The price-to-earnings ratio is a common, though limited, way to value a stock. A low P/E ratio on a solid company may mean the market is not valuing it correctly. Another signal the P/E could relate is that the company has fallen on a temporary hard time and could rebound later, and more research is needed to determine whether this is the case. The P/E ratio also has more meaning when placed in context by comparing it to that of other companies in its industry or the market as a whole.
Donald Yacktman (Trades, Portfolio), founder of the long-term-focused Yacktman Fund (Trades, Portfolio)s (YACKX, Financial), and his managers seek undervalued but high-quality companies, meaning their portfolio is a prime place to hunt for such stocks. The lowest P/E stocks in his portfolio as of the third quarter are: Samsung Electronics Co. Ltd. (XKRX:005930, Financial), ConocoPhillips (COP, Financial), Goldman Sachs Group Inc. (GS, Financial) and Exxon Mobile Corporation (XOM, Financial).
Samsung Electronics Co. Ltd. (XKRX:005930, Financial)
Yacktman purchased 1,200 shares of newly added Samsung Electronics Co. Ltd. in the second quarter of 2013. It has only a 0.0064% weight in his portfolio.
Samsung has the lowest P/E of any stock in Yacktman’s portfolio, at 6.6. This is lower than 97% of the companies in the Global Consumer Electronics industry, which has a median of 30.8. It is also low versus its history, which records a maximum P/E of 19.5.
Samsung’s P/E ratio history:
ConocoPhillips (COP, Financial)
Yacktman owns 6,144,890 shares of ConocoPhillips, a holding worth 2.1% of his portfolio, but he has been reducing his stake in the company in recent quarters.
ConocoPhillips has a P/E ratio of 9.5, which is lower than 94% of the companies in the Global Oil & Gas Integrated industry, where the median is 11.9. It is also at the high end for the company historically; its highest P/E of the past decade was 13.8.
ConocoPhillips’ P/E history:
Goldman Sachs Group Inc. (GS, Financial)
Yacktman holds 403,000 shares of Goldman Sachs, giving the company a 0.27% portfolio weight, and left the position untouched in the second quarter.
Goldman Sachs has a P/E of 11.8, lower than 85% of its fellow companies in the Global Capital Markets industry. It’s also significantly lower than its 10-year peak P/E of 31.9.
Goldman Sachs’ P/E history:
Exxon Mobil Corporation (XOM, Financial)
Yacktman owns 7,123,611 Exxon Mobil shares at third quarter-end and has reduced the position over the past two quarters. The position occupies 2.9% of the entire stock portfolio.
Exxon Mobil has a P/E of 12. This is lower than 87% of companies in the Global Oil & Gas Integrated Industry, which has a media P/E of 11.9. It is slightly off its 10-year high P/E of 18.7.
Exxom Mobil’s 10-year P/E history:
