions to institutional customers and patients in long-term care settings. PharMerica is a public company formed through the combination of the institutional pharmacy business of national healthcare services company Kindred Healthcare, Inc. and pharmaceutical services company AmerisourceBergen Corp. . The combination led to the formation of an industry-leading U.S. provider of institutional pharmacy services in terms of annual revenues.
Presently, PharMerica Corporation sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 12.40. The company’s expected 3–5 year EPS growth rate is 13.62%.
Dean Foods Company
Based in Dallas, TX, Dean Foods is a leading processor and distributor of milk and other dairy products in the U.S. It is also a leading manufacturer of various specialty food products. The company enjoys a leading position in the food and beverage industry backed by its strong portfolio of brands, which offer it a competitive advantage over its peers.
Currently, Dean Foods sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 11.79. The expected 3–5 year EPS growth rate of the company is 12%.
Sanmina Corporation (SANM - Free Report)
Sanmina Corporation is a provider of electronics contract manufacturing services. It focuses on engineering and fabricating complex components and offering complete end-to-end supply chain solutions to Original Equipment Manufacturers.
Sanmina currently sports a Zacks Rank #1 and has a Value Style Score of ‘A.’ The stock has a P/E ratio of 11.44. Its expected 3–5 year EPS growth rate is 17.50%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>