- (0:30 -- Stocks To Watch During Upcoming Earnings Season
- (4:10) - Tracey’s Top Stock Picks
- (16:15) - Episode Roundup: AVID, CAH, EME, FAST, VOO
Welcome to Episode #186 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
It should be easy to be a value investor in 2020, right?
But it’s not.
With companies withdrawing guidance, and revenue and earnings expected to fall sharply at many companies in 2020, how does a value investor figure out if a company is genuinely cheap?
With earnings on the decline, it feels like the entire S&P 500 might just be one big value trap.
Screening for Cheap Zacks Strong Buy Stocks
Zacks Rank #1 (Strong Buy) stocks are ranked that high because they are supposed to have rising earnings estimates.
Right now, many companies have just the opposite, or earnings that are expected to decline dramatically.
Why not screen for Zacks Strong Buy stocks that are also cheap to see if there are some genuine values there?
Running a basic screen with a forward P/E under 15 and the Zacks Rank of #1 (Strong Buy), returns 17 stocks.
Here are 3 of them.
3 Cheap Zacks Strong Buy Stocks
1. Avid Technology, Inc. AVID is a small cap software company in the media, television and film industries. It recently reported record growth in paid subscriptions for its cloud-enabled software in the first quarter. But with film and television shows shut down, it’s getting hurt on sales in those categories. It’s trading with a forward P/E of 7.1 but will those earnings estimates hold up?
2. Cardinal Health, Inc. CAH is supplying PPE to hospitals, labs, pharmacies and other healthcare facilities. Not surprisingly, the shares are only down 2% year-to-date. But it’s still cheap, with a forward P/E of 9.4.
3. EMCOR Group, Inc. EME is in mechanical and electrical construction, industrial energy infrastructure and facilities services. It is paying its regular dividend this month, in April, which is yielding 0.5%. Shares are down 30.9% year-to-date and are trading at just 10.4x.
Investors might want to watch companies that are involved in the PPE industry, other than Cardinal Health.
Fastenal FAST already reported earnings. It’s a Zacks Rank #4 (Sell) currently, but the safety business, which includes PPE, was up 31% in the month of March. It’s not cheap, however, as it’s trading with a forward P/E of 27.
Additionally, some investors might want to wait on the sidelines with individual stocks while the earnings picture clears up.
You don’t have to get fancy about it. Investors can just buy a broad market index, like the Vanguard S&P 500 ETF VOO.
What else do you need to know about finding value stocks while earnings remain volatile?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of VOO in her personal portfolio.]
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Fastenal Company (FAST) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Avid Technology, Inc. (AVID) : Free Stock Analysis Report
EMCOR Group, Inc. (EME) : Free Stock Analysis Report
Vanguard S&P 500 ETF (VOO): ETF Research Reports
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