When screening for value investment ideas, I like to consider the spot rate on 20-year high-quality market corporate bonds as a benchmark. To do so, I search for stocks that are doubling the bonds in terms of higher yield.
The bonds are securities representing the corporate loan issued by companies that are triple-A, double-A and single-A rated. The monthly observation on the spot rate on the 20-year bonds is indicating a yield of 4.43% as of August.
Therefore, the list is composed of stocks that have an earnings yield of no less than 8.86% based on the market value at close on Nov. 2. As a result, the following stocks have a price-earnings ratio of 11.29 or lower.Â
The first stock is Intel Corp. (INTC, Financial) with a price-earnings ratio of 10.73. The Silicon Valley-based multinational technology company was at $47.11 per share on Nov. 2 for a market capitalization of about $215.01 billion. The stock has climbed 1% so far this year and is almost on par with the S&P 500 index. The stock price at close on Friday was 12.1% above the 52-week low of $42.04 and 22.3% below the 52-week high of $57.60. The stock has a price-book ratio of 3.01 versus an industry median of 1.85, a price-sales ratio of 3.22 versus an industry median of 1.67 and a dividend yield of 2.49%.
The chart below compares the share price at close on Friday with the Peter Lynch Earnings Line.
Citigroup Inc. (C, Financial) closed at $65.92 on Friday with a market capitalization of about $161 billion. The stock has a price-earnings ratio of 10.43. The bank is down 11% year to date, underperforming the S&P 500 index by about 11.2%. The price-book ratio is 0.9 versus an industry median of 1.24, the price-sales ratio is 2.33 versus an industry median of 3.41 and the dividend yield is 2.34%. The 52-week range is $63.18 to $80.7.
The chart below shows the stock was trading close to the Peter Lynch earnings line on Friday.Â
With a price-earnings ratio of 9.65, Morgan Stanley (MS, Financial) also makes the list. The stock closed at $45.95 per share on Friday following a 12% decline since the beginning of the year. The bank underperformed the S&P 500 index by 11.5% over the same period. The stock has a market capitalization of $79.21 billion, a price-book ratio of 1.14 versus an industry median of 1.16, a price-sales ratio of 2.15 versus an industry median of 3.42 and a dividend yield of 2.39%. The 52-week range is $42.88 to $59.38.
According to the Peter Lynch chart, the stock is trading close to the earnings line.Â
The fourth stock is Mitsubishi UFJ Financial Group Inc ADR (MUFG, Financial) with a price-earnings ratio of 8.8. On Fridaythe stock had declined 18% year to date to $6, leading to a market capitalization of $78.77 billion, a price-book ratio of 0.58, a price-sales ratio of 2.48 and a dividend yield of 2.84%. The stock's closing price on Friday was 9.3% off the 52-week low of $5.49 and 35.2% below the 52-week high of $8.11.
Mitsubishi UFJ Financial is a Tokyo-based bank holding company that provides financial products and services to clients. The Japanese bank offers its products, services and solutions to individuals, corporations, institutions and multinational organizations. It also serves government entities.Â
The Peter Lynch chart suggests the stock is cheap.
The last stock on my list is China Life Insurance Co. Ltd. (LFC, Financial) with a price-earnings ratio of 11.29. The stock has fallen 32.6% so far this year to $10.56 per share, for a market capitalization of about $83.55 billion. The stock has a price-book ratio of 2.01 versus an industry median of 1.18, a price-sales ratio of 1.02 versus an industry median of 0.82 and a dividend yield of 3.02%. The closing share price on Friday was 7.1% above the 52-week low of $9.86 and 68.4% below the 52-week high of $17.78.
The Chinese company operates through four segments: life insurance, health insurance, accident insurance and other. The company is headquartered in Beijing and is a subsidiary of China Life Insurance (Group) Co. Ltd.
The Peter Lynch chart suggests the stock is undervalued.Â
Disclosure: I have no positions in any securities mentioned in this article.
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