Choosing stocks whose earnings return is more than double the monthly spot rate of the 20-year high-quality market corporate bonds attributes a higher probability to unearth high-return investments, in my opinion. These investment-grade bonds represent corporate loans issued by triple-A, double-A and single-A rated companies.
Since these bonds are granting a monthly spot rate of 2.99% as of the writing of this article, the following three stocks could attract the attention of investors, as their earnings returns are yielding more than 5.98% at price-earnings ratios of less than 16.72.
Berkshire Hathaway Inc. Class A
Berkshire Hathaway Inc Class A shares BRK.A were trading at $381,680 each at close on Wednesday for a market capitalization of $580.66 billion.
The Omaha, Nebraska-based international conglomerate holding company grants an earnings return of 7.12% and has a price-earnings ratio of 14.05.
The share price has risen by 21.17% over the past year, determining a 52-week range of $239,440 to $385,000.
GuruFocus assigned a rating of 5 out of 10 for the company's financial strength and a rating of 7 out of 10 for its profitability.
Wall Street sell-side analysts recommend a median rating of hold with an average target price of approximately $485,757 per share for this stock.
Rio Tinto PLC
Shares of Rio Tinto PLC RIO were trading at a price of $90.86 each at close on Wednesday for a market capitalization of $145.36 billion.
The Australian multinational metals and mining corporation grants an earnings return of 7.11% and has a price-earnings ratio of 14.07.
The stock has risen by 84.41% over the past year, determining a 52-week range of $35.35 to $92.85.
GuruFocus assigned a rating of 6 out of 10 for the company's financial strength and a rating of 8 out of 10 for its profitability.
Wall Street sell-side analysts recommend a median rating of overweight and have established an average target price of $102.33 per share for this stock.
Morgan Stanley
Shares of Morgan Stanley MS were trading at $82.06 each at close on Wednesday for a market capitalization of $154.31 billion.
The New York-based investment bank major grants an earnings return of 7.85% and has a price-earnings ratio of 12.74.
The stock has risen by 92.67% over the past year for a 52-week range of $27.20 to $82.94.
GuruFocus assigned a rating of 3 out of 10 to the company's financial strength and a rating of 5 out of 10 to its profitability.
Wall Street sell-side analysts recommend a median rating of overweight with an average target price of $84.40 per share for this stock.
Disclosure: I have no positions in any securities mentioned.
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