For Immediate Release
Chicago, IL – February 23, 2017 – Zacks Value Investor is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here:
Help! My Stock Is Stuck in No-Man’s Land
Welcome to Episode #82 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.
She has covered many topics on the podcast including whether or not value investors can buy growth stocks or IPOs and how to figure out the difference between a value stock and a value trap.
But there’s another important category that value investors should be aware of. That’s the stock that is stuck in no man’s land.
What does that mean?
It’s the stock that is neither a value stock nor is it a growth stock. Something is missing from the equation. It has no identity.
As a result, these stocks tend to underperform as both value and growth investors shun them.
What do these stocks look like?
Examples of Stocks in No Man’s Land
1. Shake Shack (SHAK - Free Report) , despite the shares tumbling from their post-IPO highs, still has a forward P/E of 69. It’s clearly not a value stock. But is there growth? Sure, it’s planning on opening another 35 domestic stores in 2018. But same-store-sales fell 1.2% in 2017 even as it raised menu prices. Additionally, it expects same-store-sales to be flat in 2018. Verdict: It’s an expensive stock that doesn’t have a strong enough growth story.
2. Potbelly (PBPB - Free Report) , is a stock that has gone nowhere for several years. Over the last 2 years, shares of this sandwich chain have fallen 3.2% while the S&P 500 was up about 40%. Earnings are expected to fall 33% in 2017. But is it cheap? Not even close. It has a forward P/E of 34. Verdict: Growth is lethargic, at best, and it’s not a value stock.
It’s easy for value investors to get stuck in these stocks because they appear to have value characteristics, as often the shares have sold off big.
But a stock plunge doesn’t necessarily equal value.
Buying a Real Value and Growth Stock Instead
Tracey ran a screen looking for companies that had both value fundamentals AND double-digit earnings growth.
In addition, she added the extra firepower of the Zacks Rank, screening only for Zacks Rank #1 (Strong Buy) stocks, which hopefully means rising earnings estimates.
The screen gave her a list of 56 companies.
Not too shabby.
3 Stocks with the Rare Combination of Growth and Value
1. Allstate Corporation (ALL - Free Report) , the property insurance giant, has a forward P/E of just 11.4 as the shares have fallen about 7% year-to-date. Earnings are expected to rise 25.2% in 2018.
2. PACCAR Inc. (PCAR - Free Report) , the commercial truck manufacturer, saw record annual revenue in 2017 thanks to a strong European truck market. It’s cheap, with a forward P/E of 13.1, and earnings are expected to rise 23% this year. As an added bonus, it has paid a dividend every year since 1941.
3. Sally Beauty Holdings (SBH - Free Report) , operates beauty stores worldwide. It’s known for hair color. The company has been in a transition period as it expands its online capabilities. Same-store-sales are expected to be flat in fiscal 2018 while earnings are expected to rise 32%. It’s dirt cheap as well, with a forward P/E of just 7.3.
What else should you know about stocks in the No Man’s Land and how to avoid them?
Tune into this week’s podcast to find out.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.