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5 Cheap Value Stocks to Tame a Capricious Market in Q2

Zacks Equity Research

The U.S. investment scenario has been marked by volatility of late. The stock market had an impressive run on the bourse since the election, crossing multiple milestones along the course. However, the rally in the prices looks a tad bit stretched since the beginning of March, courtesy of policy tightening issues that Congress has been facing of late.

The euphoria over the pullback of the Republican healthcare bill, the American Health Care Act (ACHA), which was designed to repeal the Affordable Care Act or Obamacare deserves a mention here. Not only this, a glimpse at the latest headlines reveals a disappointing picture for oil stocks, thanks to the supply glut and concerns over the sustainability of the OPEC-led output cut agreement.

Meanwhile, data suggests that the tech sector and semiconductors community are poised for stellar gains in the near term. The Fed chorus on the latest interest rate hike also instills our confidence on the markets.

“Buy values, not fancy names” - Philip L Carrett

While markets have been oscillating between hope and despair, we believe an inherently defensive investment strategy would be apt for the moment. The goal is to focus on stocks that are trading at tantalizing discounts and have a market value lower than intrinsic value.

Such stocks may not make it to the bigwig list of posh and famous names. However, at this point of time when the economy is once again all set to thrive, it is more meaningful to invest in stocks which are currently trading cheap.  

If the market gets into a bullish run, in contrast to expensive growth stocks, these value stocks are expected to hold enough potential to rake in more returns. And if it is not, still they may fetch positive return on the fact that they are yet to reach a level of saturation in terms of price.

Stocks in Focus

Given the volatile backdrop, we take a look at five companies which are great value bargains and poised for stellar gains in the second quarter that has just begun.

Zacks has designed the new Style Score System to compare each parameter of a stock with the peer group for an analysis of whether the stock is attractive from the value perspective. Notably, we have zeroed in on five stocks that sport a Zacks Rank #1 (Strong Buy) or 2 (Buy) with VGM Score of ‘A’ or ‘B.’ The VGM score (V stands for Value, G for Growth and M for Momentum) essentially highlights critical factors in a stock that have the potential to drive its price in the near term. Also we have considered stocks with a Value style score ‘A’ to fine tune the screening process.

Wabash National Corporation WNC: Headquartered in Lafayette, IN, the company operates as a diversified industrial manufacturer and North America’s producer of semi-trailers and liquid transportation systems. Wabash Nationalcarries a Zacks Rank #1, VGM of ‘B’ and Value Style Score of ‘A.'

Coming to price performance, Wabash National represented a stellar return of 28.3%, much higher than the Zacks categorized Automotive - Original Equipment sub-industry’s increase of roughly 8.8%.

AngioDynamics ANGO: Headquartered in Latham, NY,AngioDynamicsdesigns, manufactures, and sells various medical, surgical, and diagnostic devices for vascular access, surgery, peripheral vascular disease, and oncology in the U.S. and internationally. The stock carries a Zacks Rank #2 and Value Style Score of ‘B.’ The company has a VGM score of ‘A.’

The company has had a marvelous price performance over the last one year, representing a stellar return of 55.3%, much higher than the Zacks categorized Medical Instruments sub-industry’s gain of roughly 6.5%.

Lear Corporation LEA: Headquartered in Southfield, MI, Lear designs, develops, engineers, manufactures, assembles, and supplies automotive seating, electrical distribution systems to automotive original equipment manufacturers worldwide. The stock carries a Zacks Rank #2, Value Style Score of ‘A’ and VGM score of ‘A.’

Over the last one year, Lear represented a solid return of 30.9%, outshining the Zacks categorized Automotive - Original Equipment sub-industry’s gain of roughly 22%.

Chemed Corporation CHE): Headquartered in Irving, TX, the company develops, produces, and sells natural ingredients from edible and inedible bio-nutrients worldwide. The company holds a Zacks Rank #2, a Value Style Score of ‘A’ and a VGM score of ‘A.’

Year to date, the stock represented a return of 14.6%, outpacing the Zacks categorized Medical—Out patient/ Home Care sub-industry’s gain of roughly 2.8%.

Aegean Marine Petroleum Network Inc. ANW: Aegean Marine operates as a marine fuel logistics company that markets and supplies refined marine fuel and lubricants to vessels in port, at sea, and on rivers worldwide. The company sports a Zacks Rank #2 and Value Style Score of ‘A.’ The stock has a VGM score of A.

Furthermore, Aegean Marine has had an impressive run on a year-to-date basis, representing a stellar return of 19.7%, much higher than the Zacks categorized Transportation-Ship sub-industry’s increase of roughly 9.6%.

The Downsides

Value investing has never been a cakewalk thanks to the countless considerations and infinite risks along the way. When markets are weak, most of the fundamentally strong stocks fall within the discounted range. This may often lead to “value traps” — a situation when value picks start to underperform, even for a long period.

To avoid such value traps, investors should analyze the fundamentals of a company’s business and its historical price performance. After all, everyone seeks ‘Value, Not Junk!’

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Aegean Marine Petroleum Network Inc. (ANW): Free Stock Analysis Report
Lear Corporation (LEA): Free Stock Analysis Report
Wabash National Corporation (WNC): Free Stock Analysis Report
AngioDynamics, Inc. (ANGO): Free Stock Analysis Report
Chemed Corp. (CHE): Free Stock Analysis Report
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