- (0:30) - Stocks Are Going Parabolic
- (3:50) - Value Investing Plan For A Growth Market
- (12:10) - Tracey's Top Stock Picks
- (18:20) - Episode Roundup: FB, GOOS, BKNG, PXD, IIPR
Welcome to Episode #177 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.
In 2020, stocks have started off to a quick start, with the large cap indexes hitting multiple new all-time highs. Some of the indexes, such as the NASDAQ, are seemingly hitting highs every single day.
Most of it is being powered by the hot growth stocks, especially those in technology and social media.
Does that mean value investors have to sit on the sidelines?
Here’s 3-part plan for value investors during this hot growth period. Investors may want to deploy some, or all of it, to keep their sanity.
1. If You Can’t Beat Them, Join Them.
It’s okay for value investors to buy growth stocks.
There is nothing in the rules saying you cannot do so. Unless you’re a professional money manager running a value fund, you’re allowed to buy FAANG or Shopify.
But you can also buy growth stocks that have some value characteristics.
Facebook (FB - Free Report) , for example, is the cheapest of the FAANGs by P/E. It’s forward P/E is just 22.3. That’s not nosebleed levels and might even be considered “cheap” by growth standards.
2. Look for Opportunities
Currently, the coronavirus is causing a disruption in the travel and retail industries as China is a big consumer of both.
Booking (BKNG - Free Report) , formerly known as Priceline, is one of the largest online travel agencies in the world. But shares are up just 1.6% over the last year and have fallen 5.3% year-to-date.
It’s trading with a forward P/E of just 16.8 when it’s expected to grow revenue by 7% in 2020.
Canada Goose (GOOS - Free Report) is another high flier that has come back down to earth. The luxury apparel maker has already said that the coronavirus was going to impact earnings.
Shares are down 45% in the last year and have fallen 9% year-to-date. They trade with a forward P/E of just 27.8, down off the all-time highs 78x in 2018. Is it a deal?
3. Buy in Sectors You Hate
It’s hard to buy when everyone is fleeing but that is the essence of a value investor.
What’s out of favor right now?
Energy continues to be hated on the Street. Look for energy companies that have the best balance sheets in case crude continues to fall this year.
Pioneer Natural Resources (PXD - Free Report) is trading with a forward P/E of just 14.7. It’s a big Permian driller who also is doing a share buyback and pays a dividend yielding 1.3%.
The retailers are also in the doghouse. Gap (GPS - Free Report) has new management, so there is uncertainty there, but is trading with a forward P/E of just 10.4.
What about the cannabis stocks? They were beaten up in 2019 but it may be time to take another look.
One of Tracey’s favorites is Innovative Industrial Properties (IIPR - Free Report) , which is a REIT, that invests in buildings which it then leases back to growers producing for medical marijuana. It’s currently yielding a juicy dividend.
What else should value investors be doing during this growth stock boom?
Find out the answers on this week’s podcast.
[In full disclosure, Tracey owns shares of FB and BKNG in her personal portfolio.]
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