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Alberto Abaterusso
Alberto Abaterusso
Articles (2145) 

3 Potentially Overlooked Large Caps

Rio Tinto Group tops the list

January 13, 2020 | About:

These large-cap stocks appear to be undervalued as of Jan. 13, as their trailing 12-month price-earnings ratios stand below 20 and their price-earnings to growth (PEG) ratios are less than 1.0.

Additionally, their balance sheets are solid, which indicates that financial resources are big enough to maintain current activities and expand. Their operations are highly profitable and will likely remain so in the years ahead.

Wall Street sell-side analysts have also issued positive ratings for the below stocks.

Rio Tinto

The first company with the above-listed criteria is Rio Tinto Group (NYSE:RIO). Shares of the Anglo-Australian multinational metals and mining corporation traded at $58.45 at close on Jan. 10 for a market capitalization of $98.37 billion.

The price-earnings ratio is 7.14 compared to the industry median of 14.16 and the PEG ratio is 0.26 compared to the industry median of 1.0.

The share price has grown by 36% over the past five years through Jan. 10. Nevertheless, the stock appears cheap according to the Peter Lynch chart.

Rio Tinto Group has received positive GuruFocus ratings of 6 out of 10 for its financial strength and 7 out of 10 for its profitability.

Wall Street recommends a buy rating for this stock and has established an average target price of $72.78, reflecting a 24.5% upside from Friday’s closing price.

State Farm Mutual Automobile Insurance Co is the company's biggest top fund holder with 0.8% of outstanding shares, followed by Ken Fisher with 0.65% and Arrowstreet Capital Limited Partnership with 0.64%.

Baidu

The second company that the above-listed criteria unearthed is Baidu Inc (NASDAQ:BIDU).

Shares of the Beijing-based provider of web search services traded at $144.51 per unit on Jan. 10 with a market capitalization of $50.48 billion.

The price-earnings ratio is 17.36 versus the industry median of 27.67 and the PEG ratio is 0.87 versus the industry median of 1.2.

The stock has fallen 33.4% in the past five years through Jan. 10 to a valuation that is around fair price according to the Peter Lynch chart.

GuruFocus assigned the company a positive financial strength rating of 5 out of 10 and a very high profitability rating of 9 out of 10.

Wall Street issued an overweight recommendation rating with an average target share price of 1,027 Chinese Yuan (approximately $148.39).

With 2.89% of outstanding shares, Vanguard Group is the company's largest institutional shareholder, followed by Baillie Gifford & Co with 2.74% and Dodge & Cox 2.39%.

Magna International

The third company with the above-listed criteria that this search discovered is Magna International Inc. (NYSE:MGA).

Shares of the Canadian developer and manufacturer of automotive systems and other components closed at $53.24 per unit on Jan. 10 with a market capitalization of $16.28 billion.

The price-earnings ratio is 9.68 versus the industry median of 14.84 and the PEG ratio is 0.53 compared to the industry median of 1.45.

The share price rose nearly 10% over the past five years through Jan. 10. The stock price appears fair according to the Peter Lynch chart.

GuruFocus has assigned Magna International a positive rating of 6 out of 10 for its financial strength and a high rating of 8 out of 10 for its profitability.

Wall Street sell-side analysts recommend a hold rating for this stock and have set an average target price of $60.31, which reflects a 13.3% upside from Friday’s closing price.

Price T Rowe Associates Inc/Md is the company's largest top fund holder with 6.51% of outstanding shares, followed by Beutel, Goodman & Co Ltd with 4.3% and Vanguard Group Inc with 2.74%.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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