Value investing is about picking stocks that are trading below their intrinsic value. It should have been easy enough to do, through a comparison of the price to earnings multiple of the company and its peer group (or the S&P 500), or any other criterion you prefer to use for comparison.
But of course it isn’t that simple, or everyone would have been doing it. The tricky part is in understanding the fair valuation of the stock you’re considering. Because, for all you know, the company doesn’t have very bright prospects, or there are some big-time headwinds it’s facing that aren’t affecting the others in the group. And that’s what could be keeping the pressure on prices.
So how so we know whether a stock is worth putting money into? Obviously, in the current scenario, where there are significant market uncertainties, regular recession warnings and trade war concerns, as well as elevated share prices, one thing you want to avoid is getting into stocks that are headed down. Or extremely risky ventures like Tesla for example, that could either silence all critics or fall flat on its face. True, value investing is for the long haul, you aren’t expecting to get rich overnight. But you just don’t want to get caught in something like that.
So what you basically need is a tried and tested formula that will fetch you guaranteed returns. And that’s exactly what the Zacks Value Score for stocks brings you, especially when combined with buy (#1 or #2) ranked stocks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So here are a few I’ve selected that should generate long-term gains. And just in case you need some funds in the interim, they also pay a nice dividend.
Xperi Corporation XPER
Xperi Corporation, formerly Tessera Holding Corporation is a product and technology licensing company which manufactures semiconductors and related products. Its technologies and intellectual property are deployed in areas such as premium audio, computational imaging, computer vision, mobile computing and communications, memory, data storage, 3D semiconductor interconnect and packaging.
The company reported revenue and earnings of $92 million and $0.57, respectively in the last quarter. Revenue was 2.3% ahead of the Zacks Consensus Estimates while earnings exceeded by 21.3%.
Other details-
Zacks Rank #1
Value Score A, VGM Score A
Current year earnings estimate up 11.4% in the last 4 weeks, 2020 earnings estimate up 5.0% Dividend yield 4.5%
OneMain Holdings, Inc. OMF
OneMain Holdings Inc. is a consumer-facing financial services holding company. Its operating segments consist of Consumer and Insurance, Acquisitions and Servicing and Real Estate. The company was formerly known as Springleaf Holdings, Inc.
OMF reported revenue of $762 million in the last quarter that topped the Zacks Consensus Estimate by 2.5%. Earnings of $1.62 topped by 20.0%.
Other details-
Zacks Rank #1
Value Score A, VGM Score A
Current year earnings estimate up 6.8% in the last 4 weeks, 2020 earnings estimate up 4.8% Dividend yield 2.8%
Waddell & Reed Financial, Inc. WDR
Waddell & Reed Financial, Inc. is the exclusive underwriter and distributor of 41 mutual fund portfolios, including 18 comprising Waddell & Reed Advisors Funds (formerly the United Group of Mutual Funds) and 12 comprising W&R Funds (formerly Waddell & Reed Funds, Inc.). The remaining 11 portfolios comprise the W&R Target Funds, which serve as the underlying investment portfolios for variable annuities and variable life insurance products underwritten by United Investors Life Insurance Company and distributed by Waddell & Reed.
Waddell reported revenue of $270 million that beat the Zacks Consensus Estimate of $266 million by 1.7% and earnings of 42 cents that topped the Zacks Consensus Estimate of 37 cents by 13.5%
Other details-
Zacks Rank #1
Value Score A, VGM Score A
Current year earnings estimate up 5.4% in the last 4 weeks, 2020 earnings estimate up 3.8% Dividend yield 6.4%
Target Corporation TGT
Target Corporation operates large-format general merchandise and food discount stores in the U.S., which include Target and SuperTarget stores. It offers both everyday essentials and fashionable, differentiated merchandise at attractive prices. The customer-focused business model is supported by a strong supply chain and technology infrastructure.
Despite its size, the company has a single operating segment having integrated both its credit card operations and online business, Target.com into it. Although Target.com is small relative to the company’s overall size, its sales are growing at a much faster pace than in-store sales, strongly supplementing its stores and credit card operations.
Target reported revenue of $18.42 billion in the last quarter compared to the Zacks Consensus Estimate of $18.33 billion. Earnings of $1.82 also compared favorably with the Zacks Consensus Estimate of $1.61.
Other details-
Zacks Rank #2
Value Score A, VGM Score A
Current year earnings estimate up 3.5% in the last 4 weeks, 2020 earnings estimate up 2.6% Dividend yield 2.5%
Consolidated Communications Holdings, Inc. CNSL
Consolidated Communications Holdings, Inc. offers a wide range of telecommunications services including local and long distance telephone, digital phone, high-speed Internet access and digital TV to individuals and businesses in Illinois, Pennsylvania, and Texas. The company also offers telephone directory publishing services, wholesale transport services, billing and collection services, inside wiring services, and maintenance services.
Consolidated Communications reported revenue of $334 million that was just ahead of the estimated $333 million. The 5-cent loss was better than the estimated loss of 8 cents.
Other details-
Zacks Rank #2
Value Score A, VGM Score A
Estimated loss per share in 2019 up from 11 cents to 6 cents in in the last 4 weeks, for 2020, estimated EPS is up from 41.7%
Dividend yield 37.3%
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