Investors may want to consider securities that, as of Friday, are more than doubling 20-year high-quality market corporate bond yields. This increases the likelihood of finding value stocks.
The bonds represent corporate loans issued by triple-A, double-A and single-A-rated companies, which means they are unlikely to have financial issues.
The benchmark monthly average spot rate that holders of these bonds are enjoying is 3.97%, according to the Federal Reserve Bank of St. Louis.
Thus, based on Friday’s closing price, the following securities have price-earnings ratios below 12.59 (the ratio is the inverse of the earnings yield).
Wall Street also recommends buying shares of the following companies.
What’s more, the Peter Lynch line indicates these stocks are not expensive.
The first company is Caterpillar Inc (CAT, Financial).
Shares of the Deerfield, Illinois-based manufacturer of heavy equipment and engines closed at $119.38 on Friday for a market capitalization of $67.16 billion. The stock has an earnings yield of 9% versus the industry median of 6.96% and a price-earnings ratio of 11.12 versus the industry median of 14.37.
Caterpillar also has a price-book ratio of 4.63 versus the industry median of 1.21 and a price-sales ratio of 1.25 versus the industry median of 0.71.
GuruFocus assigned a rating of 6 out of 10 for the financial strength and for the profitability and growth.
Wall Street issued a moderate buy recommendation rating and an average target price of $139.43 per share, which represents 16.8% upside from Friday’s closing price.
The stock has fallen 6% year to date, while the S&P 500 index gained 16.43%. The 52-week range is $112.06 to $159.37.
According to the Peter Lynch chart, the stock is still trading at a fair price.
The second company is Volkswagen AG (VWAGY, Financial).
Shares of the German auto manufacturer closed at $16.23 on Friday for a market capitalization of $80.80 billion. The stock has an earnings yield of 16.8% versus the industry median of 7.7% and a price-earnings ratio of 5.97 versus the industry median of 13.04.
The stock also has a price-book ratio of 0.62 versus the industry median of 1.1 and a price-sales ratio of 0.3 versus the industry median of 0.57.
GuruFocus assigned a rating of 5 out of 10 for the company's financial strength and a rating of 6 out of 10 for its profitability and growth.
Wall Street issued a moderate buy recommendation rating for shares of Volkswagen.
The stock has increased 4% so far this year but underperformed the S&P 500 index by 12.4%. The 52-week range is $14.70 to $18.84.
The Peter Lynch chart suggests the stock is cheap.
The third company is ING Groep NV (ING, Financial).
The major Dutch bank closed at $9.73 per share on Friday with a market capitalization of $37.74 billion. The stock has an earnings yield of 11.4% versus the industry median of 8.7% and a price-earnings ratio of 8.74 versus the industry median of 11.54.
The stock has a price-book ratio of 0.68 versus the industry median of 1.02 and a price-sales ratio of 1.84 compared to the industry median of 2.86.
GuruFocus assigned a rating of 4 out of 10 for the financial strength and the profitability and growth of the company.
Wall Street issued a recommendation rating of moderate buy for shares of ING Groep NV with an average target price of $13.78, reflecting 43% upside from the closing price on Friday.
The stock has fallen 8.7% this year and underperformed the S&P 500 index by about 7.7%. The 52-week range is $9.65 to $14.08.
The Peter Lynch chart indicates the stock is trading cheaply.
Disclosure: I have no positions in any securities mentioned.
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