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Welcome to Episode #29 of the Value Investor Podcast
Every week, Zacks value stock strategist and the Editor of Zacks Value Investor portfolio, Tracey Ryniec, talks about all things happening in the value stock universe, including her top stock picks.
Stocks are again hitting new all-time highs. But unlike in 2016 when everyone was handwringing about valuation, in 2017 investors seem to be less concerned with how expensive the market is.
Why is that?
Retail and energy stocks are well off their highs. Bank stocks have also pulled back. There are vulnerable sectors so the overall market doesn’t feel quite as hot.
Tracey took a look, though, to see if there was still value amidst the stocks that are breaking out.
She ran a screen that included the Zacks Rank of #1 (Strong Buy) or #2 (Buy), so that there would be rising earnings estimates, and a Zacks Style Score for value of A which means that the company is a value compared to its peers.
There were 44 stocks that came across her screen. While that may sound like a lot, the Zacks Rank covers more than 4,000 stocks. 44 stocks is a really small part of the bigger stock universe.
A value stock breaking out to new highs, i.e. a value momentum stock, is a rare occurrence.
Tracey picked out three stocks from the screen that were her favorite. She avoided the airline stocks, although there were some that made it onto the screen. The airline stocks are one of the few undervalued groups that still have great charts. But she wanted to focus on other areas.
Instead, she picked three stocks that were from diverse industries. You might be surprised by what are values right now.
3 Value Stocks Breaking Out to New 52-Week Highs
1. Allstate (ALL - Free Report) , the big life, auto and casualty insurer, has a gorgeous 5-year chart. Have you seen it?
I know many of you think insurance companies are boring. But I’ll take this kind of “boring” all the time. And even with the multi-year breakout in the shares, they are still cheap. Allstate has a forward P/E of just 12.5.
1. Carrols Restaurant Group (TAST - Free Report) has had a bumpy 5-year ride but if you were patient, shares have gone from under $4 to above $15 in that time. Earnings are expected to grow 28% in 2017. But is it truly a “value” stock? Tracey digs into the fundamentals.
2. American Express (AXP - Free Report) has been left for dead by investors the last few years but in 2016 it started moving higher again. It has broken out to new 52-week highs and has kept that momentum into 2017. It’s cheap, with a forward P/E of just 13.8.
Value investors have difficulty in buying on the breakout because they’re conditioned to think that value means “breakdown” instead of “breakout.” But that’s not always true. Don’t be afraid to buy the breakout.
A stock breaking out means the story is good.
Who doesn’t want a value stock that investors think has a bright future?
Find out more about what Tracey thinks about buying at the 52-week highs in this week’s podcast.
Want more insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.
Image: Bigstock
Buying Value Stocks on the Breakout
Welcome to Episode #29 of the Value Investor Podcast
Every week, Zacks value stock strategist and the Editor of Zacks Value Investor portfolio, Tracey Ryniec, talks about all things happening in the value stock universe, including her top stock picks.
Stocks are again hitting new all-time highs. But unlike in 2016 when everyone was handwringing about valuation, in 2017 investors seem to be less concerned with how expensive the market is.
Why is that?
Retail and energy stocks are well off their highs. Bank stocks have also pulled back. There are vulnerable sectors so the overall market doesn’t feel quite as hot.
Tracey took a look, though, to see if there was still value amidst the stocks that are breaking out.
She ran a screen that included the Zacks Rank of #1 (Strong Buy) or #2 (Buy), so that there would be rising earnings estimates, and a Zacks Style Score for value of A which means that the company is a value compared to its peers.
There were 44 stocks that came across her screen. While that may sound like a lot, the Zacks Rank covers more than 4,000 stocks. 44 stocks is a really small part of the bigger stock universe.
A value stock breaking out to new highs, i.e. a value momentum stock, is a rare occurrence.
Tracey picked out three stocks from the screen that were her favorite. She avoided the airline stocks, although there were some that made it onto the screen. The airline stocks are one of the few undervalued groups that still have great charts. But she wanted to focus on other areas.
Instead, she picked three stocks that were from diverse industries. You might be surprised by what are values right now.
3 Value Stocks Breaking Out to New 52-Week Highs
1. Allstate (ALL - Free Report) , the big life, auto and casualty insurer, has a gorgeous 5-year chart. Have you seen it?
Allstate Corporation (The) Price
Allstate Corporation (The) Price | Allstate Corporation (The) Quote
I know many of you think insurance companies are boring. But I’ll take this kind of “boring” all the time. And even with the multi-year breakout in the shares, they are still cheap. Allstate has a forward P/E of just 12.5.
1. Carrols Restaurant Group (TAST - Free Report) has had a bumpy 5-year ride but if you were patient, shares have gone from under $4 to above $15 in that time. Earnings are expected to grow 28% in 2017. But is it truly a “value” stock? Tracey digs into the fundamentals.
2. American Express (AXP - Free Report) has been left for dead by investors the last few years but in 2016 it started moving higher again. It has broken out to new 52-week highs and has kept that momentum into 2017. It’s cheap, with a forward P/E of just 13.8.
Value investors have difficulty in buying on the breakout because they’re conditioned to think that value means “breakdown” instead of “breakout.” But that’s not always true. Don’t be afraid to buy the breakout.
A stock breaking out means the story is good.
Who doesn’t want a value stock that investors think has a bright future?
Find out more about what Tracey thinks about buying at the 52-week highs in this week’s podcast.
Want more insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.
Click here to learn more.