Cart (0)
business newsHow to Find Value Stocks in an Improving Market and Economy, and Two Top Picks
While many of the big bargains may be gone, you can still find the smart plays if you look hard enough.
PRINT
 |
|
With the Dow closing in on 12,000, value stocks are getting much harder to find. Value investors need to be careful because the market is not running over with opportunities the way it was just a few short months ago. Lots of companies appear to be getting bid up to levels that are unjustifiable by just about any metric. Despite the market advance, there are still some values in the stock market.
Let's take a look at two of them.
Hess Corporation (HES)
Energy companies have been on a nice roll recently as the price of crude oil has skyrocketed. You may have noticed that car gas prices have gone up at the pump as well. As consumers are paying more money at the pump, energy companies should benefit. Most energies companies are already reflecting the new bullish sentiment in their share prices. There are, however, still some solid value plays in the sector: companies like Hess Corporation.
Hess currently trades at 12.5 times the current year's earnings and slightly below 12 times next year's earnings. This is below the industry average of 14 and well below the projected 21% growth rate. Shares are currently trading at just 0.6 times projected earnings growth and 0.8 times sales. Shares are valued at 1.7 times book which is slightly higher than value range. Margins, return on equity, and revenue growth have been above average for the past three years.
Many analysts are bearish on the stock after last quarter's earnings release. The negativity seems overdone. The company did manage to increase EPS by 11% and revenue by 1.5%, but Wall Street wanted more. Hess is strategically positioned to benefit from a rebound in the oil and gas sector as the company has been making significant investments in its capital and exploration budget. Hess Corporation's EPS is forecasted to grow more than 120% over the next few years, and it's already showing continued signs of growth.
Intel (INTC)
Intel seems to be the stock that Wall Street loves to hate. The company does everything right quarter after quarter, and still the stock fails to move. Intel is coming off a great 2010 and the company is even more optimistic about next year's earnings. The company is projecting that earnings will be the best ever in the company's history and the stock still can't break out above the low 20's.
Intel has a fantastic chip business and a tremendous balance sheet with $16 billion dollars in cash and lots of free cash flow. Shares are cheaper than those of competitors based on earnings, revenue growth, and sales growth. There has been talk about Advanced Micro Devices (AMD) replacing Intel's chips for years now, and this has failed to come to fruition. Intel has higher operating and profit margins than competitors and less debt. The company also stands to benefit from its merger with McAfee (MFE).
Intel is now moving into the ranks of a dividend stock play with its 3% dividend yield. Based on its five-year average, Intel is dirt-cheap with its price to book, price to sales, and price to cash flow all below the norm. The only valuation metric that is headed higher is the dividend payout.
Final Thoughts
The improving market is a good sign for the economy, of course, but it creates a challenge for investors looking for value stocks. While many of the big bargains may be gone, you can still find the smart plays if you look hard enough. In fact, here are some of the best places to look for cheap stocks.
Below, find some more great ETF and market content from Benzinga:
Borders Bankruptcy, Barnes & Noble Buy?
By Gary Cassady
Egypt Still in a Fragile State as Protestors and Mubarek Supports Clash
By Staff
Why Winter Storm, Snow, and Freezing Rain Means You Should Widen Your Stopless Orders
By Gary Cassady
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
