Since the market peaked on Feb. 19, conditions have taken a drastic turn as the coronavirus outbreak and an oil price war have wreaked havoc on the economy.
The Dow Jones Industrial Average, which stood at 29,348 a little over a month ago, has declined to 18,591.93 as of March 23. Similarly, the S&P 500 Index has tumbled from 3,386 to 2,237.40, while the Nasdaq Composite has fallen from 9,817 to 6,860.67 over that same period.
As a result of the downturn, value investors are busy looking for good opportunities among stocks that have suffered along with the overall market, but the underlying company still has strong business fundamentals.
According to the GuruFocus All-in-One Screener, a Premium feature, as of March 24, companies in the S&P 500 that have fallen roughly 50% since Feb. 19 include LyondellBasell Industries NV (LYB, Financial), Under Armour Inc. (UAA, Financial), Lamb Weston Holdings Inc. (LW, Financial), Live Nation Entertainment Inc. (LYV, Financial) and Universal Health Services Inc. (UHS, Financial).
LyondellBasell Industries
Having declined around 50% from $81.95 since Feb. 19, LyondellBasell, which has a $13.51 billion market cap, was trading around $42.70 per share on Tuesday with a price-earnings ratio of 4.46, a price-book ratio of 1.76 and a price-sales ratio of 0.44.
Supported by price ratios near multiyear lows, the GuruFocus valuation rank of 9 out of 10 indicates the stock is undervalued.
The chemical company, which is headquartered in The Netherlands, has a GuruFocus financial strength rating of 5 out of 10. While the company has sufficient interest coverage, the Altman Z-Score of 2.35 suggests it is under some financial pressure since its assets are building up at a faster rate than its revenue is growing.
LyondellBasell’s profitability fared a bit better, scoring an 8 out of 10 rating. Although the margins are in decline, they still outperform 70% of competitors. The company also has strong returns and a moderate Piotroski F-Score of 4, which implies operations are stable. As a result of a slowdown in revenue growth over the past 12 months, the business predictability rank of one out of five stars is on watch. According to GuruFocus, companies with this rank typically return 1.1% per annum over a 10-year period.
Of the gurus invested in LyondellBasell, Pioneer Investments (Trades, Portfolio) has the largest stake with 0.69% of outstanding shares. Other top guru shareholders are Barrow, Hanley, Mewhinney & Strauss, Larry Robbins (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Jeff Auxier (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and Scott Black (Trades, Portfolio).
Under Armour
Tumbling 50% since Feb. 19, when it traded at $16.57, shares of Under Armour were trading around $8.76 on Tuesday. The company has a market cap of $3.71 billion, a price-earnings ratio of 41.52, a price-book ratio of 1.85 and a price-sales ratio of 0.75.
With a price-book and price-sales ratio near a 10-year low, the GuruFocus valuation rank of 8 out of 10 leans toward the stock being undervalued.
The Baltimore-based manufacturer of sports footwear, apparel and equipment has a GuruFocus financial strength rating of 6 out of 10, driven by adequate interest coverage and an Altman Z-Score of 2.68, which suggests the company is under some pressure financially since its assets are building at a faster rate than its revenue is growing. In addition, its weighted average cost of capital outweighs its return on invested capital, indicating it is not capital efficient.
Under Armour’s profitability scored an 8 out of 10 rating even though its margins are in decline and its revenue growth has slowed down over the past year. Regardless, its returns outperform at least half of its industry peers, it has a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
With 1.99% of outstanding shares, Steve Mandel (Trades, Portfolio) is the company’s largest guru shareholder. Dalio, Pioneer and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.
Lamb Weston Holdings
Plummeting slightly over 50% from $94.35 on Feb. 19, shares of Lamb Weston were trading around $54.82 on Tuesday with a market cap of $7.36 billion, a price-earnings ratio of 16.12, a price-book ratio of 40.28 and a price-sales ratio of 2.07, the latter two of which are near multiyear lows.
Despite having adequate interest coverage and a high Altman Z-Score of 3.65, GuruFocus rated the Idaho-based food processing company’s financial strength 4 out of 10.
Lamb Weston’s financial strength was rated 7 out of 10, driven by strong margins and returns that outperform a majority of competitors and a high Piotroski F-Score of 7, which suggests operating conditions are healthy.
Pioneer is the company’s largest guru shareholder with 0.36% of outstanding shares. Other top guru investors are Simons’ firm, Mario Gabelli (Trades, Portfolio), Auxier, Philippe Laffont (Trades, Portfolio) and Greenblatt.
Live Nation Entertainment
Down from its Feb. 19 price of $76.08, shares of Live Nation were trading around $41.91 on Tuesday with a $9.23 billion market cap, a price-book ratio of 7.91 and a price-sales ratio of 0.81.
GuruFocus notes the share price and price-book ratios are near two-year lows.
Headquartered in Beverly Hills, California, the company, which promotes, operates and manages ticket sales for live entertainment in the U.S., has a GuruFocus financial strength rating of 4 out of 10. In addition to having low interest coverage, the company’s Altman Z-Score of 1.55 warns it could be at risk of going bankrupt.
Live Nation’s profitability is rated 5 out of 10 on the back of an expanding operating margin. It has poor returns, however, as well as a moderate Piotroski F-Score of 4 and a one-star business predictability rank.
With 0.43% of outstanding shares, Pioneer is the company’s largest shareholder. Other top guru investors are Gabelli, Diamond Hill Capital (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Frank Sands (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Simons’ firm, Ken Fisher (Trades, Portfolio), Greenblatt and Laffont.
Universal Health Services
Falling from its Feb. 19 price of $139.03, Universal Health Services was trading around $76.96 per share on Tuesday with a $6.5 billion market cap, a price-earnings ratio of 8.23, a price-book ratio of 1.19 and a price-sales ratio of 0.58.
With price ratios near 10-year lows, the GuruFocus valuation rank of 9 out of 10 indicates the stock is undervalued.
The Pennsylvania-based company, which operates hospitals and offers other health care services, has a GuruFocus financial strength rating of 5 out of 10. While Universal Health has adequate interest coverage, its Altman Z-Score of 2.68 suggests some financial pressure.
Universal Health’s profitability fared much better, scoring a 9 out of 10 rating despite having declining margins. The company also has strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. Due to consistent earnings and revenue growth, it also has a five-star business predictability rank. GuruFocus says companies with this rank typically return an average of 12.1% per year.
The Vanguard Health Care Fund (Trades, Portfolio) is the company’s largest guru shareholder with a 3.83% stake. Other gurus with positions in the stock include First Eagle Investment (Trades, Portfolio), Simons’ firm, Robbins, Pioneer, Greenblatt, Ainslie, Robert Olstein (Trades, Portfolio) and Jones.
Disclosure: No positions.
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