Energy
Thursday, September 8th, 2022 7:48 am EDT
In this topsy turvy market, some investors are looking to find solid value stocks. In fact, Goldman Sachs believes the time is right to do just that. In a note Tuesday , analyst Cormac Conners said the wide valuation spread between the most and least expensive names in the market creates an opportunity for value to outperform over the next three years. Data also suggests value stocks tend to outperform growth names near the beginning of a recession and following peaks of inflation, or near the end of a rate hiking cycle, he said. With that in mind, CNBC Pro compiled a list of stocks in the S & P 500 that are cheap but that are also well-liked by Wall Street analysts. To find these names, CNBC screened for companies with four attributes: a current forward price-to-earnings ratio lower than their historic five-year average forward P/E; earnings that are estimated to increase by at least 10%; that had buy ratings from at least 50% of the analysts covering the stock; and at least a 10% upside to the consensus analyst price target. Walt Disney , for example, is trading at a 26% discount on a forward price-to-earnings basis, below its historic 5-year average forward P/E. It is also well-loved by analysts, with 72% of those covering the stock rating it a buy, and it has 24% upside to the average price target, according to FactSet. Daniel Loeb’s Third Point recently took a new stake in the entertainment giant, worth a reported $1 billion. In a letter obtained by CNBC’s David Faber, the activist investor pushed for Disney to spin off sports network ESPN and called for the company to integrate Hulu directly into the Disney+ platform. Also on the list is Qualcomm , which recently struck a deal with Meta to develop virtual reality chips for metaverse applications. Qualcomm is trading at an almost 39% discount on a forward P/E basis, well below its historic 5-year average forward P/E. Some 53% of analysts covering the stock rate it a buy, and Qualcomm has 42% upside to the average price target, according to FactSet. Advanced Micro Devices , another chip maker, has 52% upside to the average analyst price target, according to FactSet, and is trading at a 54% discount on a forward P/E basis. Stifel recently initiated coverage of the stock with a buy rating. Its $122 price target implies shares could jump more than 53% from Wednesday’s close. AMD shares are down about 45% so far this year. “Despite near-term demand volatility, we expect share gains to drive growth well above market, and we expect gross and operating margin expansion to continue, which ultimately, should drive multiple expansion, in our view,” Stifel analyst Ruben Roy wrote in a note Wednesday. Meanwhile, home builder DR Horton is very cheap on a forward P/E basis, trading at an almost 47% discount, well below its historic 5-year average forward P/E. In August, builder sentiment for single-family homes turned negative and the National Association of Home Builders declared a housing recession . Those headwinds weighed on DR Horton, with the home builder cutting its full-year sales guidance, citing moderating demand. The stock is down 34% year to date, but has 28% upside to the average price target, according to FactSet. Four energy names also made the list. One is Halliburton , which is up about 25% year to date yet is still cheap on a forward P/E basis. It is trading at an almost 40% discount to its historic 5-year average forward P/E. The stock, which dropped alongside other energy names and oil prices on Wednesday as spot energy prices weakened, has another 48% upside to the average price target, according to FactSet. — CNBC’s Samantha Subin and Michael Bloom contributed to this report. This post has been syndicated from a third-party source. View the original article here.
