These five large cap stocks have positive catalysts for future growth, are S&P five star rated, have positive Reuters ratings, and PEG ratios of less than 1 over the trailing 12 months. The PEG ratio is a broadly-used indicator of a stock's prospective worth. It is preferred by numerous analysts over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued. Many financiers use 1 as the cut-off point for PEG ratios. A PEG of 1 or less is believed to be favorable. Additionally, these stocks are extremely oversold due to recent market volatility prompting investors to run for the equity exits and pile in to so-called “safe haven” assets. As Warren Buffett would say, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
These are bullish indicators regarding a stock's possible future performance. Moreover, these stocks are trading well below consensus analysts’ estimates; several have recent upgrades and positive analyst comments. Nonetheless, this is only the first step in finding winners for your portfolio. Now that we have cut the wheat from the chaff, let's take a closer look to distinguish the driving factors behind these remarkable statistics and ensure the stories are intact.
Below is a table with detailed statistics regarding each company’s current fundamental information followed by a brief review of each company, detailed current analysts' estimates and up/downgrade activity followed by a chart of the company's key statistics. Please use this as a starting point for your own due diligence.
Cliffs Natural Resources Inc. (NYSE:CLF), a mining and natural resources company, produces iron ore pellets; lump and fines iron ore, and metallurgical coal products.
Cliffs Natural Resources recently announced that its Board of Directors has authorized it to repurchase up to four million of its outstanding common shares under a newly authorized share repurchase plan.
Cliffs Natural Resources recently reported second-quarter results for the period ended June 30, 2011. Consolidated revenues were up 52% for the second quarter to a record $1.8 billion, from $1.2 billion in the same quarter last year. Operating income for the second quarter was $617 million, an increase of 69% from the comparable quarter in 2010. Second-quarter 2011 net income attributable to Cliffs' common shareholders was $408 million, or $2.92 per diluted share, up from $261 million, or $1.92 per diluted share, in the second quarter of 2010. The year-over-year improvements were driven by higher pricing in the Company's iron ore business segments, along with incremental sales from Cliffs' recently acquired Bloom Lake operations in Eastern Canada.
The company is trading significantly below analysts' estimates. Cliffs has a median price target of $125 by 13 brokers and a high target of $144. The last up/downgrade activity was on Jun 13, 2011, when UBS initiated coverage on the company with a Buy rating.
Xerox Corp. (NYSE:XRX) engages in the development, manufacture, marketing, service, and finance of document equipment, software, solutions, and services worldwide.
Xerox Corporation recently announced second-quarter 2011 results that include adjusted earnings per share of 27 cents. Adjusted EPS excludes 5 cents primarily related to the amortization of intangibles, resulting in GAAP EPS of 22 cents.
The company is trading significantly below analysts' estimates. Xerox has a median price target of $12 by 9 brokers and a high target of $15. The last up/downgrade activity was on Feb 23, 2011, when Standpoint Research upgraded the company from Hold to Buy.
Marvell Technology Group Ltd. (NASDAQ:MRVL) designs, develops, and markets analog, mixed-signal, digital signal processing, and embedded and standalone ARM-based microprocessor integrated circuits.
Marvell recently announced that four of the six smart phones selected by China Mobile in its first round of smart phone purchasing are powered by the Marvell® PXA920 single-chip solution. China Mobile is the world’s largest mobile operator with more than 500 million subscribers. The wide adoption of Marvell’s single chip solution by leading mobile OEMs rewards Marvell’s continuous R&D investment around TD during the past three years.
The company is trading significantly below analysts' estimates. Marvell has a median price target of $19 by 31 brokers and a high target of $26. The last up/downgrade activity was on Oct 8, 2010, when The Benchmark Company initiated coverage on the company with a Buy rating.
HollyFrontier Corporation (NYSE:HFC) operates as an independent petroleum refiner and marketer in the United States. It produces light products, such as gasoline, diesel fuel, jet fuel, and other specialty products.
HollyFrontier Corporation recently reported record quarterly net income attributable to HollyFrontier stockholders of $192.2 million or $3.58 per diluted share for the quarter ended June 30, 2011, compared to $66.2 million or $1.24 per diluted share for the quarter ended June 30, 2010. For the six months ended June 30, 2011, net income attributable to HollyFrontier stockholders totaled $276.9 million or $5.16 per diluted share compared to $38.1 million or $0.71 per diluted share for the six months ended June 30, 2010. First Call expects 3.35 EPS for next quarter. The current Price Target for HFC is $82.00.
Avnet Inc. (NYSE:AVT), together with its subsidiaries, distributes electronic components, enterprise computer and storage products, and embedded subsystems in the Americas, Europe, the Middle East, Africa, Asia, Australia and New Zealand.
Avnet recently announced results for the fourth quarter and fiscal year ended July 2, 2011. Please review the following highlights:
- Sales for the fiscal year ended July 2, 2011 increased 38.5% over the prior fiscal year to a record $26.5 billion; pro forma revenue was up 17.1% year over year.
- Adjusted operating income increased 52.4% to over $1 billion and 3.8% of sales.
- Adjusted diluted earnings per share of $4.32 increased 56% year over year; GAAP diluted earnings per share were $4.34, up 61.9% year over year.
Rick Hamada, Chief Executive Officer, commented,
"We began our fiscal year with three significant value-creating acquisitions that expanded our global footprint in higher growth markets and increased our customer base and franchised supplier line card. These investments, combined with double-digit, year-over-year organic growth, added over $7 billion to our top-line. Adjusted operating income grew 1.4 times faster than revenue to over $1 billion, driven by operating leverage and acquisition synergies. As a result, return on capital employed improved 76 basis points year over year to 15.4%, which is within our target range of 14%-16% for the full fiscal year. Based on this record financial performance, our historical run rate of investments in acquisitions, our strong balance sheet and the current valuation of our stock, Avnet's Board of Directors has determined that it is an appropriate time to authorize a $500 million share buyback program. As we begin fiscal 2012, we are comfortable that we have adequate liquidity to continue to grow shareholder value by investing in organic growth and value-creating M&A while opportunistically returning cash to shareholders through a buyback program."
The company is trading significantly below analysts' estimates. Avnet has a median price target of $38 by 11 brokers and a high target of $46. The last up/downgrade activity was on Mar 8, 2011, when Stifel Nicolaus upgraded the company from Hold to Buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.