Market indexes rose on Thursday morning as the Consumer Price Index report for December fell in line with economists’ expectations and indicated inflation may be cooling off.
While the report showed a 0.1% dip in prices from November, it was still 6.5% higher than in the prior year.
As a result, the Dow Jones Industrial Average increased 168 points, or 0.5%, while the S&P 500 gained 0.2% and the Nasdaq Composite was up 0.1%.
After suffering tremendous declines in 2022 along with most of the market, the consumer cyclical sector has posted the largest gain for the year so far at 9.97%.
As a result of these developments, investors may be interested in finding potential opportunities among undervalued consumer cyclical stocks that have predictable performances.
The Undervalued Predictable Screener, a Premium GuruFocus feature, determines whether a stock is undervalued or overvalued based on two methods: discounted cash flow and discounted earnings.
According to both methods, companies with a discount higher than zero are consider undervalued, while discounts below zero are considered overvalued.
The companies’ predictability rates are then determined based on their historical performance over the past decade. The screener looks for companies with ranks of at least four out of five stars.
Based on these criteria, a number of consumer cyclical stocks qualified for the screener as of Jan. 12, including AutoNation Inc. (AN, Financial), Patrick Industries Inc. (PATK, Financial), Thor Industries Inc. (THO, Financial), Asbury Automotive Group Inc. (ABG, Financial) and Group 1 Automotive Inc. (GPI, Financial).
AutoNation
Shares of AutoNation (AN, Financial) are trading 84% below the DCF value of $708 and 81% below the discounted earnings value of $598.
The Fort Lauderdale, Florida-based retail company, which operates a chain of auto dealerships, has a $5.67 billion market cap; its shares were trading around $114.45 on Thursday with a price-earnings ratio of 4.68, a price-book ratio of 2.65 and a price-sales ratio of 0.26.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
The GF Score of 96 out of 100 indicates the company has high outperformance potential going forward. While it received high ranks for profitability, growth, GF Value and momentum, its financial strength rating was more moderate.
It also has a four-star predictability rank. According to GuruFocus research, companies with this rank return an average of 9.8% annually over a 10-year period.
Of the gurus invested in AutoNation, Mario Gabelli (Trades, Portfolio) has the largest position with 1.06% of its outstanding shares. Murray Stahl (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates and Lee Ainslie (Trades, Portfolio) also own the stock.
Patrick Industries
Patrick Industries (PATK, Financial) shares are trading 82% below the DCF value of $360 and 87% below the discounted earnings value of $495.
The company headquartered in Elkhart, Indiana, which provides component products and building materials for the recreational vehicle, marine, manufactured housing and other industrial markets, has a market cap of $1.50 billion; its shares were trading around $66.28 on Thursday with a price-earnings ratio of 4.61, a price-book ratio of 1.59 and a price-sales ratio of 0.31.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 95 suggests the company has high outperformance potential. It raked in high points for four of the criteria, but only middling marks for financial strength.
It has a 4.5-star predictability rank. GuruFocus found companies with this rank return, on average, 10.6% annually.
With 0.53% of outstanding shares, Chuck Royce (Trades, Portfolio) is Patrick Industries’ largest guru shareholder. Other guru investors are Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Barrow, Hanley, Mewhinney & Strauss.
Thor Industries
Shares of Thor Industries (THO, Financial) are trading 80% below the DCF value of $464 and 83% below the discounted earnings value of $534.
The Elkhart, Indiana-based manufacturer of recreational vehicles and travel trailers has a $4.94 billion market cap; its shares were trading around $92.33 on Thursday with a price-earnings ratio of 4.91, a price-book ratio of 1.36 and a price-sales ratio of 0.33.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
Further, the GF Score of 98 indicates the company has high outperformance potential, driven by high ratings across the board.
Thor Industries also has a 4.5-star predictability rank.
Hotchkis & Wiley is the company’s largest guru shareholder with 0.53% of its outstanding shares. Tweedy Browne (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Simons’ firm, Jones, Greenblatt, Hussman and Gabelli also have positions.
Asbury Automotive Group
Asbury Automotive Group (ABG, Financial) shares are trading 56% below the DCF value of $429 and 84% below the discounted earnings value of $1,208.
The operator of auto dealerships, which is headquartered in Duluth, Georgia, has a market cap of $4.25 billion; its shares were trading around $191.80 on Thursday with a price-earnings ratio of 5.46, a price-book ratio of 1.61 and a price-sales ratio of 0.30.
The GF Value Line suggests the stock is modestly undervalued currently.
The company has high outperformance potential based on its GF Score of 95. It recorded strong ranks across the board, though financial strength was more moderate at 5 out of 10.
Asbury has a four-star predictability rank.
Of the gurus invested in the company, David Abrams (Trades, Portfolio) has the largest stake with 9.57% of its outstanding shares. Glenn Greenberg (Trades, Portfolio), Royce, Hotchkis & Wiley, Jones, Simons’ firm, Dalio’s firm and Ainslie also have holdings in Asbury.
Group 1 Automotive
Shares of Group 1 Automotive (GPI, Financial) are trading 54% below its DCF Value of $406 and 83% below its discounted earnings value of $1,131.
The Houston-based company, which operates car dealerships and collision centers in the U.S. and the U.K., has a $2.80 billion market cap; its shares were trading around $191.97 on Thursday with a price-earnings ratio of 4.66, a price-book ratio of 1.32 and a price-sales ratio of 0.20.
According to the GF Value Line, the stock is modestly undervalued currently.
The company has high outperformance potential on the back of a GF Score of 93. It received high ratings for everything but financial strength, which received a moderate rank of 6.
In addition, Group 1 has a four-star predictability rank.
With 0.39% of its outstanding shares, Jeremy Grantham (Trades, Portfolio) is Group 1’s largest guru shareholder. Other gurus invested in the stock are Hotchkis & Wiley, Dalio’s firm, Jones, Royce, Greenblatt, Simons’ firm and Barrow, Hanley, Mewhinney & Strauss.
Additional opportunities
Other companies that qualified for the screener were Toll Brothers Inc. (TOL, Financial), AutoZone Inc. (AZO, Financial), Winnebago Industries Inc. (WGO, Financial), Carriage Services Inc. (CSV, Financial) and O’Reilly Automotive Inc. (ORLY, Financial).
