Screening for companies that are more than doubling 20-year high-quality corporate bonds' earnings yields raises the possibility of achieving impressive margins.
These bonds represent corporate loans issued by companies that are triple-A, double-A and single-A rated. The Federal Reserve Bank of St. Louis showed that the monthly average spot rate of the 20-year bonds is 4.26%.
Thus, the following large caps have an earnings yield of more than 8.5% or a price-earnings ratio of less than 11.74 as of May 31.
These stocks are cheap according to the Peter Lynch chart. They have strong financial conditions and run a profitable business that will likely stay so.
What’s more? Wall Street issued a recommendation rating of overweight to buy. The overweight recommendation rating means that the stock is predicted to outperform either the industry or the entire market.
Telefonica SA TEF traded around $7.93 per share at close on Friday for a market capitalization of $41.48 billion. The Spanish telecommunication services company has an earnings yield of 8.9% versus the industry median of 5.2% or a price-earnings ratio of 11.22 versus the industry median of 19.33.
Also, the price-book ratio is 1.89 versus the industry median of 2.07, and the price-sales ratio is 0.76 compared to the industry median of 1.5.
The share price declined 6.3% so far this year. The share price at close Friday was 3% off the 52-week low of $7.70 and 15.3% below the 52-week high of $9.14.
The stock seems to be priced fairly, according to the below Peter Lynch chart.
GuruFocus assigned a rating of 6 out of 10 for the financial strength and for the profitability and growth.
The stock has an overweight recommendation rating and an average target price of $10.01 per share, reflecting 26.2% upside from the share price at close on Friday.
Applied Materials Inc. AMAT traded around $38.69 per share at close on Friday for a market capitalization of $36.22 billion. The Santa Clara, California-based provider of equipment, services and software to semiconductors has an earnings yield of 9.2% versus the industry median of 5.1% or a price-earnings ratio of 10.87 versus the industry median of 19.55.
The stock also has a price-book ratio of 4.47 versus the industry median of 1.85 and a price-sales ratio of 2.40 compared to the industry median of 1.67.
Year to date the stock is up 18%. The share price at close Friday was 34.4% above the 52-week low of $28.79 and 37.6% from the 52-week high of $53.23.
According to the Peter Lynch chart, the stock appears to trade cheaply.
Applied Materials has a GuruFocus financial strength rating of 7 out of 10 and profitability and growth rating of 8 out of 10.
The stock has a buy recommendation rating and an average target price of $52.86 per share, which represents a 36.8% growth from the closing share price of Friday.
TE Connectivity Ltd. TEL traded around $84.23 per share at close on Friday with a market capitalization of approximately $28.41 billion. The Swiss electronic components company has an earnings yield of 9.7% versus the industry median of 6% or a price-earnings ratio of 10.36 versus the industry median of 16.75.
The stock also has a price-book ratio of 2.87 versus the industry median of 1.47 and a price-sales ratio of 2.16 versus the industry median of 0.98.
The share price increased 11% so far this year. The share price at close Friday was 20.6% above the 52-week low of $69.84 and 18.2% from the 52-week high of $99.52.
The stock appears cheap according to the Peter Lynch chart.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 7 out of 10.
Shares of TE Connectivity Ltd. have an overweight recommendation rating and an average target price of $104.07, mirroring a 23.6% increase from the share price at close on Friday.
Disclosure: I have no positions in any securities mentioned.
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