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What is a Value Stock?

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  • (0:20) - What Are Value Stocks?
  • (3:10) - 3 Top Attributes of a Value Stock
  • (10:25) - Stock Screener and Tracey’s Top Stock Picks
  • (15:20) - Episode Roundup: AMZN, C, CVS, LNC
  •                 Podcast@Zacks.com

Welcome to Episode #140 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Before this year’s Berkshire Hathaway annual meeting in Omaha, Warren Buffett announced that one of his lieutenants that invests for the Berkshire portfolio, had bought shares of Amazon (AMZN - Free Report) in the first quarter.

We don’t yet know how large the position is. Buffett reassured shareholders that his team is still following the value investing strategy.

But are they?

Benjamin Graham’s Keys to Finding Value Stocks

 Investors should know what makes up an actual “value” stock.

It isn’t simply a cheap growth stock.

There are certain fundamentals that should be there in value stocks including a low P/E, 5-years of earnings growth, and a low Price-to-Book ratio.

Screening for some of Graham’s requirements produced a list of 11 stocks.

3 Value Stocks That Pay Dividends

1.       Citigroup (C - Free Report) is cheap with just a forward P/E of 9. It pays a nice dividend yielding 2.6%. It also has earnings growth, with a PEG ratio of 0.7.

2.       CVS (CVS - Free Report) shares have sunk as investors have fled the healthcare stocks on worries about Medicare-for-all. CVS now owns Aetna, one of the largest health insurers. It’s also cheap, with a forward P/E of 8.1. It pays a dividend of 2%.

3.       Lincoln National (LNC - Free Report) sells life insurance, handles employee benefits, and does wealth management. It has a forward P/E of just 7. Lincoln pays a dividend with a yield of 1.3%.

What else should you know about what makes a value stock?

Listen to this week’s podcast to find out.

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