Welcome to Episode #52 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.
This month is the 1-year anniversary of the launch of the Value Investor Podcast.
Throughout the year, Tracey has been discussing value stocks, telling you how to find them, discussing Warren Buffett, buy and hold investing and how to avoid value traps.
On this anniversary episode, Tracey wanted to look at classic value.
What are the basic fundamentals value investors use to find stocks?
4 Metrics for Finding Value
1. The Price-to-Earnings Ratio, or “P/E”, is the most commonly used screening fundamental. Tracey looks for stocks under 15.
2. The PEG ratio is also popular. You can use this as a stand-alone screening criteria. It is effective for those who want both value and growth.
3. The Price-to-Book Ratio, or “P/B”, is also commonly deployed. Look for ratios under 3.0.
4. The Price-to-Sales Ratio, or “P/S”, is a screening tool far fewer investors use but it can be very effective at finding cheap stocks.
But what if you were to screen for stocks using ALL of these classic value fundamentals at the same time?
Would any even qualify?
Tracey ran it, combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) ranking, and got a grand total of 6 stocks.
Yep, that’s it. Just six.
But some of them were quite intriguing.
3 Classic Value Stocks to Buy Now
1. KB Home (KBH - Free Report) has all the classic value fundamentals including a price-to-sales ratio of just 0.5. Why are the homebuilders so cheap right now?
2. PulteHomes (PHM - Free Report) just reported earnings this week. The homebuilders are seeing rising earnings this year. It has a PEG ratio of just 0.7.
3. JC Penney (JCP - Free Report) is back on its way to being profitable. You may think all department stores are doomed, but what if they’re not? JC Penney has a forward P/E of just 10.5.
What else should you know about these classic value stocks?
Find out on this week’s podcast.
Want more value investing insights from Tracey?
Value investors are a special breed of investor. They don’t follow the herd.
If that is your style of investing, be sure to check out Tracey’s weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.
The Value Investor portfolio holds between 20 and 25 value stocks for the long haul.
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