3 High-Return Stock Picks
- By Alberto Abaterusso
Donald Yacktman, a well-known value investor and founder of the AMG Yacktman Fund (Trades, Portfolio) Class I (YACKX), takes the "forward rate of return" into account when he needs to appraise the attractiveness of a stock. He calculates this valuation ratio as "normalized free cash flow yield plus real growth plus inflation."
The following securities may attract the interest of value investors, as their forward rates of return are more than twice the return on 20-year high quality market (HQM) corporate bonds, which stands at 2.84% as of the writing of this article.
AGCO Corp
The first stock to consider is AGCO Corp (NYSE:AGCO), a Duluth, Georgia-based manufacturer and global distributor of agricultural equipment and related spare parts.
AGCO's forward rate of return is 10.42%, which ranks higher than 54% of 143 companies that operate in the farm and heavy construction machinery industry.
AGCO's share price increased by 46.04% over the past year to close at $102.80 on Wednesday for a market cap of $7.70 billion. The 52-week range is $35.33 to $118.11. Its price-earnings ratio is 38.07 and its price-book ratio is 2.74.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $120.80 per share.
BlackRock Inc. is the largest fund holder of the company, possessing 7.28% of shares outstanding. The asset management company is followed by Vanguard Group Inc with 7.07% of shares outstanding and Victory Capital Management Inc with 5.09% of shares outstanding.
Tempur Sealy International Inc
The second stock to consider is Tempur Sealy International Inc (NYSE:TPX), a Lexington, Kentucky-based manufacturer and distributor of bedding products in North America and internationally.
Tempur's forward rate of return is 10.75%, which ranks higher than 55% of 234 companies that operate in the furnishings, fixtures and appliances industry.
Tempur's share price increased by 15.27% over the past year to trade at $26.86 at close on Wednesday for a market cap of $5.54 billion and a 52-week range of $5.50 to $29.84. Its price-earnings ratio is 22.97 and its price-book ratio is 12.74.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $32.06 per share.
Amid the top fund holders of the company, Vanguard Group Inc is the leader with 8.51% of shares outstanding. It is followed by BlackRock Inc. with 7.85% of shares outstanding and FMR LLC with 5.81% of shares outstanding.
Ternium SA
The third stock to consider is Ternium SA (NYSE:TX), a Luxembourg-based producer of various steel products primarily in the U.S. and Mexico.
Ternium SA's forward rate of return is 32.07%, which ranks higher than 87% of 439 companies that operate in the steel industry.
Ternium SA's share price went up 28.62% over the past year to trade at around $27.37 at close on Wednesday for a market cap of $5.37 billion and a 52-week range of $9.59 to $33.99. Its price-earnings ratio is 22.78 and its price-book ratio is 0.82.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $34.65 per share.
With 4.18% of shares outstanding, Lazard Asset Management LLC is the leader among the top fund holders of the company. It is followed by Schroder Investment Management Group with 3.82% of shares outstanding and Oldfield Partners LLP with 2.09% of shares outstanding.
Disclosure: I have no position in any security mentioned.
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This article first appeared on GuruFocus.
