Dear Investor,
Let’s face it, value stocks are yesterday’s news.
Not only has the Russell 2000 index lagged behind other broad market indexes but the tech-heavy Nasdaq is now up 23% for the year.
Ouch.
But that hasn’t always been the case. In fact, historically, value stocks (shares of companies that are cheaper than the average as measured by things like price-to-earnings ratios) have outperformed.
Could it be time for value to catch up?
The following stocks have been selected based on their trailing price-to-earnings, price-to-book, sales growth, and return on equity.
Rockwell (ROK): This industrial automation company’s shares are up 12.5% for the year. Contributing to this increase is the upgrading of supply chains and the automation of factory processes. Revenue is expected to increase in the next two years by 5% and 7% respectively, and ROE is expected to shine at 88% in fiscal year 2021.
NVR (NVR): Homebuilding and mortgage banking is where this company operates, focussing on single-family detached homes, townhomes, and condos. The stock has gained 7.5% this year, bolstered by new home deliveries and a 12% rise in backlogs of houses under construction. Sales in 2021 are expected to rise by 8.6% in 2021, promoting earnings growth 15%.
Avery Dennison(AVY): This label and packaging giant manufactures and distributes pressure-sensitive and packaging materials around the world anywhere you can imagine a label is used. Shares and earnings are down 10% and 9.4% respectively, but forecasts for 2021 are anticipating sales to bounce back by 4.4% pushing profits up by 11%.
Illinois Tool Works(ITW): This is a world-class diversified industrial-equipment and components manufacturer operating in seven segments including but not limited to automotive, food, welding, and construction products. Sales are anticipated to grow by 10% in 2021, expanding earnings by 23% to $7.06 a share, and an ROE of 97% and a yield of 2.3%.
Procter & Gamble (PG): The Blue Chip consumer goods giant synonymous with names like Gillette, Tide, and Crest own a stable full of familiar brand names. P&G has outperformed the S&P 500’s five-year price-performance besting the index by a whopping 20%, the indexes 70% to P&G’s 90%. Fourth-quarter earnings reported $1.16 per share on revenue of $17.698 beating analysts’ expectations of $17 billion. Annual earnings per share for the year showed an increase of 13%.
Bottom Line: Stocks trading at a discount that you want to ultimately outperform the market may seem like a needle in a haystack. Consider these metrics as a jumping-off point: Price-to-Earnings Ratio, Price-to-Book Ratio, and the Price-to-Sales Ratio.
Until Next Time,
The BLI Staff
