3 Undervalued-Predictable Companies With Strong 1st-Quarter Performances

Stocks with good business profitability and have outperformed the S&P 500

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Mar 29, 2021
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According to the Undervalued-Predictable Screener, a Premium feature of GuruFocus, three companies that have high business predictability and strong performance during the first quarter, yet are still trading below their discounted cash flow valuation as of Monday are Williams-Sonoma Inc. (

WSM, Financial), Sleep Number Corp. (SNBR, Financial) and Signature Bank (SBNY, Financial).

GuruFocus' Undervalued-Predictable Screener lists companies that have shown predictable revenue and earnings growth over the past 10 years and are trading below their discounted cash flow valuation, two key criteria of Berkshire Hathaway Inc. (

BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)'s investing approach.

Undervalued-Predictable model portfolio rockets during the first quarter

The Undervalued-Predictable model portfolio returned 22.97% in the year to date, outperforming the Standard & Poor's 500 Index's return of 5.82%. The model portfolio returned a cumulative 403.94% since its December 2008 inception.

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As such, investors may find opportunities in undervalued-predictable stocks that have outperformed the benchmark during the first quarter.

Williams-Sonoma

Shares of Williams-Sonoma (

WSM, Financial) traded around $181.69, approximately 63% below its discounted cash flow valuation of $487. The stock has gained approximately 76% in the year to date, outperforming the benchmark by approximately 70%.

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The San Francisco-based company markets and sells cooking and kitchenware products through its namesake brand and the Pottery Barn brand. GuruFocus ranks the company's profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and an operating margin that has increased approximately 2.8% per year on average over the past five years and is outperforming over 89% of global competitors.

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Gurus with large holdings in Williams-Sonoma include Pioneer Investments (Trades, Portfolio) and

Jim Simons (Trades, Portfolio)' Renaissance Technologies.

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Sleep Number

Shares of Sleep Number (

SNBR, Financial) traded around $138.68, approximately 61% below its discounted cash flow valuation. The stock has returned 72.03% in the year to date and has outperformed the benchmark by approximately 65.77%.

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GuruFocus ranks the Minneapolis-based furniture company's profitability 9 out of 10 on several positive investing signs, which include a four-star business predictability rank and three-year revenue and earnings growth rates outperforming over 90% of global competitors.

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Signature Bank

Shares of Signature Bank (

SBNY, Financial) traded around $211.07, approximately 70% below its discounted cash flow valuation of $694. The stock has outperformed the benchmark by approximately 56.78% in the year to date.

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According to GuruFocus, the New York-based commercial bank has a four-star business predictability rank and a net profit margin that outperforms over 84% of global competitors.

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Disclosure: The author has no positions in the stocks mentioned. The mention of stocks in this article do not constitute a recommendation. Investors must do their own research before investing in the stock market.

Further, different valuation methods may result in different valuation zones. For example, a stock may be undervalued based on its DCF valuation yet is overvalued based on our GF Value.

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