U.S. Markets closed

A Trio of Fairly Priced Stocks for Your Portfolio

You can increase the effectiveness of your search for value stocks enormously you consider fairly priced securities during your screening.

This is what Benjamin Graham, the pioneer of value investing, suggested: multiply the result of the stock's price-earnings ratio by its price-book ratio to get the "Graham blended multiplier," with ideal result being less than 22.5.


If the Graham blended multiplier is below 22.5, the stock may be underestimated by the market, attracting the interest of investors.

To test this theory, here are some results of my screening of US-listed stocks with market capitalizations above $2 billion and a Graham blended multiplier of less than 22.5.

Voya Financial, Inc.

The first company is Voya Financial, Inc. (NYSE:VOYA). Shares of the New York-based retirement, investment and employee benefits company closed at $53.99 on Friday for a market capitalization of $7.58 billion.

The stock has a Graham blended multiplier of 11.82, resulting from a price-earnings ratio of 15.16 multiplied by a price-book ratio of 0.78. The asset management industry has a median of 14.19 for the price-earnings ratio and of 1.03 for the price-book ratio.

Voya Financials' price-earnings ratio beats 54.45% of competitors operating in the asset management industry, and its price-book ratio beats 67.97% of competitors in the industry.

Wall Street issued an overweight recommendation rating with an average target price of $60.21 for shares of Voya Financial.

Over the past year through Oct. 25, the share price has risen 30% to above the 200-, 100- and 50-day simple moving average lines.

The 52-week range is $36.66 to $57.57.

The stock has a dividend yield of 0.33% compared to the industry median of 4.22% as of Oct. 25. The company paid a quarterly dividend of 15 cents per common share on Sept. 27 earlier this year. Voya Financial has been distributing dividends since Oct. 2013.

The 14-day relative strength index of 63 suggests the stock is neither overbought nor oversold.

Air Lease Corporation

The second company is Air Lease Corporation (NYSE:AL). The stock price of the Los Angeles-based aircraft leasing company traded at around $44.69 per share at close on Friday for a market capitalization of $5 billion.

The stock has a Graham blended multiplier of 8.65, generated from a price-earnings ratio of 9.1 multiplied by a price-book ratio of 0.95. The rental and leasing services industry has a median of 15.43 for the price-earnings ratio and a median of 1.48 for the price-book ratio.

Air Lease Corporation tops 76.65% of companies operating in the rental and leasing services industry in terms of better price-earnings ratio and tops 72.52% of companies operating in the industry in terms of better price-book ratio.

Wall Street issued a buy recommendation rating with an average target price of $54.08 for shares of Air Lease Corporation.

In the past 12 months through Oct. 25, the share price traded higher 21% to place above the 200-, 100- and 50-day simple moving average lines.

The 52-week range is $28.13 to $45.43.

On Oct. 4, the company paid a quarterly dividend of 14 cents per common share to its shareholders, producing a 1.16% trailing 12-month dividend yield versus the industry median of 2.56% as of Oct. 25. Air Lease Corporation has been paying dividends since March 2013.

The 14-day relative strength index of 70 indicates the stock is not far from overbought levels.

Teck Resources Limited

The third company is Teck Resources Limited (NYSE:TECK). Shares of the Canadian industrial metals producer and mineral resources explorer closed at $16.69 on Friday for a market capitalization of approximately $9.3 billion.

The stock has a Graham blended multiplier of 2.64. The result derives from a price-earnings ratio of 4.89 and a price-book ratio of 0.54. The industrial metals & minerals industry has a median of 13.62 for the price-earnings ratio and of 1.42 for the price-book ratio.

Teck Resources Limited's price-earnings ratio is ranked higher than 82.3% of the total number of companies operating in the industrial metals & minerals industry, and its price-book ratio is ranked higher than 81.73% of competitors.

Wall Street issued a buy recommendation rating for shares of Teck Resources Limited with an average target price of $25.48.

Over the past 52 weeks through Oct. 25, the share price has fallen 9% to close below the 200- and 100-day simple moving average lines but slightly above the 50-day simple moving average line.

The 52-week range is $14.51 to $25.75.

The dividend yield is 0.9% versus the industry median of 2.37% as of Oct. 25, resulting in a 5 cents (Canadian dollars) quarterly dividend per common share paid on Sept. 30. Teck Resources has been paying dividends since June 1987.

The 14-day relative strength index of 55 suggests the stock is neither overbought nor oversold.

Disclosure: I have no positions in any securities mentioned.

Read more here:



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.