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Welcome to Episode #351 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.
Charlie Munger, the Executive Chairman of Berkshire Hathaway, best friend of Warren Buffett and legendary investor, recently died at age 99. One of his most well-known pieces of advice he gave over the years to Warren Buffett was to not just buy cheap companies, but to buy great, cheap companies.
It sounds so simple, right?
But finding “great” companies that are flying under the radar is difficult.
2 Methods for Finding Great Companies
1. You Know It When You See It
There is no scientific algorithm behind method #1. Many times, you will simply know a company is cheap, and that it’s a great company, by instinct.
2. Run a Screen
For the purposes of this podcast, Tracey ran a Zacks premium screen looking for both value and growth using the PEG ratio. It also incorporated the top Zacks Ranks of #1 (Strong Buy) or #2 (Buy).
This screen returned 13 top cheap stocks with growth.
PayPal shares have had a terrible 2-year period, falling 69% during that time. They’re also near 5-year lows, down 33% during that time. Meanwhile, the S&P 500 is up 65% during that 5-year period.
PayPal is now cheap with a forward P/E of just 11.8. Earnings are expected to be up 21% in 2023 and another 12% in 2024. PayPal has a PEG ratio of just 0.7. A PEG ratio under 1.0 indicates both growth and value.
Is PayPal a great cheap company you should have on your short list?
EOG Resources is a large independent oil and natural gas producer which drills in the Permian Basin, among other locations. Shares of EOG Resources are down 5.7% year-to-date as oil has fallen from 2022 highs.
EOG Resources is cheap with a forward P/E of 10. Earnings are expected to rise 12.6% in 2024, giving it a PEG ratio of just 0.4.
The company recently raised its 2024 cash return commitment to a minimum of 70% of annual free cash flow. EOG Resources also raised its regular dividend 10%.
Is EOG Resources a great cheap company you should have on your short list?
LegalZoom went IPO in 2021 and the shares soared. But since then, LegalZoom has retreated, falling nearly 70% from its IPO price. This year, it has rebounded off recent lows, however, gaining 55%.
LegalZoom is expected to see earnings rise 150% in 2023 and another 18.1% in 2024. It has a PEG ratio of just 0.5. A PEG ratio under 1.0 usually indicates a company has both growth and value.
Is LegalZoom a great cheap company that should be on your short list?
What Else Do You Need to Know About Finding Great Cheap Companies?
Tune into this week’s podcast to find out.
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Value Investors: How to Find Great Cheap Companies
Welcome to Episode #351 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.
Charlie Munger, the Executive Chairman of Berkshire Hathaway, best friend of Warren Buffett and legendary investor, recently died at age 99. One of his most well-known pieces of advice he gave over the years to Warren Buffett was to not just buy cheap companies, but to buy great, cheap companies.
It sounds so simple, right?
But finding “great” companies that are flying under the radar is difficult.
2 Methods for Finding Great Companies
1. You Know It When You See It
There is no scientific algorithm behind method #1. Many times, you will simply know a company is cheap, and that it’s a great company, by instinct.
2. Run a Screen
For the purposes of this podcast, Tracey ran a Zacks premium screen looking for both value and growth using the PEG ratio. It also incorporated the top Zacks Ranks of #1 (Strong Buy) or #2 (Buy).
This screen returned 13 top cheap stocks with growth.
5 Cheap Value Stocks: But Are They Great?
1. General Motors Co. (GM - Free Report)
General Motors has been a cheap stock for years. It currently trades with a forward P/E of just 4.1.
General Motors just announced a $10 billion share buyback and it raised its dividend by 33%. It’s dividend currently yields 1.3%.
Earnings are expected to fall 7.8% in 2023 and another 3.5% in 2024.
Is General Motors a great cheap company you should have on your short list?
2. PayPal Holdings, Inc. (PYPL - Free Report)
PayPal shares have had a terrible 2-year period, falling 69% during that time. They’re also near 5-year lows, down 33% during that time. Meanwhile, the S&P 500 is up 65% during that 5-year period.
PayPal is now cheap with a forward P/E of just 11.8. Earnings are expected to be up 21% in 2023 and another 12% in 2024. PayPal has a PEG ratio of just 0.7. A PEG ratio under 1.0 indicates both growth and value.
Is PayPal a great cheap company you should have on your short list?
3. EOG Resources, Inc. (EOG - Free Report)
EOG Resources is a large independent oil and natural gas producer which drills in the Permian Basin, among other locations. Shares of EOG Resources are down 5.7% year-to-date as oil has fallen from 2022 highs.
EOG Resources is cheap with a forward P/E of 10. Earnings are expected to rise 12.6% in 2024, giving it a PEG ratio of just 0.4.
The company recently raised its 2024 cash return commitment to a minimum of 70% of annual free cash flow. EOG Resources also raised its regular dividend 10%.
Is EOG Resources a great cheap company you should have on your short list?
4. Toyota Motor Corp. (TM - Free Report)
Toyota shares are up on the year, gaining 39% year-to-date. However, Toyota remains a cheap stock with a forward P/E of just 9.7.
Earnings are expected to rise 45.4% in fiscal 2024. Toyota also pays a dividend, yielding 2.7%.
There are a lot of changes coming to the auto industry in the next decade. Is Toyota a great cheap company you should have on your short list?
5. LegalZoom.com, Inc. (LZ - Free Report)
LegalZoom went IPO in 2021 and the shares soared. But since then, LegalZoom has retreated, falling nearly 70% from its IPO price. This year, it has rebounded off recent lows, however, gaining 55%.
LegalZoom is expected to see earnings rise 150% in 2023 and another 18.1% in 2024. It has a PEG ratio of just 0.5. A PEG ratio under 1.0 usually indicates a company has both growth and value.
Is LegalZoom a great cheap company that should be on your short list?
What Else Do You Need to Know About Finding Great Cheap Companies?
Tune into this week’s podcast to find out.