But the improving mood of financial markets in recent years has made it tougher for Buffett to lock in investments which befit his value style investing.
Buffett has always had an eagle’s eye for those stocks that have generally have been side-lined in the marketplace but have good fundamentals and can be purchased at a bargain, compared with book value, replacement value or liquidation value.
Buffett’s unprecedented investments in Berkshire have driven growth for the company. The company’s latest annual filing shows that Berkshire’s book value has grown at a compounded annual gain of 19.7% compared with 9.8% gain for S&P 500 from 1964 to 2013.
Most of the S&P 500 companies have reported second-quarter results and the season has been positive, with company managements generally reporting upbeat outlooks for the rest of 2014. Strong corporate fundamentals should therefore provide good support for share prices going forward and further propel the rally in the equity markets.
Moreover, a nod from the Fed about the rebound in economic activity and an improvement in labor market conditions in its latest meeting also signal that equities will gain.
Buffett’s acquisition choices have changed over time. While at the start of his career he would look for lesser-known companies trading at bargain prices, more recently he has been favoring larger, higher quality names at reasonable prices. We believe the change is just appropriate since he now manages many billions of dollars at Berkshire Hathaway, and therefore buying small firms would be like bolt on acquisitions and not make much difference to the company’s overall results.
Below we point out some promising stocks which have the capacity to deliver. Needless to mention that looking out for value stocks amid the bull-run is a challenging task, since valuations are stretched across the markets. The primary measures used to define value stocks are price-to-earnings ratio (the price of a stock divided by the current year’s earnings per share) and price-to-book ratio (share price divided by book value per share). Value stocks have relatively low price-to-earnings and price-to-book ratios.
We have listed three stocks with a forward PE ratio below 15 and Price/Book Value (P/B) less than 2.5. with a debt-to-equity ratio of less than 1.
These stocks have trailed the S&P 500 in terms of year-to-date price returns, and thus possess attractive valuations. In addition, these stocks with a favorable Zacks Rank have posted positive earnings surprise over the past four quarters and have are witnessing upward estimate revisions.
The stock has gained 4.7% year-to-date.
Forward P/E = 10.4x.
P/B Ratio = 1.04
Debt to Equity Ratio of 0.85
Zacks Rank #2 (Buy)
Moreover, Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive, making it an attractive pick for investors.
The stock has gained 3.3% year-to-date. It has a PEG Ratio of 1.
Forward P/E = 11.7x.
P/B Ratio = 1.44
Debt to Equity Ratio =0.24
Zacks Rank #2 (Buy)
Lincoln National has taken steps to protect and build its capital base and mitigate balance sheet risks. The company adopts strong asset and liability management practices from time to time, including equity and interest rate hedging programs, which partially mitigate risk exposure. The company is focused on product development to increase its competitive position among small to mid-sized corporates and employee benefit markets as well as to capitalize on opportunities from regulatory changes effective in 2009.
The stock has gained 3.5% year-to-date. It has PEG Ratio = 0.90, which indicates future growth.
Forward P/E = 10.4x.
P/B Ratio = 0.93
Debt to Equity Ratio =0.33
Zacks Rank #2 (Buy)
PE ratio and PB ratio combined with a solid Zacks Rank, rising earnings estimate revisions as well as and a moderate debt position are nonetheless solid indicators of lucrative stocks in an overvalued market.
The viral disease is characterized by symptoms like high fever and internal bleeding, and often proves to be fatal. According to WHO, outbreaks of the Ebola virus disease primarily takes place in remote Central and West African villages located near tropical rainforests. Wild animals are responsible for transmitting the virus to humans. Human-to-human transmission then results in the spread of Ebola in the entire population.
According to the U.S. Center for Disease Control, the different sub types of Ebola (Ebola-Sudan, Ebola-Reston, Ebola-Ivory Coast and Ebola-Bundibugyo or Ebola-Uganda) are named after the places in which they were discovered. The most contagious and infectious disease in the Ebola family is Ebola-Zaire, the strain of which is present in the Ebola-Uganda and Ebola-Sudan subtypes.
With the severity of the outbreak increasing each passing day, the FDA declared late last week that it will collaborate with companies to develop treatments to combat the deadly virus. There is currently no approved treatment for the Ebola virus. According to Reuters, the FDA is not averse to proposals that aim to offer treatments to combat Ebola under special emergency new drug applications in the event of the therapy having a favorable benefit-risk profile.
However, the FDA statement rekindled hopes of an earlier resolution and subsequent progress (including submission of a new study proposal) on the matter, as the world desperately awaits a treatment to curb Ebola.
Tekmira carries a Zacks Rank # 3 (Hold).
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SOURCE Zacks Investment Research, Inc.