Singapore markets closed

Value Investors: Time to Get Back to Basics

Tracey Ryniec
  • (0:20) - Getting Back To The Basics: Finding Deals In A Down Market
  • (6:45) -Tracey’s Top Stock Picks
  • (13:20) - Episode Roundup: BBY, COST, SFM, TPH, SPXC

Welcome to Episode #185 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Stocks have rebounded off the big coronavirus sell-off, but that doesn’t mean there aren’t still bargain stocks out there.

Value investors don’t have to get fancy.

Don’t worry about buying at the bottom, or that you might have missed the bottom. Worry about buying the best quality companies when they are cheap.

How to Screen for Cheap Stocks

Value investors could use a basic P/E ratio screen to find cheap stocks, but what is the “E” going to look like over the next couple of quarters as the coronavirus shutdowns hit?

Investors might want to use the price-to-sales (P/S) ratio instead.

While there may not be much certainty over revenue, current P/S ratios are calibrated on the prior 12 months. If a stock is cheap heading into the pandemic, they may be once we come out of it.

You can run a screen with a P/S ratio under 1 and a Zacks Rank of #1 (Strong Buy) and #2 (Buy), to get stocks with rising earnings estimates, if that’s even possible right now.

This screen returned over 200 stocks so if you remove the small caps, you’ll get 78 stocks.

5 Stocks with Low P/S Ratios

1.       Best Buy BBY could be one of the beneficiaries of the work-from-home mania gripping the country during the coronavirus crisis. Have you ordered a new computer, microphone or other tech equipment? Best Buy has a P/S ratio of just 0.37.

2.       Costco COST has had strong comparables even before the virus hit. It has a P/S ratio of just 0.85.

3.       Sprouts Farmers Market SFM shares are actually up 0.1% year-to-date. Groceries are hot. But it still trades with a value P/S ratio of just 0.4.

4.       TRI Pointe Group TPH is a smaller home builder based in Irvine, California. It builds single family homes in 10 states. Shares have fallen 32.6% year-to-date. It has a P/S ratio of only 0.4.

5.       SPX Corporation SPXC operates in heating, ventilation and cooling in 17 countries. Shares have been hit hard, falling 34% in 2020. But it has a P/S ratio of just 0.9.

What else should you know about finding companies with low P/S ratios?

Tune into this week’s podcast to find out.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
TRI Pointe Group, Inc. (TPH) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
SPX Corporation (SPXC) : Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research