While the market seems to be working very hard, it has gone nowhere in the last few weeks. With no movement following the Greece elections, there is uncertainty about whether the market bounces or tanks. Investors concerned about the direction should look at low beta stocks that generally have lower volatility. Low volatility stocks with a reasonable valuation should hold up during an undecided market. These stocks are low beta, dividend payers with a good valuation and bullish outlook.
VSE Corporation (VSEC) focuses on providing sustainment services for the legacy systems and equipment of the U.S. Department of Defense (DoD); and professional services to the DoD and federal civilian agencies in the United States. When the DoD announced budget cuts, investors cut the price of VSEC to a 52 week low. However, after being awarded several government contracts, VSEC spiked 18% to its current trading price of $25.40. VSEC is still cheap as it is trading at 5.5 times next year's earnings.
VSEC recently announced that it has been awarded a 10-year, multiple-award contract by the National Institutes of Health worth up to $20 billion, which will help the diversified federal services company expand its presence in the federal health and information technology markets. VSEC subsidiary, Akimeka, has been awarded a prime contract by the Office of the Secretary of Defense (OSD), Tricare Management Activity (TMA). VSEC was one of seven awardees of an indefinite-delivery/indefinite-quantity (IDIQ) contract which has a five-year period of performance and a total cumulative contract value not to exceed $300 million for the entire program.
VSEC posted Q1 2012 earnings of $1.26 per share easily beating the consensus estimate of $1.11. VSE pays a 1.28% dividend yield and has an average annual 5-year dividend growth rate of 18%. VSE has a 1 year beta of 0.40. VSE has an equity summary score (see methodology below) of 9.7 out of 10 for a VERY Bullish outlook.
Everest Re (RE), through its subsidiaries, underwrites an array of reinsurance and insurance products. RE has rebounded nicely in the first half of 2012 following a terrible year of losses in 2011. Re posted Q1 2012 net income of $304.7 million, or $5.68 per share, compared with a net loss of $315.9 million, or $5.81 per share, a year ago. Analysts estimate operating EPS of $13.23 for 2012 and $13.60 for 2013, versus the $1.73 operating loss reported for 2011. Operating EPS were $9.08 in 2010 and $12.51 for 2009.
RE per share results will be enhanced by buybacks, which totaled 1.1 million shares in 2011. RE is still cheap with a forward PE of 7.7. RE pays a 1.88% dividend yield and has an average annual 5-year dividend growth rate of 7.8%. RE has a 1 year beta of 0.48. RE has an equity summary score of 9.7 out of 10 for a VERY Bullish outlook.
PDL Biopharma (PDLI) is a biopharmaceutical company engages in the discovery and development of antibodies for oncology and immunologic diseases worldwide. PDLI engages in intellectual property asset management and royalty bearing assets investment activities. PDLI receives royalty payments on several drugs manufactured and distributed by Genentech. These drugs include Herceptin®, Lucentis®, Xolair® and Tysabri® Avastin®, and Xolai®.
Royalty revenues for the first quarter of 2012 increased five percent over the same period of 2011. Total revenues for the first quarter of 2012 were $77.3 million, compared to $83.3 million for the same period of 2011. PDLI announced royalty revenue guidance for the second quarter ending June 30, 2012, of approximately $125 million, as compared with actual royalty revenue of $122 million for the second quarter of 2011, a two percent increase. PDLI is extremely cheap with a forward PE of 3.6. PDLI pays a 9.36% dividend yield. PDLI has a 1 year beta of 0.53. RE has an equity summary score of 10 out of 10 for a VERY Bullish outlook.
Methodology: The Equity Summary Score provides a consolidated view of the ratings of 10+ independent research providers. It uses the providers' relative, historical recommendation performance along with other factors to give you an aggregate, accuracy-weighted indication of the independent research firms' stock sentiment. The normalized analysts' recommendations and the accuracy weightings are combined to create a single score. For the largest 1,500 stocks by market capitalization, these scores are then forcibly ranked against all the other scores to create a standardized Equity Summary Score on a scale of 0.1 to 10.0 for the 1,500 stocks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.