We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Welcome to Episode #199 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
With so many new investors, many are confused about what value investing is.
What is it?
And how do you find good value stocks?
The Definition of Value Investing
Value investing is buying cheap stocks. But “cheap” doesn’t mean share price.
Cheapness is usually determined by the price-to-earnings ratio (P/E). That is price divided by earnings. The lower it is, the cheaper the company.
Value stocks are also usually in an industry that Wall Street is ignoring. In 2020, think of the banks. They are all mostly cheap as Wall Street is avoiding them.
Screening for Value Stocks
Investors can use the P/E ratio to find cheap stocks, but if you only screen with that one metric, you will get over 1,000 stocks.
That’s where the Zacks Rank comes in handy. The Zacks Rank can narrow down the list of cheap stocks.
Screening for Zacks Rank #1 (Strong Buy) stocks, which is the highest of the Zacks Ranks, and a P/E ratio under 15, really narrowed down the list of stocks.
That screen gave just 77 stocks.
5 Value Stocks with Zacks Ranks of #1
1. Asbury Automotive Group (ABG - Free Report) has a forward P/E of just 10.6. It recently reported record second quarter results as operating margin was a record 5.7%.
2. American Woodmark (AMWD - Free Report) has seen its earnings estimates revised higher over the past 30 days. The cabinet maker is cheap, with a forward P/E of 12.8.
3. DR Horton (DHI - Free Report) just posted a hot second quarter as consumers are out in droves buying new homes. Even as the shares have surged, they are still attractive with a forward P/E of 13.2.
4. Kroger (KR - Free Report) is part of the cocoon at home companies. Many consumers are still reluctant to eat outside the home. The shares are still trading with a cheap valuation, with a forward P/E of 12.4.
5. Flagstar Bancorp is a community bank in Michigan which also operates a national mortgage lending business. With record low mortgage rates, home buying has been hot despite the pandemic. In the second quarter, Flagstar reported its best quarter in the company’s history. Yet these shares are still dirt cheap with a forward P/E of 8.1.
What else do you need to know about how to value invest?
Find out this week’s podcast.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Shutterstock
The Basics of Value Investing
Welcome to Episode #199 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
With so many new investors, many are confused about what value investing is.
What is it?
And how do you find good value stocks?
The Definition of Value Investing
Value investing is buying cheap stocks. But “cheap” doesn’t mean share price.
Cheapness is usually determined by the price-to-earnings ratio (P/E). That is price divided by earnings. The lower it is, the cheaper the company.
Value stocks are also usually in an industry that Wall Street is ignoring. In 2020, think of the banks. They are all mostly cheap as Wall Street is avoiding them.
Screening for Value Stocks
Investors can use the P/E ratio to find cheap stocks, but if you only screen with that one metric, you will get over 1,000 stocks.
That’s where the Zacks Rank comes in handy. The Zacks Rank can narrow down the list of cheap stocks.
Screening for Zacks Rank #1 (Strong Buy) stocks, which is the highest of the Zacks Ranks, and a P/E ratio under 15, really narrowed down the list of stocks.
That screen gave just 77 stocks.
5 Value Stocks with Zacks Ranks of #1
1. Asbury Automotive Group (ABG - Free Report) has a forward P/E of just 10.6. It recently reported record second quarter results as operating margin was a record 5.7%.
2. American Woodmark (AMWD - Free Report) has seen its earnings estimates revised higher over the past 30 days. The cabinet maker is cheap, with a forward P/E of 12.8.
3. DR Horton (DHI - Free Report) just posted a hot second quarter as consumers are out in droves buying new homes. Even as the shares have surged, they are still attractive with a forward P/E of 13.2.
4. Kroger (KR - Free Report) is part of the cocoon at home companies. Many consumers are still reluctant to eat outside the home. The shares are still trading with a cheap valuation, with a forward P/E of 12.4.
5. Flagstar Bancorp is a community bank in Michigan which also operates a national mortgage lending business. With record low mortgage rates, home buying has been hot despite the pandemic. In the second quarter, Flagstar reported its best quarter in the company’s history. Yet these shares are still dirt cheap with a forward P/E of 8.1.
What else do you need to know about how to value invest?
Find out this week’s podcast.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>