These are the 5 most undervalued stocks for the second half of 2017
The first rule of the legendary investor Benjamin Graham is that investment is most intelligent when it is most businesslike.
Graham was Warren Buffet’s mentor in the early 40’s. He said that the stock investor is neither right nor wrong just because others agreed or disagreed with him. He is right because of his facts and analysis are correct.
Graham’s favorite allegory is “Mr. Market”, a fellow who turns up every day at the stock holder’s door and offers to buy or sell his shares at a different price. Usually, the price quoted by Mr. Market seems plausible, but occasionally it is ridiculous. The investor is free to either agree with his quoted price and trade with him or to ignore him completely. Mr. Market doesn’t mind this and he will be back the following day to quote another price.
Our analysis department does their research on a day-to-day basis and studies the market for tracking the same stocks that Graham is talking about, the stocks that are uncommon in wall-street and if you are an average investor, you probably won’t know even half of their names.
The 5 businesslike stocks that our team picked up for you are:
- American Express Company (NYSE: AXP) – The American Express Company, also known as AmEx, is the fourth biggest credit card company after Visa, Mastercard and “Discovery” with a total of 58M cardholders and with a total revenue of $32.12 billion, AXP could be a good “ace card” for your portfolio. In our analysts’ opinion, AmEx is the most interesting stock from all the credit companies with P/E ratio of 14.83, P/B ratio of 3.52 and 12% EPS growth YoY.
AXP stocks look great and the company has announced recently that they would increase their yearly fee on its Platinum card by $100 per card. This extra fee should be translated to pure extra profit for AmEx. If you combine that with the good P&L report that AXP have shown us last month, you got yourself a great purchase.
- Organovo Holdings (NASDAQ: ONVO) – with a price-to-book ratio of 4.38 that fits Graham’s standards and a 60% quarter-over-quarter growth, this company can be a serious underdog for the next few months.
Organovo Holdings Inc. was covered by a number of analysts recently, 2 have rated the stock as Buy, 2 have rated it as Outperform, and 0 analysts have rated this stock as a Hold, Underperform or Sell. The current market capitalization of Organovo Holdings is 275M and after losing 30% of its value in the past 6 months, ONVO seems to be a decent purchase.
- Travelers Companies Inc. (NYSE: TRV) – TRV is an American insurance company and is the second largest writer of the US commercial property casualty insurance and the third largest writer of US personal insurance. This stock has an amazing price-to-book ratio of 1.38 and price-to-earnings ratio of 12.61. This stock fits Graham’s standards by 100%. TRV shows strong and steady EPS (Earnings per share) with 25% average growth at the past 5 years.
Currently, the stock is only 1% short of their all-time highs prices. TRV looks great both technically and fundamentally for a nice high-yield investment for the upcoming year.
- Cisco Systems Inc. (NASDAQ: CSCO) – Cisco Systems is located in the heart of Silicon Valley and is one of the most reliable stocks an investor can ask for.
Following the Modern-Graham approach, any average investor should feel comfortable with the key numbers of this company.
Cisco market cap is 160B, more than the 3 companies mentioned above combined together and has a revenue of 49B. CSCO is one of the most stable companies in the market and as for the valuation – CSCO’s EPS (Normalized earnings) have shown a steady growth in the last 5 years from $1.5 in 2013 to $2 in 2017. CSCO are paying a yearly dividend of $0.99 per share, a dividend yield of 3.4% per year. That puts Cisco among the best “dividend stocks” in the market. After a decline of 8% from the last high in May Cisco seems to be in a comfortable price for purchase.
- Boeing Co. (NYSE: BA) – Boeing manufactures airplanes, rotorcraft, rockets and satellites for the worldwide industry.
Boeing is among the few companies that get a flow of contracts from the US federal government on weekly basis. This strong cash-flow from the government allows Boeing to focus on new civilian air project. Recently, in the Paris air show, Boeing exposed their new jet – the 737 max-10 that already got $30B worth of orders. As for Boeing’s valuation, some will say that Boeing has reached their peak since the stock went up by 50% over the past year. Our analysts’ opinion is bit different, Boeing gets a great backwind from Trump’s policies since he got elected.
Boeing’s value also gets a support that comes from the low oil prices that we are witnessing over the past few months. Boeing’s net worth is $121.7B and has a net income of $5.12B that shows steady 27.8% year-to-year growth.
With this performance, Boeing can be considered as one of the top-10 stocks of the Standard & Poor’s index.