Donald Yacktman, one of the most famous value investors and founder of the AMG Yacktman Fund Class I (YACKX), considers the "forward rate of return" highly when it comes to determining whether a stock may be appealing or not. He calculates this valuation ratio as "normalized free cash flow yield plus real growth plus inflation."
The following stocks may attract the interest of value investors, as they represent companies whose forward rate of return is more than double the return on 20-year high quality market (HQM) corporate bonds, which yields 2.96% as of the writing of this article.
BHP Group Ltd
The first stock value investors may want to consider is BHP Group Ltd (BHP, Financial), a Melbourne, Australia-based mining, metals and oil company.
BHP Group Ltd's forward rate of return is 20.91% (as of the most recent quarter ended on June 29), which ranks higher than 82% of the 386 companies that are operating in the metals and mining industry.
The share price of BHP Group Ltd gained 4.43% over the past year to trade at around $52.11 at close on Thursday for a market cap of $134.28 billion. The 52-week range is $29.78 to $58.35. Its price-earnings ratio is 16 (versus the industry median of 19.06), its price-book ratio is 2.65 (versus the industry median of 2.38) and its price-sales ratio is 2.97 (versus the industry median of 1.65).
In the third quarter, Ken Fisher (Trades, Portfolio) increased his holding in the stock by 1.58% to 7,659,814 shares.
Wall Street recommends a buy rating with an average target price of $59.07 per share of the stock.
CVS Health Corp
The second stock value investors may want to consider is CVS Health Corp (CVS, Financial), a Woonsocket, Rhode Island-based retail pharmacy chain company.
CVS Health Corp's forward rate of return is 15.42% (as of the most recent quarter ended on Sept. 29), which ranks higher than five competitors out of a total of 13 companies that operate in the healthcare plans industry.
CVS Health Corp's share price lost nearly 5% over the past year to close at $69.39 on Thursday for a market cap of $90.83 billion and a 52-week range of $52.04 to $77.03. Its price-earnings ratio is 11.47 (compared to the industry median of 17.21), its price-book ratio is 1.33 (versus the industry median of 2.74) and its price-sales ratio is 0.34 (compared to the industry median of 0.86).
In the third quarter, Richard Pzena (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Robert Olstein (Trades, Portfolio) added shares to their holdings of the company.
Wall Street recommends an overweight rating with an average target price of $81.12 per share for the stock.
Anthem Inc
The third stock that value investors may want to consider is Anthem Inc (ANTM, Financial), an Indianapolis, Indiana-based healthcare plans company.
Anthem Inc' forward rate of return is 14.62% (as of the most recent quarter ended on Sept. 29), which ranks higher than six competitors out of 13 companies that are operating in the healthcare plans industry.
Anthem Inc's share price rose by 17% over the past year to trade at around $329.92 at close on Thursday for a market cap of $82.05 billion and a 52-week range of $171.03 to $337.68. Its price-earnings ratio is 17.06 (versus the industry median of 17.21), its price-book ratio is 2.43 (versus the industry median of 2.74) and its price-sales ratio is 0.72 (compared to the industry median of 0.86).
In the third quarter, Yacktman Asset Management (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio) have increased their positions in the company by 3.97% to 399,794 shares and by 0.4% to 2,168,053 shares, respectively.
Wall Street recommends an overweight rating with an average target price of $347.96 per share for the stock.
Disclosure: I have no position in any security mentioned.
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