If you screen for stocks that are outperforming 20-year high-quality market corporate bonds in terms of higher return, you can increase your chances of success.
The bonds represent the corporate loan issued by companies that are triple-A, double-A and single-A rated. According to the Federal Reserve Bank of St. Louis, the most recent observation on the monthly average spot rate on the 20-year bonds indicates a yield of 4.77%.
Therefore, the list is composed of companies that have a price-earnings ratio of 10.48 or lower as of Jan. 22 The price-earnings ratio is the inverse of the earnings return. Further, these companies are publicly traded on the New York Stock Exchange.
The first company is Dynex Capital Inc. DX with a price-earnings ratio of 3.55 versus an industry median of 15.5.
The Glen Allen, Virginia-based real estate investment trust was trading around $6.18 per share on Tuesday for a market capitalization of $368.88 million. The stock has risen 8% so far this year and has outperformed the S&P 500 index by nearly 1%. The share price at close on Tuesday falls in a 52-week range of $5.56 to $6.98. The stock has a price-book ratio of 0.9 versus an industry median of 1.1 and a price-sales ratio of 2.79 versus an industry median of 7.55.
Dynex Capital has a forward price-earnings ratio of 8.88. When multiplied by forecasted annual net earnings of 72.5 cents per share, this yields a value of $6.44 per common share.
The stock has a hold recommendation rating and an average price target of $6.56 per share.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 1 out of 10.
The second company is Chimera Investment Corp. CIM, which was trading around $18.66 on Tuesday with a market capitalization of approximately $3.49 billion. The stock has a price-earnings ratio of 5.99 versus an industry median of 15.5.
The New York-based REIT has gained 5% year to date, but is underperforming the S&P 500 index by 0.3%. The price-book ratio is 0.89 versus an industry median of 1.1 and the price-sales ratio is 5.34 versus an industry median of 7.55. The closing price on Tuesday was 18.3% above the 52-week low of $15.77 and 3.5% below the 52-week high of $19.32.
The Peter Lynch chart shows the stock is undervalued by the market since it is trading below its fair value.Ă‚
The stock has a hold recommendation rating and an average price target of $18.70 per share.
Chimera's financial strength and profitability and growth were both rated 3 out of 10 by GuruFocus.Ă‚
The third company is The Buckle Inc. BKE.
The stock has a price-earnings ratio of 8.8 while the industry median stands at 19.95. The stock closed at $17.49 per share on Tuesday. Having fallen 9.6% since the beginning of the year, the retail company is underperforming the S&P 500 index by 4.6%. The stock has a market capitalization of $857.32 million, a price-book ratio of 2.09 versus an industry median of 1.63 and a price-sales ratio of 0.95 versus an industry median of 0.68.
The share price falls within the 52-week range of $17.20 to $29.65.
The Peter Lynch chart suggests the stock is cheap.
The stock has a hold recommendation rating and an average price target of $19 per share.
GuruFocus has assigned a financial strength of 9 out of 10 and a profitability and growth rating of 5 out of 10.
During the third quarter, Barrow, Hanley, Mawhinney & Strauss increased its holding by 44.19% to 295,316 shares and Joel Greenblatt (Trades, Portfolio) boosted his position by 40.03% to 34,706 shares.
Disclosure: I have no positions in any securities mentioned in this article.
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