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Welcome to Episode #34 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
Volatility has finally returned to the stock market after over 100 days of calm. We knew it couldn’t last forever.
It has also meant a tinge of weakness in stocks, which means, for value investors, that there might be some buying opportunities out there.
Tracey ran a “pure play” screen for value stocks with a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) along with classic value fundamentals including a forward P/E under 15 and a price-to-sales ratio under 1.0.
She also wanted to find value stocks that were beaten down in 2017 so she looked for stocks that were in the red this year.
Not surprisingly, of the 107 stocks in the screen, a vast majority were in the sectors that have been hit the hardest including the airlines, retailers and energy.
Tracey narrowed the list down to 5 stocks in a variety of the sectors. Of course, being a value stock isn’t the whole story and investors should research any company before jumping in.
5 Beaten Down Value Stocks
1. Denbury Resources is a small cap energy company that focuses on the Gulf Coast and the Rocky Mountains. Shares are down 35% year-to-date as oil has tanked. It’s trading under $5 which caused Tracey to dig into its liquidity situation. It has a $1.05 billion revolver with $750 million available. It is trading with a forward P/E of 12.4.
2. Lithia Motors (LAD - Free Report) has fallen about 7% year-to-date. Investors seem to be worrying about peak auto again. It’s cheap, with a forward P/E of only 10.9.
3. Ascena Retail Group is getting crushed this year, with shares down 35%. The owner of Ann Taylor now trades with a forward P/E of 10.3. Retail is tough. Do you have the guts to get in with all the upheaval in the sector?
4. Kroger (KR - Free Report) is down 15.4% year-to-date as analysts have lowered full year estimates. Is the boom in supermarkets over? It trades with a forward P/E of 13. 2.
5. United Holdings (UAL - Free Report) is this week’s airline stock. Shares are down 7.4% year-to-date and it trades with a forward P/E of 10. The airlines can be value traps though. They usually trade with single digit P/Es.
If you’re nervous about catching a falling knife, there’s nothing wrong with putting stocks on a watch list and having some patience.
Additionally, one way to take some of the fear out of buying value is to use dollar cost averaging. Buy a little bit each month. If the shares drop further, you buy more.
What else should you know about the most beaten down value stocks of 2017?
Tune into this week’s podcast to find out.
Want more value investing insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks Tracey thinks are the best bargains now.
It holds between 20 and 25 value stocks for the long haul.
Image: Bigstock
5 Beaten Down Value Stocks
Welcome to Episode #34 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
Volatility has finally returned to the stock market after over 100 days of calm. We knew it couldn’t last forever.
It has also meant a tinge of weakness in stocks, which means, for value investors, that there might be some buying opportunities out there.
Tracey ran a “pure play” screen for value stocks with a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) along with classic value fundamentals including a forward P/E under 15 and a price-to-sales ratio under 1.0.
She also wanted to find value stocks that were beaten down in 2017 so she looked for stocks that were in the red this year.
Not surprisingly, of the 107 stocks in the screen, a vast majority were in the sectors that have been hit the hardest including the airlines, retailers and energy.
Tracey narrowed the list down to 5 stocks in a variety of the sectors. Of course, being a value stock isn’t the whole story and investors should research any company before jumping in.
5 Beaten Down Value Stocks
1. Denbury Resources is a small cap energy company that focuses on the Gulf Coast and the Rocky Mountains. Shares are down 35% year-to-date as oil has tanked. It’s trading under $5 which caused Tracey to dig into its liquidity situation. It has a $1.05 billion revolver with $750 million available. It is trading with a forward P/E of 12.4.
2. Lithia Motors (LAD - Free Report) has fallen about 7% year-to-date. Investors seem to be worrying about peak auto again. It’s cheap, with a forward P/E of only 10.9.
3. Ascena Retail Group is getting crushed this year, with shares down 35%. The owner of Ann Taylor now trades with a forward P/E of 10.3. Retail is tough. Do you have the guts to get in with all the upheaval in the sector?
4. Kroger (KR - Free Report) is down 15.4% year-to-date as analysts have lowered full year estimates. Is the boom in supermarkets over? It trades with a forward P/E of 13. 2.
5. United Holdings (UAL - Free Report) is this week’s airline stock. Shares are down 7.4% year-to-date and it trades with a forward P/E of 10. The airlines can be value traps though. They usually trade with single digit P/Es.
If you’re nervous about catching a falling knife, there’s nothing wrong with putting stocks on a watch list and having some patience.
Additionally, one way to take some of the fear out of buying value is to use dollar cost averaging. Buy a little bit each month. If the shares drop further, you buy more.
What else should you know about the most beaten down value stocks of 2017?
Tune into this week’s podcast to find out.
Want more value investing insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks Tracey thinks are the best bargains now.
It holds between 20 and 25 value stocks for the long haul.
Click here to learn more.