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Guru Held Stocks Trading At Deep Discounts To Cash Flows

Chris Mydlo

Chris Mydlo

31 followers

Using the GuruFocus All-In-One Screener, I scanned for stocks that are trading for less than 80 percent of their discounted fee cash flow value (FCF). For confirmation, I selected the stocks that were held by at least five of the investing gurus we follow. While further refining the list, I rejected the stocks that had decreasing cash flow figures for the last quarter. I used the GuruFocus DCF Calculator to determine the rate at which FCF would have to grow in order to justify the current prices of the stocks. The calculator uses a default discount rate of 12 percent to determine the value.

Apple Inc (AAPL)

Market Cap: 564.62 billion, P/E: 15.80, P/FCF: 13.20

Business Predictability: 4.5/5, Financial Strength: 6/10, Profitability & Growth: 8/10

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Apple is the largest company in the United States based on market cap. It is well known for its innovative consumer tech products with the iPhone as their top seller. Apple has generated $7.32 per share of FCF over the last twelve months. FCF would have to grow at a rate of 7.7 percent for the stock to maintain its current value. FCF per share has increased at an annual rate of 50.03 percent over the past five years and 27.23 percent year-over-year for the last reported quarter. The stock is held by 46 gurus we follow with Carl Icahn of Icahn Capital Management LP holding the largest position of 52.8 million shares, representing 0.83 percent of the shares outstanding.

AutoZone Inc (AZO)

Market Cap: 17.34 billion, P/E: 17.20, P/FCF: 17.30

Business Predictability: 4/5, Financial Strength: 6/10, Profitability & Growth: 9/10

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AutoZone is the nation’s leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. The company operates 4,901 stores in the United States, 374 in Mexico and 4 in Brazil. AutoZone has generated $30.75 per share of FCF over the last twelve months. FCF would have to grow at a rate of 12.44 percent for the stock to maintain its current value. FCF per share has increased at an annual rate of 20.76 percent over the past five years and 32.3 percent year-over-year for the last reported quarter. The stock is held by 13 gurus we follow with Chris Shumway of Shumway Capital Partners holding the largest position of 352,495 shares, representing 0.99 percent of the shares outstanding.

Oracle Corporation (ORCL)

Market Cap: 178.91 billion, P/E: 16.90, P/FCF: 13.20

Business Predictability: 4.5/5, Financial Strength: 7/10, Profitability & Growth: 9/10

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Oracle is the world’s largest provider of enterprise software and a leading provider of computer hardware products and services that are engineered to work together in the cloud and in the data center. Oracle has generated $3.11 per share of FCF for the last twelve months. FCF would have to grow at a rate of 7.84 percent for the stock to justify its current value. FCF per share has increased at an annual rate of 16.55 percent over the past five years and 2.2 percent year-over-year for the last reported quarter. The stock is held by 45 gurus we follow with Jeremy Grantham of GMO LLC holding the largest position of 42.3 million shares, representing 0.91 percent of the shares outstanding.

Rock-Tenn Company (RKT)

Market Cap: 7.11 billion, P/E: 14.30, P/FCF: 11.50

Business Predictability: 4/5, Financial Strength: 7/10, Profitability & Growth: 8/10

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Rock-Tenn is one of North America’s leading integrated manufacturers of corrugated consumer packages with operations in the United States, Canada, Mexico, Chile, Argentina, Puerto Rica, and China. The company operates in the segments of corrugated packaging, consumer packaging, and recycling. The company has generated $8.70 in FCF over the past twelve months. FCF would have to grow at a rate of 5.96 percent for the stock to justify its current value. FCF has grown at a slow rate of less than 2 percent over the past five years, but increased at a high rate of 37 percent year-over-year for the latest quarter. The stock is held by 12 gurus we follow with Richard Perry of Perry Capital holding the largest position of 881,762 shares, representing 1.23 percent of the shares outstanding.

Raytheon Co (RTN)

Market Cap: 29.61 billion, P/E: 14.50, P/FCF: 13.20

Business Predictability: 4/5, Financial Strength: 8/10, Profitability & Growth: 8/10

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Raytheon is a technology and innovation leader specializing in defense and other government markets worldwide. The company develops technologically advanced, integrated products, services and solutions in four core defense markets: sensing; effects; command, control, communications and intelligence; and mission support, as well as other important markets, such as cyber and information security. Raytheon has generated $7.21 per share of FCF over the past twelve months. FCF would have to grow at a rate of 8.19 percent for the stock to justify its current value. FCF has grown at a rate of 2.10 percent over the past five years and 76.6 percent year-over-year for the latest quarter. The stock is held by 16 gurus we follow with James Barrow of Barrow, Hanley, Mewhinney & Strauss holding the largest position of 14 million shares, representing 4.34 percent of the shares outstanding.

Travelers Companies Inc (TRV)

Market Cap: 32.94 billion, P/E: 9.20, P/FCF: 8.80

Business Predictability: 1/5, Financial Strength: 7/10, Profitability & Growth: 7/10

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The Travelers Companies is a holding company principally engaged in providing a wide range of commercial and personal property and casualty insurance products and services to business, government units, associations and individuals. The company has generated $10.82 per share of FCF over the past twelve months. FCF would only have to grow at a rate of 1.90 percent for the stock to justify its current value. FCF has grown at a rate of 9.4 percent over the past five years and 42.4 percent year-over-year for the last reported quarter. The stock is held by 16 gurus we follow with Mason Hawkins of Southeastern Asset Management holding the largest position of 9.73 million shares, representing 2.61 percent of the shares outstanding.


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