12 Low Volatility Large Caps Undervalued By The Graham Number

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Includes: AEP, CB, COP, CVX, EIX, ETR, HPQ, NLY, PEG, PPL, SRE, TRV
by: Kapitall

Interested in stock ideas but worried about their risk? For ideas on how to find low-risk stocks, we ran a screen you might be interested in.

We screened large-cap companies, with market caps above $10 billion, for those with low volatility, screening for those that have traded within 2% ranges every day over the last month.

We then screened for those trading at significant discounts to their Graham Number, potentially indicating that they are undervalued.

This number was created by the "godfather of value investing" Benjamin Graham, and calculates a stock's maximum fair value based off of its EPS and book value per share (BVPS). Stocks trading below their Graham Number may be undervalued.

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks have low risk? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by Graham Number.

1. Hewlett-Packard Company (NYSE:HPQ): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses, as well as to the government, health, and education sectors worldwide. Average intra-day trading range over the last month at 1.93%. Diluted TTM earnings per share at 3.32, and a MRQ book value per share value at 19.41, implies a Graham Number fair value = sqrt(22.5*3.32*19.41) = $38.08. Based on the stock's price at $27.94, this implies a potential upside of 36.28% from current levels.

2. ConocoPhillips (NYSE:COP): Operates as an integrated energy company worldwide. Average intra-day trading range over the last month at 1.35%. Diluted TTM earnings per share at 7.8, and a MRQ book value per share value at 49.56, implies a Graham Number fair value = sqrt(22.5*7.8*49.56) = $93.26. Based on the stock's price at $68.49, this implies a potential upside of 36.17% from current levels.

3. Entergy Corporation (NYSE:ETR): Operates as an integrated energy company in the United States. Average intra-day trading range over the last month at 1.48%. Diluted TTM earnings per share at 7.92, and a MRQ book value per share value at 50.92, implies a Graham Number fair value = sqrt(22.5*7.92*50.92) = $95.26. Based on the stock's price at $70.17, this implies a potential upside of 35.75% from current levels.

4. The Chubb Corporation (NYSE:CB): Provides property and casualty insurance to businesses and individuals. Average intra-day trading range over the last month at 1.39%. Diluted TTM earnings per share at 6.2, and a MRQ book value per share value at 56.24, implies a Graham Number fair value = sqrt(22.5*6.2*56.24) = $88.57. Based on the stock's price at $66.79, this implies a potential upside of 32.62% from current levels.

5. Chevron Corp. (NYSE:CVX): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Average intra-day trading range over the last month at 1.54%. Diluted TTM earnings per share at 13.44, and a MRQ book value per share value at 60.7, implies a Graham Number fair value = sqrt(22.5*13.44*60.7) = $135.48. Based on the stock's price at $102.33, this implies a potential upside of 32.4% from current levels.

6. Annaly Capital Management, Inc. (NYSE:NLY): Engages in the ownership, management, and financing of a portfolio of investment securities. Average intra-day trading range over the last month at 1.09%. Diluted TTM earnings per share at 1.36, and a MRQ book value per share value at 16.22, implies a Graham Number fair value = sqrt(22.5*1.36*16.22) = $22.28. Based on the stock's price at $16.83, this implies a potential upside of 32.37% from current levels.

7. American Electric Power Co., Inc. (NYSE:AEP): Engages in the generation, transmission, and distribution of electric power to retail customers. Average intra-day trading range over the last month at 1.26%. Diluted TTM earnings per share at 3.76, and a MRQ book value per share value at 30.34, implies a Graham Number fair value = sqrt(22.5*3.76*30.34) = $50.66. Based on the stock's price at $39.32, this implies a potential upside of 28.85% from current levels.

8. Sempra Energy (NYSE:SRE): Engages in the development of energy infrastructure, operation of utilities, and provision of energy-related products and services worldwide. Average intra-day trading range over the last month at 1.37%. Diluted TTM earnings per share at 5.55, and a MRQ book value per share value at 40.2, implies a Graham Number fair value = sqrt(22.5*5.55*40.2) = $70.85. Based on the stock's price at $57.34, this implies a potential upside of 23.56% from current levels.

9. PPL Corporation (NYSE:PPL): Generates and sells electricity; and delivers natural gas to approximately 5.3 million utility customers primarily in the northeastern and northwestern US. Average intra-day trading range over the last month at 1.51%. Diluted TTM earnings per share at 2.64, and a MRQ book value per share value at 18.77, implies a Graham Number fair value = sqrt(22.5*2.64*18.77) = $33.39. Based on the stock's price at $27.58, this implies a potential upside of 21.07% from current levels.

10. The Travelers Companies, Inc. (NYSE:TRV): Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Average intra-day trading range over the last month at 1.64%. Diluted TTM earnings per share at 3.37, and a MRQ book value per share value at 62.31, implies a Graham Number fair value = sqrt(22.5*3.37*62.31) = $68.74. Based on the stock's price at $57.69, this implies a potential upside of 19.15% from current levels.

11. Public Service Enterprise Group Inc. (NYSE:PEG): Operates in the energy industry primarily in the northeastern and mid Atlantic United States. Average intra-day trading range over the last month at 1.78%. Diluted TTM earnings per share at 2.8, and a MRQ book value per share value at 20.08, implies a Graham Number fair value = sqrt(22.5*2.8*20.08) = $35.57. Based on the stock's price at $30.1, this implies a potential upside of 18.16% from current levels.

12. Edison International (NYSE:EIX): Engages in the supply of electric energy in central, coastal, and southern California. Average intra-day trading range over the last month at 1.30%. Diluted TTM earnings per share at 2.95, and a MRQ book value per share value at 33.81, implies a Graham Number fair value = sqrt(22.5*2.95*33.81) = $47.37. Based on the stock's price at $40.69, this implies a potential upside of 16.42% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.