Eq: Value

Eq: Value (30)

Tuesday, 09 July 2019 08:40

The Best Cheap Blue Chip Stocks

Written by

(New York)

The market may be way up this year, but there are still some great values out there. The average P/E ratio of the S&P 500 is 16.7, yet 67 of the companies in it trade at below 10, triple the amount of five years ago. Here are a handful of blue chips that are very cheap, but have strong market positions, decent profitability, and nice growth positions: Delta Airlines, Bank of America, Kroger, homebuilder Lennar, and BorgWarner, a maker of car components.

FINSUM: These seem like great picks, but they also appear to be the victims of the long-term decline in value investing. Investors keep thinking value investing will bounce back, but it hasn’t.

Wednesday, 26 June 2019 07:24

10 Stocks to Win in a Downturn

Written by

(New York)

The market’s outlook grew significantly dimmer yesterday. The Fed made clear that investors should not expect a rate cut in a July, which took the wind out of equity investors’ sails. With that in mind, here is a list of ten stocks that should help investors win in a downturn. The theme here is “low volatility” stocks, or stocks with less risk that should outperform the market in a choppy environment. The list: Aflac, Amdocs, American States Water, Atmos Energy, DTE Energy, Duke Energy, McDonalds, NextEra Energy, OGE Energy, WEC Energy Group.

FINSUM: Given the Fed’s reversal from what the market thought was its stance yesterday, right now does seem like a good time for low volatility stocks.

Friday, 21 June 2019 10:22

Why Low Volatility Stocks are a Good Pick

Written by

(New York)

Low volatility stocks aren’t behaving the way they are suppose to right now, but that is what makes them interesting. Stocks chosen because of their generally low volatility tend to perform poorly in up markets as their low beta means they underperform benchmarks. But the nature of this year’s rally has defied that idea. Stocks are up 18% this year, but there are still many worries about the economy, the combination of which has given a big boost to otherwise boring stocks. Even during the losses of May to June, low vol stocks barely lost anything even though the market plunged.

FINSUM: There are a number of low vol funds like USMV and SPLV which are good choices for this area. These stocks seem like they have found a sweet spot in the current market environment.

Friday, 14 June 2019 10:20

Goldman Says to Buy This Stock

Written by

(New York)

You might not think it is the right time for this stock, but Goldman Sachs says you should. The bank has just come out very positive on Ford. The automotive company has far outpaced the S&P 500 this year, but is still down 16% over the last 12 months. Goldman says that Wall Street is not appreciating how significant Ford’s recent restructuring is, as they think it can unlock “billions in trapped value” by lowering costs in the trucks division.

FINSUM: Basically, Goldman says Ford is going to see a big and sustained pop in earnings that no one sees coming. It is a nice, simple thesis and we like it.

Monday, 10 June 2019 11:36

Should You Buy Stocks with a Wide Moat?

Written by

(New York)

If you follow Warren Buffett at all, you will know that one of his main investing philosophies is to buy companies with a wide moat, or a major defensive position in their industry which blocks competitors from grabbing market share. It seems second nature to want to invest in such stocks, however, research suggests they may not perform as well as one would think. The reason why is that wide-moat stocks are often very popular, which means they get overpriced as investors pile in. Because of this, companies that consumers love often have returns that lag lesser companies. “Great companies don’t always make great investments”, says the CIO of retirement for Morningstar Investment Management.

FINSUM: This is a really a matter of timing. At some point these popular companies see a big run up in their stock, so it is more a matter of buying them early than saying they underperform.

Thursday, 30 May 2019 08:38

Why Car Companies Will Win Either Way

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Will the robotaxi model come to dominate the car landscape or will the current ownership model persist? Will electric cars come to dominate? These are big questions for the US automotive industry. However, the answer is that it likely won’t matter because Detroit will win either way, especially GM. While Tesla would have no backup plan if electric cars didn’t become mainstream, GM could continue on with its main business line. Further, GM has a valuable self-driving card division, Cruise, which could do very well if robo taxis become the predominant model.

FINSUM: A couple things to note here. Firstly, GM is the cheapest stock in the S&P 500 on an earning basis, so it has a lot of upside. Secondly, we don’t think the robo taxi model will take over as the cost per mile to the end consumer is likely 2-7x the current cost, which means there would need to be massive changes to make it competitive.

Thursday, 23 May 2019 08:33

Big Trouble Brewing in Retail

Written by

(New York)

The retail sector had a terrible 2017, the “retailpocalypse”, only to recover and have a strong bounce back in the first half of last year. Now things are looking bleak once again. Top retailers like Nordstrom and Urban Outfitters have already fallen 25%+ in the last year. Each business has its own issues, but the general trend in the sector has been bearishness. Some may think with valuations very low it is a good time to buy in. Think again. Retailers are having to invest heavily to update their models and offerings in the face of digital disruption to the industry. Further, tariffs from the trade war will wound the sector.

FINSUM: The bruising period retail has been going through is not over and it does not seem like a wise time to invest.

Tuesday, 14 May 2019 06:33

Buy GM and Ford, Not Parts Makers

Written by


Investors looking at the automotive sector need to think carefully about their allocation. In particular, it might be smarter to put money into automakers themselves, like GM and Ford, rather than parts suppliers. This runs counter to the typical investment strategy of buying into suppliers in major industries rather than producers themselves. Parts maker in autos have outperformed makers over the last several years, but there is a big catalyst for a reversal: auto makers are no longer looking to slash prices to increase volume. Instead, they are shifting to a higher priced margin-oriented model, which favors the makers’ stocks versus suppliers’.

FINSUM: We think the concept of a higher margin business favoring makers is logical.. However, we aren’t sure the customer is actually going to buy into this model, in which case neither makers nor suppliers would do well.

Friday, 10 May 2019 12:07

This Beat Up Stock is Suddenly Loved

Written by

(New York)

One the most brutalized stocks on Wall Street is going through a renaissance. The agricultural stock Mosaic has been beat up lately. The fertilizer specialist has been hammered because of weakness in crop prices and corresponding falls in fertilizer. Shares are down 18% this year. The company just released earnings where it cut profit forecasts and then something amazing happened—it surged 7%. Analysts and the market suddenly decided the stock was too cheap. One JP Morgan analyst summarized, saying “Mosaic has been a poor equity performer over a one, three, five, and 10 year period … And we think the shares are now priced to create a favorable risk-reward balance”.

FINSUM: This is a classic blood-in-the-streets type purchase, but the stock is so cheap compared to almost every valuation metric that there does seem to be asymmetric risk to the upside.

Tuesday, 23 April 2019 12:58

Why You Should Buy Kohl’s Stock

Written by

(New York)

Kohl’s did something we think is really brilliant. The company announced yesterday that it has entered an agreement with Amazon to accept all the online retailer’s returns. Kohls’ shares soared on the news. The program is an expansion of a pilot it started in 100 stores, but will now offer the service in all 1,150 stores. Kohl’s will also be selling Amazon merchandise.

FINSUM: We know from in-depth retailing experience that returns are a huge driver of foot traffic and extra sales. This is a very smart way to bring new customers into the store. Kohl’s revenue will rise materially from doing this. Brilliant strategy and very synergistic for both sides.

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