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The Most Basic Value Stock Screen Ever

  • (1:10) - Getting Back To The Basics of Value: Focusing On Low P/E
  • (10:50) - Tracey’s Top Stock Picks: The Ignored Value Stocks
  • (27:30) - Seeing The Trends Before They Happen: BMY, DAC, DHI, PACW, SYF
  •                Podcast@Zacks.com

 

Welcome to Episode #225 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

But this week, she’s keeping it simple.

You don’t have to get fancy when looking for value stocks.

A basic value stock screen, with a secret ingredient, is enough to do the trick.

The Most Basic Value Stock Screen Ever

Value stocks are fundamentally those where investors can buy a company’s earnings on sale.

That means the earnings have to be cheap.

Investors should start by screening for a Price-to-Earnings (P/E) ratio under 15.

Then add on the secret ingredient of the top Zacks Rank stocks, of Strong Buy and Buys.

Just this basic screen, with just 3 components, however, still returned over 400 stocks.

Value investors may have to go even cheaper, to a forward P/E of 10 or less, and may have to limit market cap to those companies over $500 million. That would eliminate the micro-cap companies.

That basic screen returned 94 top Zacks Ranked value stocks.

5 Cheap Top Stocks

1.       Bristol Myers Squibb BMY, the big, global drug maker, has a forward P/E of just 8. 7 estimates have been revised higher for 2021 in the last 30 days. The company is expected to grow earnings by 15% in 2021. It’s a Zacks Rank #2 (Buy) stock.

2.       Danaos Corp. DAC is one of the largest independent owners of containerships. Shares have soared 37% in the last month but remain incredibly cheap, with a forward P/E of just 2.7. 2021 earnings are expected to soar 89% and it has the coveted Zacks Rank of #1 (Strong Buy).

3.       DR Horton DHI is one of the largest home builders in the United States. Earnings are expected to jump 40% in fiscal 2021 while revenues rise 28%. Yet, it’s cheap with a PEG ratio of just 0.7. It’s also a Zack Rank #1 (Strong Buy), the top Zacks Rank.

4.       PacWest Bancorp PACW is a regional California bank with a market cap of $4.3 billion. Earnings are expected to soar 70% in 2021 to $3.57 from $2.10 last year. Shares trade with a forward P/E of just 9.9. It also pays a dividend, currently yielding 2.8%.

5.       Synchrony Financial SYF is a private label credit card provider and financial company. 2021 earnings are expected to soar 92% but the shares remain cheap, with a forward P/E of just 8.5 and a PEG ratio of 0.95. This Zacks Rank #2 (Buy) also just announced a new $1.6 billion share repurchase program.

What else should you know about screening for top value stocks?

Listen to this week’s podcast to find out.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Bristol Myers Squibb Company (BMY): Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
 
Synchrony Financial (SYF): Free Stock Analysis Report
 
PacWest Bancorp (PACW): Free Stock Analysis Report
 
Danaos Corporation (DAC): Get Free Report
 
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