The stock market is off to a rocky start as we begin the new year. If you are considering shifting some of your money out of growth stocks, you are not alone.
This could be a good time to establish positions in value stocks. However, identifying the perfect value stocks set to spike as we segue to the first quarter of the new year is inherently challenging.
Tractor Supply Company (TSCO)
Though most investors are primarily focused on growth-oriented tech stocks, value stocks such as TSCO are worthy of your consideration too. TSCO operates retail farm/ranch stores throughout the country. Ask ranchers or farmers in your area about TSCO, and you will likely be inundated with praise. Furthermore, everyday tradesmen, rural residents, and small businesses rely on TSCO for sundries related to farming and other farm/ranch-related activities.
Analysts have established an average price target of $164.75 for TSCO, indicating a potential 17% upside. Of the eight analysts who cover the stock, six advise buying, two advise holding, and none recommend selling.
The POWR Ratings reveal TSCO has an “A” grade in the Trade Grade component. The stock also has “B” grades in the Peer Grade and Buy & Hold Grade components. Of the 37 publicly traded companies in the Specialty Retailers industry, TSCO is ranked fourth.
TSCO has excelled during the pandemic, reporting quarterly net sales growth of over 30%. The company’s comparable-store sales have increased by 15%-20%. TSCO continues to open new stores even though the virus is spreading. If everything goes as planned, TSCO will open 80 additional stores in the year ahead, reaching a total of 2,000 stores, adding side-lot garden centers to some for enhanced product diversity.
Cisco Systems (CSCO)
CSCO, a networking business that provides services and products to a wide range of customers, is a tech stock yet also qualifies as a value stock. CSCO is expanding its horizons to network security, data centers, and beyond.
Many analysts believe CSCO is currently underpriced, establishing an average price target of $49.11, indicating a potential 12% upside. Of the 13 analysts who cover the stock, seven recommend buying, six recommend holding, and none advise selling. CSCO appears to be slightly underpriced based on the analysts’ expectations, yet also because its forward P/E ratio of 13.86 is surprisingly low.
If you are on the fence as to whether CSCO is a good investment, consider that it has a dividend of 3.28%. The POWR Ratings show CSCO has an “A” grade in the Trade Grade component and “B” grades in the Industry Rank, Peer Grade, and Buy & Hold Grade components. CSCO is ranked 14th out of 52 companies in the Technology – Communication/Networking industry.
Though CSCO’s legacy hardware isn’t performing as well as it used to, the company’s executives deserve credit for pivoting toward subscription-based services and products in recent years. CSCO has operating profits in excess of $13 billion along with a fantastic balance sheet highlighted by more than $15 billion in cumulative cash, investments, and cash equivalents in excess of aggregate debt.
OneMain Holdings (OMF)
This consumer financial services holding company has operating segments stretching from Servicing and Real Estate to Acquisitions and Servicing, Consumer and Insurance, and beyond. Of the nine analysts who cover the stock, every single one of them recommends investors buy OMF. Indeed, it appears as though OMF is undervalued at its trading price of $48.51, as it has a forward P/E ratio of a mere 7.24.
The POWR Ratings show OMF has “A” grades in the Peer Grade, Trade Grade, Buy & Hold Grade, and Industry Rank components. OMF is ranked 12th out of 51 publicly traded companies in the Consumer Financial Services industry.
As long as OMF maintains its quest to improve its credit performance, boosts loan performance, and expands its margins, it could continue its upward climb through the new year.
Penske Automotive Group (PAG)
PAG sells both used and new motor vehicles, including related services and products. In fact, PAG business even extends to collision repair services, parts, financing, lease contracts, aftermarket products, and more.
Though new car sales have slowed during the pandemic, used car values are at an all-time high. PAG has hiked its ratio of used car sales from 20 per every 100 new cars sold to 28, giving investors hope as the industry changes in response to the pandemic and economic recession. The growth of PAG’s digital sales channel also bodes well as an increasing number of car-seekers turn to the web for inventory.
Of the half dozen analysts who cover the stock, five recommend buying, one advises holding, and none recommend selling. The average analyst price target for the stock is $67.67, indicating a potential 15% upside. PAG has “A” grades in the Trade Grade and Industry Rank components and “B” grades in the Peer Grade and Buy & Hold Grade components. The stock is ranked 7th out of 36 publicly traded companies in the Auto & Vehicle Manufacturers industry. Add in the fact that PAG has a 2.92% dividend, and you have all the more reason to consider the stock.
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TSCO shares were unchanged in after-hours trading Wednesday. Year-to-date, TSCO has gained 3.76%, versus a -0.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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