4 Solid Value Stocks
Finding that perfect blend of a great business that sells at a low price is the pot of gold investors seek. Here are four stocks that fit that mold.
The stock market’s recent setback shouldn’t stop you from buying shares of the many excellent companies available at reasonable prices. In fact, the rocky spell in May and June offers you the chance to get in on some fine names inexpensively. Some ideas (all prices and related data are as of the June 21 market close):
Xerox (symbol (XRX)
Price as of the June 21 market close: $9.98Dividend Yield: 1.7%
Xerox’s buyout of Affiliated Computer Services in 2010 made Xerox more like today’s IBM than a mere manufacturer of copying machines and printers. Xerox still makes those, but services bring in two-thirds of its revenue. That part of the company is also growing faster than manufacturing. Through Affiliated, Xerox runs corporate IT departments, manages company benefits and handles specialized jobs, such as operating electronic highway toll systems. Although Xerox’s stock is down 13% in 2011, analysts expect earnings per share to rise 14% this year, to $1.07, and 16% more in 2012, to $1.24. That puts Xerox’s price-earnings ratio based on 2011 estimates at 9.3 which is low compared with 12.5 for IBM and 11.4 for computer services in general.
Price: $79.25Dividend Yield: 1.3%
With 34 million people in its health plans, most of them Blue Cross and Blue Shield, WellPoint is the largest publicly traded health insurer by membership. Some people object to investor involvement in this business, but if you are okay with shareholders taking a cut of health insurance premiums, WellPoint’s immensity -- revenues should exceed $59 billion this year -- gives it great financial strength on top of marketing muscle. WellPoint began issuing quarterly dividends in February, at 25 cents a quarter, and says it will earn $6.70 a share for 2011. At a price-earnings ratio of 11.8 based on the company’s forecast, WellPoint stock costs half per dollar of earnings what it did five years ago -- and there’s no reason to think it’s going to get any cheaper. Analysts are a bit more exuberant, forecasting the company will earn $7.06 per share this year putting Wellpoint’s current P/E at 11.2, In fact, the stock is having a splendid year, despite all the loose talk about the terrible fate of health-related investments.
Price: $101.59Dividend Yield: 3.1%
Natural gas prices are depressed and oil is falling off its peak, but there are still barrels of money to be made producing petroleum and gas. In fact, Chevron is selling some refining assets to focus on exploration and production, both on land and at sea and in the United States and elsewhere. Chevron expects its energy production growth rate to go from today’s 1%-2% to 4%-5% starting in 2014. That might enable the company to raise dividends faster than the 8% boosts in the last five years. Chevron’s price-earnings ratio of 8 based on analysts’ 2011 average earnings estimate makes it a hair cheaper than other big worldwide oil companies, though all are much less expensive by this yardstick than they were before many of the world’s governments began making it harder for global oil companies to get control of reserves.
Teva Pharmaceutical (TEVA)
Price: $47.53Dividend Yield: 2.0%
Teva is the largest generic drug company in the world and is busy getting larger. The Israeli company is on a global shopping spree, buying other drugmakers and forming joint ventures to expand all over Europe and in Brazil, Peru and Russia. Most recently, Teva bought 57% of a Japanese generic drugmaker and then Cephalon, which gives Teva new cancer pain treatments. But of greatest note to investors: Teva’s stock is down 10% so far in 2011, a rare interruption in a tremendous long-term growth pattern. If these acquisitions work out, this will prove the right time to get a dose of Teva at a reasonable price.