(1:00) - Learning The Basics To Value Investing (6:15) - Creating A Screen To Find The Right Stock For You (13:00) - Tracey’s Top Stock Picks (30:25) - Episode Roundup: BP, DHI, GPI, PATK, VSH Podcast@Zacks.com
Welcome to Episode #283 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.
Value investors are made, not born. Even Warren Buffett started off trading, and buying stocks based on the chart patterns, until he read Benjamin Graham’s Intelligent Investor at age 19 and had a light bulb moment.
But not everyone has to have a light bulb moment. Maybe you just like to buy stocks on sale or maybe you became obsessed with companies that actually had earnings over the last 2 years, versus growth stocks that did not.
And now you are thinking about buying value stocks. But where do you even begin?
Screening for Value Stocks
Value stock investing is about buying companies that are undervalued by Wall Street. They are usually cheap in fundamentals and have low P/E, P/S and PEG ratios.
New value investors can find value stocks by running a basic screen. Zacks.com has one, under the screening tab, then click on “predefined” and then click on the “Basic” button.
To recap: click on the following tabs and buttons on Zacks.com
2. Stock Screener
Or you can get the “Basic” screens
These are free.
Value and Growth is a Powerful Combination
On the “Basic” page, there is just one value screen. It is called Classic Value with Growth. It looks for stocks with low P/E, P/S, P/B and PEG ratios as well as 5 years of earnings growth and future earnings growth.
This screen returned 41 stocks.
That’s a LOT of value stocks. Tracey pulled out 5 to take a closer look at on the podcast.
Without even trying, she happened to pull out 5 stocks that all had P/Es under 10. And 4 out of 5 were under 5.
5 Value Stocks with Growth 1. BP ( BP Quick Quote BP - Free Report)
BP is a large integrated energy company. It took a huge charge in the first quarter as it exited its Russian business due to the Ukraine War. BP owned a 19.75% position in Russia’s Rosneft.
But it’s cash flows are strong as oil and natural gas prices remain elevated. BP announced a $2.5 billion share buyback program that it would complete prior to its second quarter results. It pays a dividend, currently yielding 4%.
Shares have gained 23% in 2022 but remain dirt cheap. BP trades with a forward P/E of just 4.8.
Should value investors still be diving into BP?
2. D.R. Horton ( DHI Quick Quote DHI - Free Report)
D.R. Horton is a large national home builder. The homebuilders have been value stocks all year long.
D.R. Horton shares have tumbled in 2022, falling 31% year-to-date. It’s dirt cheap, with a forward P/E of just 4.3.
But analysts are worried about D.R. Horton having had “peak” earnings now that mortgage rates are rising.
Is D.R. Horton a value trap?
3. Group 1 Automotive ( GPI Quick Quote GPI - Free Report)
Group 1 Automotive operates 147 dealerships in the United States and 55 in the United Kingdom along with 46 collision centers. It sells new and used vehicles, as well as parts and services.
In the first quarter, Group 1 Automotive had a record quarter.
Group 1 Automotive is doing a $250 million share repurchase program and just raised the dividend by 2.8%. It currently yields 0.8%.
Group 1 Automotive shares have fallen 8.4% year-to-date and are also dirt cheap. They trade with a forward P/E of just 4.2.
Is there more left in the tank for Group 1 Automotive shares?
4. Patrick Industries ( PATK Quick Quote PATK - Free Report)
Patrick Industries provides products and building materials for RVs, Marine, Manufactured Housing and various industrial markets. The RV and boat industries have been red hot during the pandemic as people sought adventures in the outdoors.
But Patrick Industries shares are down 26% year-to-date on fears about “peak” earnings in the RV and boat industries.
Patrick Industries is now dirt cheap as well, with a forward P/E of just 4.7. It pays a dividend, yielding 2.2%.
Are analysts getting it wrong on the RV industry and Patrick Industries?
5. Vishay Intertechnologies ( VSH Quick Quote VSH - Free Report)
Vishay is a manufacturer of semiconductors and passive electronic components servicing customers across all industries.
Vishay shares have been down as much as 20% this year but have rebounded recently and are now down “only” 7% year-to-date. But they’re cheap, with a forward P/E of 7.6.
Vishay also pays a dividend, currently yielding nearly 2%.
Is the worst over in the semiconductors?
What Else do you Need to Know About How to Start Value Investing?
Tune into this week’s podcast to find out.