- (0:15) – Historic Record Highs Just Keep Coming
- (2:30) – Stock Screener For Hot Value Stocks
- (5:30) – Tracey’s Top Stock Picks
- (17:00) – Episode Roundup: [email protected]
Welcome to Episode #78 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
The stock market is off to a historic start in 2018 with the S&P 500 closing at new record highs in 13 out of the first 16 sessions. Not only that, but it hasn’t had a 5% pullback in well over a year.
Even the small caps, which have been slightly more volatile, haven’t seen much sustained weakness either.
But it’s not just the growth stocks that are sizzling. Many value names are also breaking out to new 52-week and all-time highs to start the year.
Screening for Value Stocks Hitting New Highs
Tracey ran a basic screen which looked for stocks that had Zacks Ranks of #1 (Strong Buy) or #2 (Buy), which usually means rising earnings estimates, along with a Zacks Value Style Score of A, the highest score.
She then combined it with stocks that were trading at or within a few percent of their 52-week high.
Surprisingly, the screen returned 77 companies. Who knew there was that much value in this hot market?
Tracey selected 5 stocks from the screen that she thought value investors would be especially interested in.
5 Value Stocks Breaking Out Right Now
1. AmerisourceBergen Corp. (NYSE:ABC), the pharmaceutical products provider, has a forward P/E of 16.4. Many healthcare stocks lagged in 2017 but ABC shares are up 11% in 2018. It’s expected to report earnings on Feb 6.
2. GATX Corporation (NYSE:GATX) has a forward P/E of 15.9. It already reported earnings and said there’s still an industry-wide railcar overcapacity issue. However, its managing the downward part of the cycle. Analysts have recently gotten more bullish that the worst may be over in the industry, as it raised 2018 earnings estimates after the earnings report.
3. Gap Inc (NYSE:GPS) is more expensive than it was in the middle of last year but it still trades with a forward P/E of 16.8, which is under that of the S&P 500. Shares spiked in November and December and started off 2018 hot. Is the worst over for the apparel retailers?
4. Sony Corp (NYSE:SNE) is more than just electronics, PlayStation 4 and movies. It recently presented at CES 2018 in Las Vegas for its image sensors. The sensors can detect their 360-degree surroundings, which is helpful for automobiles. It has a forward P/E of just 17.6.
5. Lithia Motors Inc (NYSE:LAD) has been a value stock for years. In 2015 and 2016, the shares plunged on peak auto concerns but they’re back to new 5-year highs. This auto retailer has a forward P/E of just 13 and a PEG ratio of 0.6. It’s a rare combination of both a value, growth AND momentum stock.
Most of these companies haven’t yet reported earnings. Investors should be sure to tune into those earnings reports and the conference calls to find out how 2018 is shaping up.
This list of stocks proves you don’t have to pay 50x or 100x earnings to get one of the hot stocks. Many value stocks are sizzling too.
It’s possible to find the values out there. You just have to know where to look.
What else should you know about these hot value stocks?
Tune into this week’s podcast to find out.
Exclusive Buffett Report for Podcast Listeners
What 3 secrets drive the success of arguably the world’s greatest value investor? Which 5 stocks might he buy right now if he weren’t already a billionaire?
Today, podcast listeners are invited to download Zacks’ Special Report, Invest Like Warren Buffett for free. At the same time, you may also look inside Tracey Ryniec’s personal Value Investor portfolio to see more stocks at exceptional “discounts.”