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, Financial) 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, Financial), 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, Financial).
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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