If you look for stocks that more than double the earnings return the 20-year high quality market corporate bonds are offering to their holders, you could significantly increase your chances of finding value opportunities. The monthly yield on these bonds is 3.34% as of May. The bonds represent corporate loans issued by triple-A, double-A and single-A-rated companies.
Thus, value investors may want to have a look at the following stocks as they grant earnings returns exceeding 6.68% (twice the monthly return on the corporate bonds) and, therefore, have price-earnings ratios below 14.97.
Enterprise Products Partners
Shares of Enterprise Products Partners LP (EPD, Financial) were trading at a price of $18.17 each at close on Tuesday for a market capitalization of $39.72 billion.
The Houston-based oil and gas midstream operator grants an earnings return of 11.7% and has a price-earnings ratio of 8.57.
The share price has fallen by 37.7% over the past year for a 52-week range of $10.27 to $30.87.
GuruFocus assigned a moderate rating of 4 out of 10 to the company's financial strength and a very good rating of 7 out of 10 to its profitability.
For Wall Street sell-side analysts. Enterprise Products Partners is a buy with an average target price of $24.65 per share.
International Business Machines
Shares of International Business Machines Corp. (IBM, Financial) were trading at a price of $120.77 each at close on Tuesday for a market capitalization of $107.23 billion.
The Armonk, New York-based technology conglomerate grants an earnings return of 8.37% and has a price-earnings ratio of 11.95.
The stock has fallen 14% over the past year, determining a 52-week range of $90.56 to $158.75.
GuruFocus assigned a moderate rating of 4 out of 10 to the company’s financial strength and a very good rating of 7 out of 10 to its profitability.
As of June, the stock has seven buy ratings, 15 hold ratings and only three underperform ratings on Wall Street. The average target price is $127.29 per share.
Eastman Chemical
Shares of Eastman Chemical Co. (EMN, Financial) were trading at a price of $69.64 each at close on Tuesday for a market capitalization of $9.46 billion.
The Kingsport, Tennessee-based global specialty chemicals company grants an earnings return of 8.4% and has a price-earnings ratio of 11.89.
The stock has tumbled 14.4% over the past year for a 52-week range of $34.44 to $86.18.
GuruFocus assigned a moderate rating of 4 out of 10 to the company’s financial strength and a very good rating of 7 out of 10 to its profitability.
Wall Street sell-side analysts issued an overweight recommendation rating for the stock and have established an average target price of $72.42 per share. The rating means that the stock is expected to outperform either the industry or the overall market.
Disclosure: I have no positions in any securities mentioned.
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