To find value opportunities, investors should look for securities with earnings yields that at least double the returns of 20-year high-quality market corporate bonds.
The bonds represent corporate loans issued by triple-A, double-A, and single-A-rated companies. These companies are unlikely to have financial problems. Thus, the related bonds imply a very low investment risk for their holders.
The Federal Reserve Bank of St. Louis indicated the 20-year bond’s monthly average spot rate is 3.97%. As a result, the following stocks have an earnings yield of more than 7.94% or a price-earnings ratio of less than 12.59 as of Aug. 2.
In addition, these large caps stocks are not expensive based on the Peter Lynch value.
Walgreens Boots Alliance Inc (WBA, Financial) closed at $53.67 on Friday for a market capitalization of $48.48 billion. The Illinois-based pharmacy-led health and wellbeing company has an earnings yield of 9.5% versus the industry median of 5.2% and a price-earnings ratio of 10.53 versus the industry median of 19.36.
The price-book ratio is 2.10 versus the industry median of 1.57 and the price-sales ratio is 0.37 versus the industry median of 0.44.
The stock has lost 21.44% so far this year. The share price at close on Friday was 8.84% above the 52-week low of $49.31 and 60.82% below the 52-week high of $86.31.
The stock appears to be cheap based on the Peter Lynch chart.
GuruFocus assigned a rating of 6 out of 10 for the company's financial strength and 8 out of 10 for its profitability and growth.
The stock has a hold recommendation rating and an average target price of $58.42 per share, reflecting nearly 9% upside from the closing price on Friday.
Tatneft PJSC (OAOFY, Financial) closed at $67.9 per share at close on Friday for a market capitalization of $27.15 billion. The Russian oil and gas exploration and production company has an earnings yield of 15.4% versus the industry median of 11.3% and a price-earnings ratio of 6.51 versus the industry median of 8.85.
The stock also has a price-book ratio of 1.8 versus the industry median of 0.98 and an enterprise value-Ebitda ratio of 5.17 compared to the industry median of 5.35.
The share price is up 6.93% year to date. The closing share price on Friday was 10.9% above the 52-week low of $61.25 and 13.4% below the 52-week high of $77.
According to the Peter Lynch chart, the stock appears to be fairly priced.
GuruFocus assigned a rating of 4 out of 10 for the financial strength and 6 out of 10 for the profitability and growth of the company.
The stock has an overweight recommendation rating and an average target price of $74.67 per share, representing 10% upside from Friday's closing price.
E.ON SE (EONGY, Financial) closed at $10.13 per share on Friday with a market capitalization of $22.05 billion. The German energy operator worldwide has an earnings yield of 13.9% versus the industry median of 6% and a price-earnings ratio of 7.22 versus the industry median of 16.67.
The stock also has a price-book ratio of 3.55 versus the industry median of 1.49 and an enterprise value-Ebitda ratio of 5.11 versus the industry median of 9.96.
The stock has increased 2.63% so far this year. The closing share price on Friday was 6.9% above the 52-week low of $9.48 and 12% below the 52-week high of $11.35.
The Peter Lynch chart suggests the stock is not expensive.
GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 4 out of 10.
The stock has a hold recommendation rating and an average target price of $10.92 per share, reflecting nearly 8% increase from the closing price on Friday.
Disclosure: I have no positions in any securities mentioned.
