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5 Value Stocks for the Second Half of 2020

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  • (0:20) - Have Value Stocks Been Left Behind?
  • (5:00) - Looking For Value Companies With Strength: Stock Screener
  • (9:30) - Tracey’s Top Stock Picks
  • (20:10) - Episode Roundup: PXD, ABG, BIG, CNC, GTN

Welcome to Episode #196 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.

It’s been a crazy year for stocks, and the world, thanks to COVID-19.

But now the calendar has turned and we’re officially in the second half of the year.

Growth stocks continue to be the super star stocks of 2020 despite the recovery rally off the coronavirus lows which lifted all boats.

But there may still be some opportunities in value stocks too.

Remember the Top Rule of 2020: Buy Strength

With coronavirus cases on the rise in the United States, there’s still a level of uncertainty with the economy.

Will it remain a “V” recovery?

No one knows.

That’s why investors should own the strong companies. Even within the value universe, there are strong value companies and there are weak ones.

In the spring, the Value Investor podcast covered the energy exploration and production companies and warned against those with lots of debt.

Investors should buy the strongest energy companies with the lowest debt ratios like Pioneer Natural Resources (PXD - Free Report) .

Shares have retreated over 20% in the last month after a big recovery rally.

Screening to Find the Best Value Stocks

The Zacks Rank is working well during these market conditions to highlight companies with rising earnings estimates.

The Zacks Value Style Score of A and B, the two highest scores, can also narrow the universe of value stocks.

Add in an Industry Rank in the top 50, to avoid getting those industries, such as the fertilizers, which are struggling.

And look for stocks over $5 to cut out some of the more speculative plays.

This screen returned just 12 stocks.

4 Value Stocks for the Second Half of 2020

1.       Asbury Automotive Group (ABG - Free Report) is one of the largest auto retailers in the United States. Used car sales are up big in May and June as consumers have been buying cars during the pandemic on fears of riding public transportation. It has a forward P/E of just 13.2.

2.       Big Lots (BIG - Free Report) is a discount retailer whose shares are up 192% in the last 3 months. In June 2020, it gave a bullish business update saying that the second quarter same-store-sales were up mid-to-high 20s. Earnings estimates have jumped to $6.10 from $4.39 in just the last week. It’s dirt cheap, with a forward P/E of 6.9.

3.       Centene (CNC - Free Report) is a big cap managed care company. On June 12, it raised revenue and earnings guidance for the year. Earnings in 2020 are expected to be up 9.7%. Centene has a PEG ratio of just 0.9, which means it has both value and growth.

4.       Gray Television (GTN - Free Report) owns television stations that reach 24% of the US TV households. While its revenue was getting hit hard by the crash in advertising spending during the coronavirus, it will also see a big surge in political advertising heading into the November election. Earnings are expected to rise 89% in 2020. But the shares are cheap, with a forward P/E of just 5.8.

What else should you know about value stocks in 2020?

Listen to this week’s podcast to find out.

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