Investors may want to consider securities that, as of Friday, are beating 20-year high-quality market corporate bond yields by at least 100%. This gives them a better chance of finding value opportunities.
The bonds represent corporate loans issued by triple-A, double-A and single-A-rated companies, which means they are unlikely to have financial problems. The Federal Reserve Bank of St. Louis indicated the monthly average spot rate of the 20-year bond is 4.26%.
Thus, since the earnings yield is the inverse of the price-earnings ratio, the following securities are trading for less than 11.74 times earnings as of Friday.
Further, the recommendation rating for these stocks ranges between overweight and buy, indicating they are expected to gain in the coming weeks. The average price target brings at least 5% stock appreciation within 12 months. In contrast, the U.S. stock market is expected to fall 1.3% over the same period.
The first company is Russian oil and gas giant Gazprom PJSC (OGZPY, Financial).
Shares were trading around $6.22 at close on Friday for a market capitalization of $69.69 billion. The stock has an earnings yield of 26.5% versus the industry median of 8.1% and a price-earnings ratio of 3.77 versus the industry median of 12.38.
The stock also has a price-sales ratio of 0.55 compared to the industry median of 0.84 and an enterprise value-Ebitda ratio of 2.82 versus the industry median of 6.79.
GuruFocus assigned a rating of 6 out of 10 for the company's financial strength and of 9 out of 10 for its profitability and growth.
Wall Street issued an average price target of $6.54 per share of Gazprom.
The stock has climbed nearly 41% so far this year, outperforming the S&P 500 index by 28%. The closing price on Friday fell within a 52-week range of $4.13 to $6.54.
The Peter Lynch chart suggests the stock is cheap.
The second company is First BanCorp (FBP, Financial), a regional bank headquartered in Puerto Rico.
Shares closed at $10.12 on Friday for a market capitalization of $2.2 billion. The stock has an earnings yield of 9.5% versus the industry median of 8.1% and a price-earnings ratio of 10.54 versus the industry median of 12.36.
First BanCorp also has a price-sales ratio of 3.77 versus the industry median of 3.01 and a price-book ratio of 1.06 versus the industry median of 1.11.
GuruFocus assigned a rating of 4 out of 10 for the bank's financial strength and 2 out of 10 for its profitability and growth.
Wall Street issued an average target price of $13.30 per share of First BanCorp.
The stock has gained nearly 18% year to date, topping the S&P 500 index by 5%. The 52-week range is $7.59 to $11.94.
According to the Peter Lynch chart, the stock is not expensive.
The third company is PPDAI Group Inc. (PPDF, Financial), a Chinese credit services company.
Shares closed at $5.14 on Friday with a market capitalization of roughly $1.5 billion. The stock has an earnings yield of 25.3% versus the industry median of 6.2% and a price-earnings ratio of 3.96 versus the industry median of 16.14.
Further, the stock has a price-book ratio of 1.68 versus the industry median of 1.19 and a price-sales ratio of 3.00 compared to the industry median of 3.46.
GuruFocus assigned a rating of 5 out of 10 for the company's financial strength and a 2 out of 10 rating for its profitability and growth.
Wall Street issued an average target price of $6.32 per share of PPDAI Group.
So far this year, the stock has climbed 43%, outperforming the S&P 500 index by 30%. The closing price on Friday fell within a 52-week range of $2.85 to $7.83.
The Peter Lynch chart indicates that the stock is trading cheaply.
Disclosure: I have no positions in any securities mentioned.
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