By Jeff Bailey
As we reported in our Mid-Year Report Part One, halfway through 2014, stocks are looking pricier. As investors who choose individual stocks mull the taking of profits, eating of losses and some judicious rebalancing, it’s worth asking very broadly: what’s still cheap?
^SPX data by YCharts
Rather than search for super-low-priced shares at this point, we’re looking at the S&P 500 components and using the YCharts Stock Screener to sort out companies trading at a forward P/E ratio of below 15. That gives us a pretty big list, ordered by market cap here and also featuring dividend yield and payout ratio. There are 125 stocks in all.
And it turns out, with YCharts’ focus on value investing, we’ve written about a fair number of these stocks during the last six months. YCharts articles drill down into the world of value investing, delving into dividend growth and the attractiveness of companies with wide competitive moats. Our articles aren’t aimed at short-term plays, but rather seek to unearth information that can help you form long-term conclusions. So, a little recap here is hopefully of use.
The sub-15 forward P/E ratio stocks, as of today, include a fair number of financial stocks, energy stocks, tech stocks and healthcare stocks.
One of those, Express Scripts (NASDAQ:ESRX), which my colleague Carla Fried weighs in on today, is a quality stock trading cheaply. And YCharts has been highlighting many of these cheaper stocks in recent months. Screening for value and income in recent months, it has been impossible not to focus on Chevron (NYSE:CVX), the global energy concern that has made huge capital expenditures in recent years to power future growth.
In finance, during the entire history of YCharts' market coverage, we’ve written admiringly about Wells Fargo (NYSE:WFC), a giant bank that eschews risky trading businesses and instead focuses on being the most efficient plain vanilla financial institution. That’s why Warren Buffett’s Berkshire Hathaway (NYSE:BRK.B) counts Wells Fargo as its largest stock holding.
WFC Return on Assets (TTM) data by YCharts
We’ve also highlighted the appeal of two major credit card companies. MasterCard (NYSE:MA) stacks up nicely for its growth and return on equity. And we wrote about a market-beating fund manager who’d made Capital One (NYSE:COF) his top holding.
MA data by YCharts
Western Union (NYSE:WU) is a wide moat stock that gets no respect from a market besotted by supposedly disruptive stocks like Xoom (NASDAQ:XOOM), a tiny online payments competitor. As we explained, Western Union’s online business is accelerating while Xoom’s decelerating. Go figure. And Western Union is very cheap.
When YCharts dissected the Piotroski F-Score, a composite that measures nine different quality metrics, and then screened for value, we ran into railroad stock Union Pacific (NYSE:UNP). Again. As we’d earlier noted, Union Pacific has been out-performing Warren Buffett’s railroad, BNSF.
The market is pricey. And even cheaper stocks wouldn’t be spared in a big sell-off. But solid earnings and low valuation are keys to long-term value investing.