Earnings season is off to a particularly promising start. By now, 10% of S&P 500 companies have reported Q2 results. About 88% of them have outperformed estimates, with earnings overall coming in 16.4% above expectations.
As impressive as those (admittedly early) results are, there’s a catch. Investors are already paying elevated prices for that growth. At high valuations, strong results may simply confirm what is already reflected in share prices, while even a modest disappointment can trigger an outsized decline.
The way to counteract these issues is simple, at least in theory: Find undervalued businesses, the ones whose valuations truly do not reflect their strong fundamentals and earnings power.
Usually, that requires a lot of time and effort. But there is a way to expedite the process. The best place to start is …
Value Stock Strategy
Our in-house quant rating system uses 115 unique factors to screen 4,600 stocks every single day. The insights from that review are used to form a simple, intuitive metric — a stock’s Zen Rating.
Only the top 5% of stocks are given a Zen Rating of A, equivalent to a Strong Buy rating. That narrows the search down to about 230 stocks — and while it’s a great start, that’s still a lot of tickers to look at and compare. Thankfully, there’s still room to optimize, refine, and speed up your research. The simplest way to do that is to turn to one of our exclusive Zen Strategies.
Each Zen Strategy is a carefully-built portfolio consisting of just 7 rigorously selected stocks. Since we’re looking for undervalued equities, today the spotlight is on our Value Stock Strategy.
Our Value Stock portfolio has an all-time annual return of 23.6%. It has been hitting a stride lately — having secured a 5.87% gain in the past 30 days alone, blowing the S&P 500’s 0.2% loss in the same timeframe out of the water.
Now, let’s take a look at 2 new additions to this strategy.
ACCO Brands (ACCO)
ACCO Brands makes branded office, school, art, gaming, and technology products, ranging from notebooks and whiteboards to computer accessories, gaming gear, and headsets. ACCO currently ranks in the top 4% of the stocks we track, giving it a Zen Rating of A, and it’s also the top-rated stock in the A-rated Business Equipment & Supply industry.
We’ll get to the valuation in a bit — but the important thing to note straight off the bat is that our first pick is no slouch when it comes to growth either. In terms of the Growth Component Grade rating, it ranks in the top 27% of everything we track. With regard to our Artificial Intelligence rating, which uses a neural network to spot patterns that hint at outperformance, ACCO is in the top 14%.
With that being said, Sentiment, our smart money rating, and Value are the stars of the show here. ACCO is in the top 4% for Sentiment and the top 1% for Value. At a price-to-earnings growth (PEG) ratio of 0.58x, it’s clear that the stock is severely undervalued.
The areas where it isn’t as stellar are Momentum, Safety, and Financials, although it lands mid-pack in most of those categories.
ACCO has rallied by 27% since its last earnings report on April 30, although price action has calmed down since then. The next earnings report is due August 11.
Open Text (OTEX)
OpenText is an enterprise software company whose portfolio spans content management, cybersecurity, software development, and enterprise AI. OTEX currently ranks in the top 4% of the stocks that we track, and it’s the 8th highest-rated name in the B-rated App industry.
The fundamental profile here is incredibly balanced. Financials and Sentiment come in at the top 30% and 22%, respectively, indicating both a solid balance sheet and notable smart money accumulation. When it comes to Growth, OTEX is in the top 13% — and it scores even more highly, in the top 10%, for Safety.
However, the strongest ratings are Artificial Intelligence in the top 2%, and Value in the top 1%. That tells us that the patterns that tend to show up before outperformance are already present in a severely undervalued stock. At present, OTEX is trading at a PEG of just 0.52x.
The only real drawback here is Momentum, which gets a D grade. Since the last quarterly report, which saw a beat, the stock has essentially remained flat. That could change on August 6, when the company’s next earnings report is due.
And remember ... The Zen Ratings are updated daily, so be sure to check the WallStreetZen website for the latest data on these or any stocks.
Interested In More Great Stock Picks?
The 2 stocks highlighted above are just a fraction of what you get from our proven Value Stock strategy.
That’s because each day our system recalibrates — and Zen Strategies members get access to the top 7 value stocks based on 115 different parameters that point to outperformance.
See all Top 7 Value stocks here >
However, maybe value stocks aren’t what you’re after right now. Perhaps you would like to see all 11 of our market-beating strategies including Growth, Momentum, and our coveted AI Factor model.
Each featuring the top 7 stocks.
Each featuring tremendous performance
We spell it all out in this timely presentation below that lives up to its name:
77 Best Stocks Now! >
Comments
Post a Comment
VHAVENDA IT SOLUTIONS AND SERVICES WOULD LIKE TO HEAR FROM YOUπ«΅πΌπ«΅πΌπ«΅πΌπ«΅πΌ