Seeking Alpha

5 Non-Financial Large-Cap Value Stocks To Consider

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Includes: ADM, CCL, EQNR, MPC, MU
by: Shailesh Kumar
Summary

Great value stocks are hard to find in the large-cap universe, although there are candidates to consider.

Here we look at non-financial stocks.

None of these stocks offer a very compelling valuation.

Originally published on July 5, 2019

Introduction

Great value stocks are hard to find in the large-cap universe, although there are candidates to consider. This segment of the market tends to be highly efficient, so we do need to go through a lot of names before we can find some potentially investment worthy values. It is also important to cast a wide net. We have looked both domestic names as well as ADRs in this screen. Here we look at non-financial stocks. In the next installment, I will list the financial stocks that met the screen criteria.

Screen Details

For this screen, we have considered the basic price to earnings and price to book value filters. We added an additional qualification for the historical EPS growth rate to be in the highest 40% of the market.

  • Market capitalization between $18.20 B and $82 B
  • Price to Earnings (TTM) < 15
  • Price to Book < 1.5
  • EPS Growth Rate (five-year historical) in highest 40%

You will note that both P/E ratio and P/B ratio criteria are less stringent than what we normally use for small-cap and mid-cap screens.

The screen was run using the Fidelity screener.

The Screen Results

STOCK

COMPANY NAME

P/E (TTM EARNINGS)

P/B

EPS GROWTH (5YR)

DIVIDEND YIELD

CCL

Carnival Corp.

10.9

1.32

26.15%

4.33%

ADM

Archer-Daniels-Midland Co.

14.4

1.24

9.57%

3.34%

EQNR

Equinor ASA

8.3

1.46

1.96%

4.77%

MPC

Marathon Petroleum Corp

10.4

1.07

9.72%

3.90%

MU

Micron Technology Inc.

4.6

1.24

59.07%

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Notes and Observations

  • CCL: Nicely valued, Carnival Cruise Line also offers a good dividend. A good, solid hold for a buy-and-hold investor that prioritizes income.

  • ADM: While the valuation does not appear to be very compelling, the company has a good moat. Agri business is a loose oligopoly, and the barriers to entry today are high. This can be a solid, long-term hold for an investor looking to diversify, and it pays a good dividend.

  • EQNR: Equinor is a Norwegian integrated oil producer, refiner and marketer. The company was formerly known as Statoil. As an integrated oil major, the company is more dependent on the oil prices than refiners only. As a result of the weakening oil prices the valuation has suffered. If you expect the oil prices to firm up in the future as OPEC gets more teeth, this may be a great stock to buy. Excellent dividend to compensate you for waiting.

  • MPC: Marathon Petroleum is an oil and gas refiner and marketer. The company operates Marathon and Speedway retail brands. Oil prices are weaker now than the recent years due to increasing shale output, and the industry stocks have declined. At this time the stock is attractively priced and offers a great 3.9% dividend yield.

  • MU: Micron makes memory and storage solutions. The company operates at a very high margins and about 30% return on equity. The stock has sold down on the trade war worries (including Huawei ban) as well as the slowdown in China potentially hurting revenues. However, MU has a strong balance sheet, ample liquidity and trades at a very reasonable valuation, allowing the company and any investor to ride out any near-term volatility.

Ending Note

None of these stocks offer a very compelling valuation. Most large caps typically do not interest value investors unless they are cyclical stocks flirting with a turnaround in business prospects. I suspect EQNR and MPC are such stocks, but it is likely that the valuations can get even more attractive before the eventual turnaround occurs. MU carries some political risk, but it is discounted in the stock price.

These are all great stocks to buy in a steady buy-and-hold portfolio. However, if you manage a deep value investing portfolio, you may want to keep looking.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.