Welcome to Episode #76 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.
Warren Buffett and John Templeton are legendary value investors. Both bought cheap, undiscovered stocks early in their careers that turned out to be big winners.
Buffett famously bought shares of car insurer Geico while still a student in his 20s. He bought more in the 1970s and Berkshire Hathaway bought all of the company in 1995.
John Templeton, who died in 2008 at the age of 95, made several big bets including buying 100 shares of all the stocks trading under $1 in 1939 just as World War II was breaking out. His $10,400 investment was quadrupled in just 4 years.
Templeton would also go on in the 1960s and 1970s to invest in cheap Japanese companies, which were trading at just 2 to 3 times earnings. By 1970, fully 60% of his portfolio was in Japanese stocks.
That paid off big when the Japanese economy heated up in the late 1970s and 1980s.
Are There Still Undiscovered Stocks?
But back when those two legends were buying, they had to rely on news from newspapers and annual reports, which were printed and mailed to shareholders each year in the mail.
Information wasn’t as readily as available. More investors would be aware, for instance, if Japanese stocks were trading at 2x earnings today.
Or would they?
Tracey argues that there are plenty of hidden gems out there which few investors are paying attention to.
She tracked down 5 of them that are flying under the radar.
5 Hidden Gems for a Hot Stock Market
1. RPM International (RPM - Free Report) was founded in 1947 and makes paint and coatings, sealants and specialty chemicals. From 1971 to 2002, sales rose from $11 million to $2 billion and in fiscal 2017 they were $5 billion. The company has raised its dividend every year for 44 years. It’s a dividend aristocrat.
2. John Bean Technologies (JBT - Free Report) operates in two main segments: food processes and Aerotech in the form of ground support equipment and jetways at airports. It’s not a cheap stock, with a P/E of 30, but earnings are expected to rise 19.9% in 2017 and another 20% in 2018.
3. Oxford Industries (OXM - Free Report) is a specialty retailer which owns Tommy Bahama, Lily Pulitzer and Southern Tide brands. Shares have rallied big since December now that investors have figured out all retail is not going to go away. It now has a forward P/E of 21.6 but is expected to see double digit earnings growth in fiscal 2018 and 2019.
4. Thor Industries (THO - Free Report) makes RVs and towables, including the popular Airstream. It’s not just Baby Boomers who are buying as Millennials and Generation X are hitting the road too. It’s still cheap, even though shares have risen in 2017, with a forward P/E of 16.9.
5. RPC, Inc. (RES - Free Report) is a mid-cap oil services provider who does pumping, drilling and well services to the E&Ps. In 2016, 70% of its revenue came from oil drilling and just 30% from natural gas. Earnings have really turned around. It lost $0.66 in 2016 but is expected to make $0.81 in 2017. Earnings are expected to double again in 2018. It’s still cheap, with a forward P/E of just 16.5.
Even with all the information that is now available at our finger tips, many of these companies are little known amongst investors.
And there are plenty of others. These five companies are all American companies. Many international companies are ignored by US investors.
What else do you need to know about finding hidden gems in 2018?
Tune into this week’s podcast to find out.
Exclusive Buffett Report for Podcast Listeners
What 3 secrets drive the success of arguably the world's greatest value investor? Which 5 stocks might he buy right now if he weren't already a billionaire?
Today, podcast listeners are invited to download Zacks' Special Report, Invest Like Warren Buffett for free. At the same time, you may also look inside Tracey Ryniec's personal Value Investor portfolio to see more stocks at exceptional "discounts."
Click to see them now >>