Every week, Zacks value stock strategist and the Editor of Zacks Value Investor portfolio service, Tracey Ryniec, talks about all things happening in the value stock universe, including her top stock picks.
But with all the major stock indexes hitting new all-time highs, Tracey wonders if there are any value stocks left to invest in out there. And if there are, how do you find them?
One thing to keep in mind is that the P/E, which is one of the fundamental criteria that value investors use to find their stocks, is about more than just the “P”, or Price. There is also the “E” or earnings.
With the US economy improving, the E part of the equation should also be improving.
This week, RV and motorhome maker Thor Industries, Inc. (THO) reported record earnings. In its guidance, it said it sees 2017 as the best year the industry has ever seen in 40 years.
Thor’s shares have been soaring all year. It’s great stock performance hasn’t been just a post-election move. You might think, with the shares making that big move, that Thor was probably an expensive stock. Tracey thought it must be but when she looked at its P/E ratio, she was surprised to see that it was trading with a forward P/E of just 15.5.
How can it be so cheap?
While the share price has been soaring, the earnings have been adjusted higher as well.
How Do Value Investors Find Cheap Stocks During a Bull Rally?
Tracey still runs her screens, but as stock soar, you may need to lower the number of fundamental parameters that you include.
For example, Tracey ran a “classic value” screen that included P/E, P/S, P/B, P/CF, PEG and a volume over 100,000.
She also added a Zacks Rank of #1 (Strong Buy) or #2 (Buy).
She only got 7 stocks. Yikes.
But when she adjusted the parameters to fewer criteria, and added a dividend over 2%, she got 68 stocks. That’s a much bigger selection.
Here’s a selection of some of the stocks in that screen that caught her eye.
Value Stocks with Dividend Yields Over 2%
1. Banco de Chile (ADR) (BCH): Be cautious on companies in the emerging market but BCH has a 3.4% yield.
2. Fifth Third Bancorp (FITB): a major regional bank. It has a 2.05% yield.
3. Eastman Chemical Company (EMN): forward P/E of 10.9, 2.5% yield. Chemical companies are the blocks of the manufacturing industry
4. Kohl’s Corporation (KSS): the retailers are out of favor but Kohls has a forward P/E of 13.8 and a juicy dividend yielding 3.7%.
Find out more of Tracey’s advice about finding value stocks during a bull market rally on this week’s podcast.
Want more insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.