Investors are always in search of cheap stocks. Below, I have identified and analyzed five stocks that are trading at a discount to their competitors and offer decent divided yields, too. I expect these stocks to outperform their peers as well as major stock indices. These can serve as core portfolio positions for 2012.
JPMorgan Chase & Company (JPM) is a financial holding company that provides financial services. It has market capitalization of $142 billion. The company's stock is currently trading at around $37 per share. JPMorgan generated a profit margin of 21% and a return-on-equity of 10.5%. It has a dividend yield of 2.7%.
Barclays PLC (BCS) is a competitor of JPMorgan. JPMorgan reported an operating margin of around 31% while Barclays reported the same margin at 26%. JPMorgan also has a higher earnings-per-share value of $4.5 versus $1.3 reported by Barclays. JPMorgan is also trading at a cheaper valuation as shown by its price-to-earnings ratio of 8.3 versus 10.7 reported by Barclays. Many new branches opened by JPMorgan in the Bay Area have seen tremendous growth. The company's CEO has also mentioned that the Greek default will not impact U.S. banks negatively. Insider trading at JPMorgan also gives me a clue as to where the company is headed.
KeyCorp (KEY) is a holding company that provides banking services. It has a market capitalization of $7.6 billion. Stock of KeyCorp is currently trading at $8 per share. Over the last 52 weeks, its shares have traded within a narrow range of $5.59 and $9.77 per share, also shown by the company's beta value of 0.9. KeyCorp generated a profit margin of 23% and a return-on-equity of 10.4%. It has a dividend yield of 1.5%.
KeyCorp's operating margin of 38% is higher than the industry average of 34%. U.S. Bancorp (USB) is a competitor of KeyCorp. It reported a price-to-earnings ratio of 11.3 while KeyCorp reported a lower ratio of 8.1. U.S. Bancorp also reported a higher price-to-sales ratio of 3.2 while KeyCorp reported the same ratio at 1.7. These ratios indicate that KeyCorp is trading at a cheaper price than its competitor. Currently, KeyCorp is looking for acquisitions in order to boost the company's payout. Despite the company's improving credit quality and a growth in its portfolio, KeyCorp's valuations barely topped analysts' estimates.
MetLife, Inc. (MET) engages in the provision of insurance, annuities, and other products. It has a market capitalization of $37.3 billion. The company's stock is currently trading around $35 per share. MetLife generated a profit margin of 8.9% and a return-on-equity of 11%. Additionally, it reported a dividend yield of 2.1%.
Allianz SE (OTCQX:AZSEY) is a competitor of MetLife. Allianz reported lower gross and operating margins of 16% and 7% respectively while MetLife reported the same margins at 36.6% and 13% respectively. MetLife also had a lower price-to-earnings ratio of 6.6 while Allianz reported the same ratio at 12.4. The American International Group, Inc. (AIG), another competitor of Metlife, has a price-to-sales ratio of 0.7 vs. MetLife's 0.5. These ratios indicate that MetLife is cheaper than its competitors. Recently, MetLife added six quality resource guides to its dental continuing education program, showing its dedication to oral health education. Analysts' valuations also show that MetLife is a worthy investment. They have also recently closed their mortgage operations and loan business.
News Corporation (NWSA) is a media company. It has a market capitalization of $47.6 billion. The company's stock is currently trading around $19 per share. News Corporation generated a profit margin of 8% and a return-on-equity of 11.3%. It also reported a dividend yield of 1%.
Rovi Corporation (ROVI) is a competitor of News Corporation. Rovi Corporation has a price-to-earnings ratio of 46 versus News Corporation's 11. Rovi also has a higher enterprise-value-to-EBITDA ratio of 14.3 while News Corporation reported a value of 8. Additionally, Rovi's price-to-sales ratio of 4.7 was higher than News Corporation's 1.4. These ratios indicate that shares of News Corporation are valued cheaper than that of its competitor. The company has recently seen an increase in both sales and income. It is also announcing a free-to-air Spanish network, which is aimed at the 50 million Hispanics living in the U.S. Additionally, News Corporation has been given a buy rating by S&P, and I am also bullish on the stock.
Regions Financial Corporation (RF) is a holding company for Regions Bank, providing commercial, retail, and mortgage banking services. It has a market capitalization of $6.6 billion. The company's stock is currently trading at around $5 per share. It generated a profit margin of 8.3% and a return-on-equity of 2.5%. Regions Financial has a dividend yield of 0.8%.
Bank of America Corporation (BAC) is a competitor of Regions Financial. The Bank of America reported a lower operating margin of 4.5% versus 7% reported by Regions Financial. BB&T Corporation (BBT), another competitor, has a price-to-sales ratio of 2.5 versus 1.3 of by Regions Financial. These valuations indicate that Regions Financial's stock is trading at a cheaper price than its competitors. The company is using new tactics to increase its customer base. Despite posting a loss of around $602 million in the fourth quarter, many analysts continue to give the stock a buy rating. This may be partly due to some stable results posted in its fourth quarter earnings. I am also bullish on the stock.