Welcome to Episode #125 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.
2018 couldn’t end fast enough for investors as a stock market correction roiled Wall Street in the final weeks of the year.
But corrections also produce opportunities for value investors to buy stocks even cheaper.
A Basic Screen for Cheap Big Cap Stocks
Keep it simple. Look for stocks with a forward P/E less than 10 and a market cap above $10 billion.
Then, add on the Zacks Ranks of #1 (Strong Buy) and #2 (Buy) so that there will be nice upward estimate revisions.
5 Dirt Cheap Big Cap Stocks
1. American Airlines is one of the cheap airlines right now. Shareshave fallen 9% in the last 3 months. While earnings are expected to fall 6.4% in 2018 analysts expect a 22% rebound in 2019. It’s really cheap right now, with a forward P/E of just 5.9.
2. United Continental Holdings has been holding its own during the correction. Shares are down only 1.5% in the last 3 months. The earnings picture looks a little brighter than its competitor American, as earnings are expected to be up double digits in both 2018 and 2019. It’s trading with a forward P/E of just 8.
3. Discovery, Inc. owns the popular cable channels HGTV, Travel Channel, Animal Planet and Oprah’s OWN. Shares are off 17% in the last 3 months even though analysts are looking for 61% earnings growth in 2019. It has a forward P/E of 7.6.
4. CVS recently closed on its acquisition of Aetna, so it now operates one of the largest managed insurers in the United States. Will this combination prove a success? The Street isn’t buying it as shares are down 14% in the last 3 months but that means it’s cheap, with a forward P/E of 9.
5. Dell Technologies is back. After 5 years in private hands it has recently gone public. While it’s still early, Zacks has some analyst estimates on it already which has produced a forward P/E of only 7.1. Shares are down off their IPO debut price.