Welcome to Episode #328 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 the growth stocks surging again, especially technology stocks, value investors might be feeling a bit depressed. Even Apple is so expensive that it’s not considered a value anymore. And while big cap tech, like NVIDIA, are not value stocks, what about other technology companies? Surely there are some technology companies that are cheap right now?
Screening for Cheap Tech Stocks
It’s pretty easy to screen for cheap technology stocks. You can plug in the Computer and Technology sector in the Zacks.com stock screening tool. For “value,” Tracey looked for stocks that had a price-to-sales ratio under 1.0. A P/S ratio under 1.0 indicates you are getting the sales for less than what they are worth. You are getting the sales on sale. To get companies that have rising earnings estimates, Tracey also screened for Zacks Rank #1 (Strong Buy) stocks. This is the top Zacks rank. There are only 247 stocks with the #1 (Strong Buy) rank right now. That is an elite group. Running this basic screen, it returned 5 stocks.
5 Top Dirt-Cheap Tech Stocks
Bel Fuse is a small cap global company which manufactures a broad array of products that power, protect and connect electronic circuits. Last year, Bel Fuse ramped up headcount and production in North American factories to meet expected demand from commercial aerospace and defense customers. Shares of Bel Fuse are up 45% year-to-date but are still cheap. It trades with a P/S ratio of just 0.88 and a forward P/E of 11.8. As an added bonus, Bel Fuse also pays a dividend, currently yielding 0.6%. Should Bel Fuse be on your short list?
Mitsubishi Electric is a big cap Japanese company that sells electrical and electronic equipment worldwide. 49% of Mitsubishi Electric’s revenue comes from Japan, with 12% in North America, 12% in China, 13% Asia ex China, 12% in Europe and 2% in others. Shares of Mitsubishi Electric are up 28.8% year-to-date but are still cheap. It has a P/S ratio of just 0.7. Mitsubishi Electric also pays a dividend, currently yielding 2%. Is it time to look abroad for tech companies like Mitsubishi Electric?
Hello Group is a Chinese based technology company that operates mobile apps for dating and finding friends nearby. In 2022, revenue actually fell 12.8% year-over-year, but China has now re-opened from zero covid. Shares of Hello Group are down 8.1% year-to-date. But they remain dirt cheap with a forward P/E of just 5.5 and a P/S ratio of 0.9. Will revenue of Hello Group improve in 2023 on the reopening after the pandemic?
Ribbon Communications is a small cap company delivering communications software, IP and optical networking solutions. In the first quarter of 2021, revenue rose 7% to $186 million. IP Optical Networks sales were up 13% in Q1, led by robust demand in India and EMEA. Ribbon Communications reaffirmed 2023 guidance. Shares of Ribbon Communications are down 2.9% year-to-date and remain cheap. It has a P/S ratio of just 0.6. Ribbon Communications is a stock under $5. Should you take a chance on Ribbon Communications in 2023?
RumbleON is a small cap company, with a market cap of just $171 million. It is the nation’s largest retailer and the first technology-based omnichannel marketplace in powersports. Revenue was down 22% in the first quarter to $346.3 million from $445.2 million. Shares of RumbleON have gotten crushed in the last 2 years, falling 74% in that time. But in 2023, they have rebounded, jumping 54%. RumbleON is still cheap. It has a P/S ratio of just 0.1. Should RumbleOn be on your short list?
What Else do Value Investors Need to Know About Cheap Technology Stocks?
Listen to this week’s podcast to find out.