- (0:20) - Value Stocks On The Rise: Restaurant and Oil Industry
- (3:15) - Retail Value Stocks: Summer Sell Off
- (5:30) - Stock Screener For Retail Stocks
- (7:05) - Tracey's Top Stock Picks
- (11:00) - Are They Cheap For A Reason: Insider Buying
- (18:10) - Episode Roundup: Podcast@Zacks.com
Welcome to Episode #57 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.
Just a few months ago, it seemed like value investing was dead. Growth stocks kept rising, with no end in sight, as the major stock indexes hit new highs. It was even hard to find good quality value stocks.
But over the summer, several industries broke down which has brought some stocks that were overpriced previously, back into the value fold.
Tracey has talked about all three industries recently: the restaurants, the exploration and production energy companies, and now she takes a look at the retailers.
Will All Shopping Be Done on Amazon?
Could there be a more hated industry than the retailers right now?
Many investors believe that the traditional retailers are doomed. The most extreme scenario is that they ALL go out of business and Amazon ends up ruling the retail world in the United States.
But realistically, most of us know that’s not going to be the case. Humans are social. We like shopping. There’s a reason the Grand Bazaar has been operating in Istanbul for hundreds of years.
However, there’s no doubt that online shopping has been disruptive in the industry. There are clearly winners and losers.
With the stocks selling off this summer, value investors should be looking at the industry for buying opportunities.
Screening for Retail Value
Tracey did screen for retail stocks with a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) in the retail sector with P/Es under 10. She wanted them dirt cheap.
17 companies made it through the screen. She expanded it to companies with P/Es under 15, still cheap compared to the S&P 500.
55 companies made the cut including the auto retailers, pharmacies, furniture retailers and department stores.
She narrowed it down to those most investors have heard of and are familiar with.
Are These Dirt Cheap Retail Stocks a Buy?
1. Bed Bath & Beyond (BBBY - Free Report) has a forward P/E of 6.9. Should value investors be intrigued?
2. Macy’s (M - Free Report) is trading with a forward P/E of just 6.3. It also pays a dividend, currently yielding 7.1%. There’s no guarantee on the dividend’s “safety” of course, but with fundamentals like that, is it time to add it to the short list?
3. JC Penney (JCP - Free Report) fell to 42-year lows after its earnings report. It’s profitable again and its P/E is now 8.9. Is this a risk worth taking?
4. Pier 1 (PIR - Free Report) has seen its shares plunge about 50% in 2017. Shares now have a forward P/E of 8.7. It has been in a turnaround for a number of years, is it finding success?
5. Gap (GPS - Free Report) has a forward P/E of just 11.3 and pays a dividend yielding 3.9%. But its shares are actually UP on the year, having risen 5%. Is Banana Republic finally finding its feet after a few rocky years?
Tracey also looked at the insider buying at these, and several other, cheap retailers.
Are the Insiders Sending a Signal by Buying?
She uses insider buying as a signal in the beaten down industries that there may be value there.
After all, the insiders are putting their own money in too. They wouldn’t be buying if they didn’t have some belief in the company.
The insiders are buying in some of the retailers now. But which ones?
Should value investors be buying the retailers now?
Tune into this week’s podcast to find out.
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.
Click here to learn more>>>