While value stocks have trailed growth stocks since early June, I see no reason to avoid them. Even with the Delta variant surging across the nation, the economic recovery remains intact. So, I expect value to overtake growth at some point in the near future, which means now is the time to get in.
With so many stocks at all-time highs, you would think that value would be hard to find, but that is further from the case. There are still plenty of undervalued stocks if you know where to look. But you must act fast if you want to get into these companies at a great price. When many investors hear value, they only think of cyclical industries such as construction, steel, or energy.
But investors can find value in almost any industry. That’s why I ran a screen in our POWR Ratings system for stocks that had an overall rating of Buy and a Value Grade of A. I then trimmed down this list to find some of the best opportunities, which include Gilead Sciences Inc. (GILD), HP Inc. (HPQ), and CNH Industrial N.V. (CNHI).
Gilead Sciences Inc. (GILD)
GILD develops and markets therapies to treat life-threatening infectious diseases, with the core of its portfolio focused on HIV and hepatitis B and C. The acquisitions of Corus Pharma, Myogen, CV Therapeutics, Arresto Biosciences, and Calistoga have broadened this focus to include pulmonary and cardiovascular diseases and cancer.
The company’s flagship HIV therapy, Biktarvy, continues to deliver strong growth and market share gains. Along with Genvoya, these next-generation products offer better long-term safety profiles. The FDA’s full approval of the company’s Veklury (remdesivir) for the treatment of patients with COVID-19 has also aided growth.
GILD is also looking to boost its portfolio and pipeline and expand beyond antivirals into other areas. For instance, the company previously acquired oncology company Immunomedics. This added Trodelvy to its portfolio. The addition will help accelerate the company’s efforts to develop a strong oncology portfolio, thereby reducing dependence on its virology business.
The company has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. GILD has a Value Grade of A due to a low valuation. The company’s forward P/E is a paltry 10.59, and its EV/FCF of 9.6 is well below the industry average. The firm also has a Quality Grade of B due to solid fundamentals.
As of the most recent quarter, its cash balance was $6.5 billion compared to only $2.3 billion in short-term debt. We also provide Growth, Momentum, Stability, and Sentiment grades for GILD, which you can find here.
GILD is ranked #8 in the Biotech industry. For more top stock in this industry, make sure to visit this link.
HP Inc. (HPQ)
HPQ is a leading provider of computers, printers, and printer supplies. In 2015, Hewlett-Packard was separated into HP Inc. and Hewlett Packard Enterprise. The company’s three operating business segments are its personal systems, including notebooks, desktops, and workstations, and its printing segment, which contains supplies, consumer hardware, and commercial hardware.
The company has been benefiting from the rising demand for PCs, which initially started during the height of the COVID-19 pandemic. This is expected to continue as the move to remote or hybrid remote working is here to stay. Plus, the surging Delta variant has created apprehension among workers returning to the office.
This strength was evident in the most recent quarter. In its earnings call, management noted that demand for its products remained strong, with its backlog increasing quarter-over-quarter. The Q3 results also reflected a strong rebound in the Printing business. HPQ is also expected to increase its market share in A3 copiers, graphics, managed print services, and 3D printing.
The company has an overall grade of B and a Buy rating in our POWR Ratings system. HPQ has a Value Grade of A, which makes sense with a trailing P/E of 8.68 and a forward P/E of 7.4. The company also has a low EV/FCF of 7.4. HPQ has a Quality Grade of B as its $3.4 billion in cash heavily outweighs its $214 million in short-term debt.
For the rest of HQP’s grades (Growth, Momentum, Stability, and Sentiment), click here. HPQ is ranked #7 in the B-rated Technology – Hardware industry. For more top-ranked stocks in this industry, click here.
CNH Industrial N.V. (CNHI)
CNHI is a global manufacturer of heavy machinery, with a range of products, including agricultural and construction equipment, commercial vehicles, and powertrain components. One of its most recognizable brands, Case IH, has served farmers for generations. Its products are available through a robust dealer network, including over 3,600 dealer and distribution locations globally.
The company’s 2020-2024 business plan ‘Transform 2 Win’ is expected to boost its operational efficiency and help streamline its portfolio. As part of this plan, management is planning on separating its ‘On-Highway’ and ‘Off-Highway’ businesses. This should unlock value by maximizing its focus, optimizing costs, and delivering synergies for the company.
CNHI is also seeing strong sales from industrial activities as it expects net sales from industrial activities for 2021 to increase 24-28% year due to a strong backlog. This upgraded guidance was raised from its previous range of 14-18%. Plus, the impending acquisitions of Raven Industries and Sampierana should help augment its product portfolio.
The company has an overall grade of B, translating into a Buy rating in our POWR Ratings system. CNHI has a Growth Grade of B as sales are up 25% over the past year. Plus, analysts expected earnings to rise 118.2% year over year in the current quarter. The company also has a Value Grade of A, which isn’t surprising, with a forward P/E of only 11.65.
CNHI also has a price-to-sales ratio of 0.7. To access all of CNHI’s grades (Momentum, Stability, Sentiment, and Quality), click here. CNHI is ranked #21 in the A-rated Industrial – Machinery industry. For more top stocks in this highly rated industry, click here.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years
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GILD shares . Year-to-date, GILD has gained 27.09%, versus a 17.12% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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