In the never-ending quest for investment opportunities, I regularly run stock screens, using various criteria in search of good companies selling at bargain prices. This week's screen focuses on stocks highly rated by analysts. Using Reuters and Standard & Poor's highest buy ratings as the basis, this screen surprisingly turned up less than 50 names. In keeping with an income strategy, I narrowed this list further by requiring > 2% dividend yield. Here are the twelve stocks that passed the screen (prices as of Jan 30):
EV / EBITDA
Applied Materials Inc (NASDAQ:AMAT)
0.31 (2.53%) ex-div:"Nov 21"
Chevron Corp (NYSE:CVX)
3.09 (2.97%) ex-div:"Nov 16"
Enterprise Products Partners LP (NYSE:EPD)
2.436 (5.07%) ex-div:"Jan 27"
Harris Corp (NYSE:HRS)
1.06 (2.67%) ex-div:"Nov 16"
Coca-Cola Co (NYSE:KO)
1.88 (2.79%) ex-div:"Nov 29"
McDonalds Corp (NYSE:MCD)
2.53 (2.56%) ex-div:"Nov 29"
Magna International Inc (NYSE:MGA)
1.00 (2.37%) ex-div:"Nov 28"
Philip Morris International Inc (NYSE:PM)
2.82 (3.74%) ex-div:"Dec 20"
PPG Industries Inc (NYSE:PPG)
2.26 (2.54%) ex-div:"Nov 8"
Rockwell Automation Inc (NYSE:ROK)
1.55 (2.02%) ex-div:"Nov 9"
Exxon Mobil Corp (NYSE:XOM)
1.85 (2.16%) ex-div:"Nov 8"
The list is filled with some of the largest, most well-known companies in the world - perhaps analysts are cautioning against possible market turbulence? Readers can view detailed financial metrics, including my estimated intrinsic value, in spreadsheet format here. Summaries follow below.
Applied Materials, Inc. provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. AMAT generated ROE of 24% (vs industry's 12%) and 20% ROI (vs 10%). I have discussed the bullish case for AMAT in the past and am long the stock.
Chevron Corporation manages its investments in subsidiaries and affiliates and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in petroleum operations, chemicals operations, mining operations, power generation and energy services. A fairly roundabout description for one of the largest publicly-traded energy companies in the world. Return figures relative to the industry are not available but Chevron joins Exxon Mobil on this screen. Of the two, Chevron appears to be trading at a slight premium, perhaps due to its higher yield and growth expectations, with XOM being so large that maintaining and growing reserves is difficult).
Enterprise Products Partners L.P. is a North American midstream energy company providing a range of services to producers and consumers of natural gas, natural gas liquids (NGLS), crude oil, refined products and certain petrochemicals. EPD generated ROE of 14% (vs. industry's 3%) and ROI of 7% (vs. 2%).
Harris Corporation is an international communications and information technology company serving government and commercial markets in more than 150 countries. The Company operates in three segments: RF Communications segment, Government Communications Systems segment and Broadcast. HRS generated returns of 24% ROE and 13% ROI, handily beating the industry's 5% ROE/ROI figures.
The Coca-Cola Company is a non-alcoholic beverage company that owns or licenses and markets more than 500 non-alcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages. KO generated returns 42% ROE (vs. industry's 14%) and 28% ROI (vs. 9%). The Coke brand is one of the strongest in the world and the stock has long traded at a premium to the broader market due to its consistent profits and stable market position.
McDonald's Corporation franchises and operates its restaurants in the global restaurant industry. Return figures vs. its peers is not available but MCD had done a great job of delivering growth in the recession-like environment these past few years. Like KO, MCD is trading at a premium due to its high-quality business position.
Magna International Inc. designs, develops and manufactures technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks. MGA delivered returns of 12% ROE (vs. industry's 5%) and 11% ROI (vs. 3%. The company also has over $5 net cash per share on the balance sheet.
Philip Morris International Inc. engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. PM generated eye-popping returns of 253% ROI (vs. industry's 11%) and 43% ROI (vs. 4%).
PPG Industries, Inc. is a producer and supplier of protective and decorative coatings, optical and speciality materials, commodity chemicals, and glass. Return comparison figures are not available but by my rough valuation, I estimate the stock is currently trading around fair value.
Rockwell Automation, Inc. (Rockwell Automation) is a global provider of industrial automation power, control and information solutions. ROK operates in two segments: Architecture & Software, and Control Products & Solutions. With returns of 42% ROE (vs. industry's 8%) and 18% ROI (vs. 6%), ROK is a highly profitable company. It is also carrying almost $7 net cash on its balance sheet but is trading at a premium to its historic free cash flow.
ExxonMobil Corporation is the largest publicly traded energy company in the world and best-in-class among its peers, with returns of 27% ROE beating the industry's 12% and 18% ROI doubling peers' 9%. While the company's operations and focus are top-notch, I recently sold my shares due to valuation, which I detailed in a previous article. If the stock was to drop roughly 20+%, I would look into re-opening a position.
Disclosure: I am long AMAT.