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5 Value Stocks That Still Have P/E Below 15

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Post-election of Donald Trump as President-elect, the financial markets are steadily rising. This is evident from the Dow Jones Industrial Average which has touched new highs 13 times in the last 22 trading sessions. Similarly the bullish trend is echoed by the S&P 500 which has done the same 9 times.

However, going forward the markets may come to a crossroads. Our apprehension comes from the uncertainty regarding the outcome of a slew of events including the possibility of a rate hike by the Fed, a stronger dollar, steady inclusion of generals in the Trump cabinet and the stance of healthcare insurance companies over the Affordable Care Act, or ACA, are expected to spark bouts of volatility. Added to these, growing discontent in Italy against the European Union which is showing early signs of another Brexit and we all know why investors are edgy.

Amid this uncertainty, it will be a prudent decision to stay invested in fundamentally sound companies that are unperturbed by market gyrations. If such companies are undervalued, it’s even better, since they will gain in strength once the broader markets move north.

Fed Rate Hike?

Investors remain concerned about the decision to be taken by the Fed on rate hike next week, as the latest polls suggest chances of a rate hike this month is considerable. It is the optimism stemming from November’s jobs report that increased the rate hike possibility. The U.S. economy added 178,000 jobs in November, mainly from professional, business services and in health care, according to the Labor department.

The jobless rate fell to 4.6% last month, but the drop was mostly due to declining labor force participation. This is due to the fact that a higher number of people were actively not looking for employment and were therefore not counted as unemployed. Now, this isn’t a promising sign and is bound to have repercussions on consumer confidence. This might even hamper spending levels that have been one of the bright spots driving the economy.

An All General Trump Cabinet?

The way things are moving in Capitol Hill, it may not be too farfetched to think of an all general cabinet under Trump. After army general Michael Flynn as White House national security adviser and Marine general James Mattis as defense secretary nominee; comes the news of the selection of Marine general John F. Kelly as Secretary of Homeland Security. Also in the reckoning are army general David H. Petraeus for Secretary of State and Navy Admiral Michael S. Rogers for Director of National Intelligence. Investor apprehension was aptly expressed by Senator Chris Murphy who said, “…when we view problems in the world through a military lens, we make big mistakes.”

Beginning of the End for Affordable Care Act

A number of times during his presidential campaign, Donald Trump labeled Affordable Care Act (ACA) as a disaster which requires immediate, less-expensive replacement. According to him, Obamacare is replete with special interest handouts, budget gimmicks and tax increases, all leading to higher premiums and deductibles with reduced access to care.

In particular, he talked about the adversities of the Medicaid expansion plan and the two highly controversial taxes — the “Cadillac plan” and the temporarily repealed medical-device tax. Given the writing on the wall, the healthcare insurance industry is resigned to the demise of the Affordable Care Act and is closely watching developments on Capitol Hill.

So, if you are set to maneuver in such an uncertain market and unleash the potential of your portfolio, all you need to do is... play your stocks right.

How to Make the Right Moves

In value investing, investors select stocks that are trading lower than their fair value or intrinsic value and thus offer a significant upside potential. However, not all cheap stocks can ensure high returns over the long haul.

With the market at the crossroads, it is essential for investors to be watchful of what they are paying for. Hence, investing in low price/earnings (“P/E”) stocks can prove to be good bargains as the P/E ratio is a snapshot of a firm's earnings strength. A low P/E indicates that either a stock’s price has declined or that its earnings performance has been improving.

We have taken the help of the Zacks Stock Screener to easily pick the winning stocks. In order to screen out potential value stocks, we have considered only those that have a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a value score of ‘A.’ You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best upside potential. These stocks also have a lower forward P/E ratio and favorable growth potential. Moreover, as they currently trade at a Price/Earnings (F1) ratio of less than 15, there is further room to run.

5 Value Bets

Ocean Rig UDW LLC

With a Zacks Rank #1, Nicosia, Cyprus-headquartered Ocean Rig mainly provides services related to offshore drilling to the upstream energy players. The company’s drilling units specialize in operating in harsh-environment. The company is currently trading at a forward P/E multiple of 0.44, which compares favorably with the industry average of -1.90.



 

Seagate Technology plc (STX - Free Report)

Headquartered at Dublin, Ireland, Seagate is the second-largest manufacturer of hard disk drives (HDDs) in the U.S. It also develops other electronic data storage products such as SSD (solid state drive) and solid state hybrid drives (SSHD). This Zacks Rank #1 stock is currently trading at a forward P/E multiple of 10.43 and saw the Zacks Consensus Estimate for its current year earnings surging almost 25% over the last 60 days.




The Liberty Media Group

Englewood, CO-based Liberty Media owns interests in a broad range of businesses, including media, communications and entertainment. The company offers its services predominantly in the North American region. The Zacks Rank #1 stock is currently trading at a forward P/E multiple of 10.70, which compares favorably with the industry average of 17.30.



 

Best Buy Co. Inc. (BBY - Free Report)

Incorporated in 1966 and headquartered in Richfield, MN, Best Buy Company Inc. is a multinational specialty retailer. It deals in consumer electronics, home office products, entertainment software, appliances and related services through around 1,500 domestic locations and 300 international outlets. The company is currently trading at a forward P/E multiple of 14.35 and saw the Zacks Consensus Estimate for its current year earnings rising almost 7.6% over the last 30 days.



 

General Motors Company (GM - Free Report)

Detroit, MI-based General Motors Company produces, sells and services cars, trucks and parts under four core brands – Chevrolet, Buick, GMC and Cadillac. GM assembles passenger cars, crossover vehicles, light trucks, sport utility vehicles (SUVs), vans and other vehicles. The company is currently trading at a forward P/E multiple of 5.83 and saw the Zacks Consensus Estimate for its current year earnings rising almost 3.3% over the last 30 days.


End Note

The strong fundamentals of these aforementioned picks blended with bullish analyst interest could just have unveiled stocks that might rally harder in the months to come.  Hence, by simply playing it smart, one can emerge as a winner even in a market as erratic as this.

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