The market environment has been erratic stemming from a number of macroeconomic factors of late. The International Monetary Fund (‘IMF’) has lowered the global growth projection by 0.1% to 3.1% for 2016 and to 3.4% for 2017. The existing macro markets are distraught with a number of headwinds, with major developed and booming economies struggling for resurgence or development.
Viewing U.S. economy, we note that Britain’s decision to exit the European Union (EU) has pushed back hopes of an interest rate hike to 2018, while rates around the world continue to drop post-Brexit. Unemployment rate of the country stands at only 4.9%, indicating a fragile job market scenario. Other adversities such as constant appreciation of U.S. currency, sluggish Chinese economy, Japan sighing over high debt, aging population and low investments are fuelling this dismal scenario. How to Win In the Volatile Equity Universe?
Investors can be winners only by apportioning their funds with a clear roadmap in the current indecisive equity market. At this juncture, we perceive that investors can do well by acquiring less risky stocks rather than opting for the uncertain ones. Braving Unpredictability with Value Investing
Investing in value stocks could essentially be a safer bet at this moment, given their penchant for momentum in price and steady growth. Value endowing provides a chance to step in the market and obtain stocks that are yet unnoticed by most investors, and hence are traded cheap. It allows investors to park funds on cheap stocks that offer high returns and possess robust growth potential. However, is it enough to allot one’s hard-earned money on any value stock?
Value investment can be rewarding as the stocks are less risky. However, it is vital to take a company’s growth prospects into report before taking leaping with merely low value stocks as lifeguards.
We perceive that value stocks with relatively low price/earnings (P/E) ratio than their peers should be considered. Investing in low P/E stocks can prove to be a good bargain for investors as the P/E ratio is a snapshot of a firm’s earnings strength. Also, the pick would be even more lucrative if we go for the ones offering decent dividend rates. Sound dividend offering stocks are not only tempting for income seeking investors but also promise substantial yields on a regular basis to investors in a low interest rate environment. Zacks to the Rescue
With the help of the Zacks Stock Screener, we have zeroed-in on five stocks that sport a Zacks Rank #1 (Strong Buy), have a Value Score of “A,” offers a dividend over 1% and has a P/E ratio lower than its industry average. Our Picks Alliance Holdings GP, L.P. ( AHGP) produces and sells coal majorly to industrial and utility users.
P/E: 9.56 (versus 49.40 for the industry)
Dividend Yield: 8.9%. Spark Energy, Inc. ( SPKE) is a premium independent retail energy services company.
P/E: 11.39 (versus 17.20 for the industry)
Dividend Yield: 5.1%. Outerwall Inc. ( OUTR) is a renowned automated retailed solutions providing company.
P/E: 7.82 (versus 19.90 for the industry)
Dividend Yield: 4.6%. Enviva Partners, LP ( EVA) creates and supplies utility-grade wood pellets to variable power generators.
P/E: 15.08 (versus 26.10 for the industry)
Dividend Yield: 8.6%. Hallador Energy Company ( HNRG) engages mining, fabrication, and sale of premium quality steam coal for the U.S. electric power generating industry.
P/E: 10.36 (versus 49.40 for the industry)
Dividend Yield: 2.6%.
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