- (0:25) - Is It Time To Buy Large Cap Stocks?
- (2:15) - Stock Screener Criteria
- (4:45) - Tracey's Top Stock Picks
- (15:00) - Takeaways On Large Cap Stocks: AMGN, CMA, CVX, HPQ, PCAR
Welcome to Episode #98 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.
For the last couple of years, the large cap stocks dominated the headlines. The S&P 500, the Dow and the NASDAQ out performed the small cap indexes.
But in 2018, the tide has recently turned.
The small cap index, the Russell 2000, is easily out performing the large caps which have weakened on trade and tariff worries.
But you know what that means. There’s value in some of those large caps now.
Where are the buying opportunities?
Screening for Large Cap Value Stocks
Tracey did a basic screen to find cheap large cap stocks.
She screened for stocks with a market cap above $10 billion and a forward P/E below 15. P/E is not always the best metric for finding value, but in this screen, it will be a good enough basic indicator to get the cheap stocks.
She then added on the Zacks Rank, screening only for Zacks Rank #1 (Strong Buy) and #2 (Buy) stocks. By having those Ranks, it should mean that earnings estimates are on the rise.
It’s one thing to buy a cheap stock, but it’s a whole new ballgame to get a cheap stock that is also growing its earnings.
The screen returned 62 stocks, which isn’t too shabby.
Tracey narrowed it down to her 5 favorite names.
5 Cheap Large Cap Stocks to Buy Now
1. Amgen AMGN is one of the mega-cap biotechnology companies. These have been out of favor for a while now. It has a forward P/E of 13.6 and rewards investors’ patience with a 2.9% dividend yield. Analysts are bullish with earnings on the rise for both 2018 and 2019.
2. Comerica CMA is a Texas-based regional bank with a market cap of $16 billion. In April, it raised its dividend 13%. It now yields 1.5%. Earnings are expected to pop 42% in 2018 and with a low P/E, it has a PEG ratio of 0.7. That means it is both a value and growth stock. That’s a rare combination.
3. Chevron CVX is one of the largest oil companies in the United States with a market cap of $234 billion. Earnings are expected to jump 130% thanks to the increase in the price of oil yet the shares trade with a forward P/E of just 14.4. You also get a juicy dividend, which was not cut during the oil price plunge years.
4. HP Inc. HPQ is one of the “boring” technology companies as it makes notebooks, desktops and printers. But one look at its fundamentals and you can see why its attractive. Earnings are expected to rise 21% in fiscal 2018 and analyst estimates are on the rise for both F2018 and F2019. It’s also really cheap, with a forward P/E of just 11.5.
5. PACCAR PCAR is a global manufacturer of light, medium and heavy-duty trucks under the brands of Kenworth, Peterbilt and DAF. It has a market cap of $21.9 billion and reported a record quarter in the first quarter. Orders for US & Canada Class 8 trucks were more than double a year ago, prompting PACCAR to raise its full year industry sales range. It’s trading at just 11x and earnings are expected to jump 32% in 2018.
Wall Street has been ignoring value stocks for a couple of years.
But the tide might be turning in 2018.
Suddenly, the cheap large cap stocks are holding their own and, in some cases, even beating the returns of the major indexes.
Should you be buying the big caps on this weakness?
Find out the answer to this, and more, in this week’s podcast.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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HP Inc. (HPQ) : Free Stock Analysis Report
Comerica Incorporated (CMA) : Free Stock Analysis Report
PACCAR Inc. (PCAR) : Free Stock Analysis Report
Amgen Inc. (AMGN) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
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