by Bristol Voss | September 27, 2013 6:30 am
While it’s true you can’t get something for nothing, what fun it is to get a bargain — to snag something with a lofty value for less than you might expect to pay. So with bargain hunting in mind, we looked at large-cap companies — $10 billion or more in capitalization — that cost less than $10 per share (and also met some basic financial criteria).
Of the 539 large-cap stocks trading on the New York Stock Exchange, Nasdaq and NYSE MKT, 15 were trading for less than $10 — and the majority of these were in the financial sector.
To determine which large-cap stocks in the 2013 group delivered the biggest bang for an investor’s buck, we first looked at price-to-earnings, forward P/E, return on equity, return on assets and dividend yield. If any financial indicator was negative, we knocked the company off the list. We then booted Sirius XM Radio (SIRI) and Lloyds Banking (LYG), which had P/Es of two to three times the group’s average.
That gives us 10 sub-$10 large-cap stocks that will give you some bang for your buck, ranked by the ratio of how many billions in market cap the current stock price leveraged:
First, a couple of interesting notes:
There are numerous different ways to determine the “best” from this group. Dividend investors, for instance, would probably only concentrate on the six large-cap stocks that paid dividends. Purely looking at the ratios also provided a good guide, but it gave me two Santanders.
It seemed fair to consider all the data gathered and rank it on a 1-10 scale, with 1 the best. The large-cap stocks with the lowest total scores therefore would be on the “best” list.
This is how the final list shook out:
Mizuho Financial: The final five was headed by Mizuho Financial (MFG), a Japan-based bank holding company. MFG increased net income 64% year-over year, according to its most recent earnings report, and 35% quarter-over-quarter.
BBVA: Banco Bilboa Viscaya Argentaria (BBVA) has a presence in 32 countries including many in South America. While many financial institutions in Spain have been in crisis mode, BBVA posted net profits that grew 91% for the first six months of 2013. Much of this improvement came from its international divisions, including Turkey, Mexico, the U.S. and South America. Although BBVA is based in Spain, much of its income is tied to South America, so you have to be confident in those countries’ ability to buoy BBVA’s performance (along with an eventual turnaround in Spain).
Mitsubishi UFJ Financial: Tokyo-based Mitsubishi UFJ Financial (MTU) provides financial services in Japan and internationally. Net income increased 40% year-over-year, though it was nearly unchanged from Q1 to Q2.
Sumitomo Mitsui: The third Japanese finance stock on the list, Sumitomo Mitsui (SMFG), showed the highest year-over-year gain in net income, 144.7%, as of its most recent quarter. SMFG attributed this to profits from index-linked investment trusts. Income from the previous quarter was up 16%.
As a note, though, you clearly don’t want to buy any Japanese financials unless you’re generally bullish about the Japanese economy as a whole.
Click to Enlarge I looked at the new top five according to this scoring, the stock performance of Brazil’s Gerdau (GGB) was so awful compared to its peers, it didn’t look like it belonged (although at least it was trending up). I turned to the next-best stock based on the screening and found a better fit in Wipro (WIT), although it has clearly shown more volatility than the others that made the cut.
According to its last earnings statement, WIT’s net income was up 11% year-over-year, which the company attributed to “a pickup in large deal closures.” It has won multimillion-dollar, multiyear projects in the healthcare, retail and aviation fields.
While Wipro says it has deals for the next year or two, its continued success will be determined in part by the continuing need for its IT services.
As of this writing, Bristol Voss did not hold a position in any of the aforementioned securities.
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