To find value opportunities, investors should look for stocks 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, implying a very low investment risk for their holders.
The holders of these 20-year high-quality corporate bonds receive a 3.82% monthly spot rate, according to the Federal Reserve Bank of St. Louis.
Thus, the following companies have price-earnings ratios (the inverse of earnings yield) of less than 13.09.
Shares of Marathon Petroleum Corp. (MPC, Financial) closed at $53.29 on Friday for a market capitalization of $35.08 billion. The Findlay, Ohio-based oil and gas refining, marketing, retailing and transportation company has an earnings yield of 8.7% and a price-earnings ratio of 11.53, in line with the industry median.
The stock also has a price-book ratio of 1.06 versus the industry median of 1.11 and a price-sales ratio of 0.28, which is in line with the industry median.
The stock price decreased 9.7% year to date. The closing share price on Friday was 21.2% above the 52-week low of $43.96 and 66% below the 52-week high of $88.45.
The Peter Lynch chart indicates that the stock is not expensive.
GuruFocus assigned a moderate rating of 4.8 out of 10 for the financial strength and of 5 out of 10 for the profitability of the company.
Marathon Petroleum Corp. has a buy recommendation rating with an average target price of $76.37.
Shares of Aflac Inc. (AFL, Financial) were around $51.77 at close on Friday for a market capitalization of $38.33 billion. The Columbus, Georgia-based life insurer has an earnings yield of 7.9% versus the industry median of 8.8% and a price-earnings ratio of 12.63 versus the industry median of 11.33.
The stock also has a price-book ratio of 1.38 versus the industry median of 0.96 and a price-sales ratio of 1.81 versus the industry median of 0.98.
The stock price increased 13.6% per share so far this year. The closing price on Friday was 24.9% above the 52-week low of $41.45 and 10.5% below the 52-week high of $57.18.
According to the Peter Lynch chart, the stock seems cheap.
Aflac Inc. has a moderate rating of 4.4 out of 10 for financial strength but a low rating of 3 out of 10 for profitability.
As of Sept. 13, one analyst out of a total of six released a buy recommendation rating for shares of Aflac Inc., two analysts issued a hold recommendation rating and three analysts suggest selling the stock. The average target price is $51.
Shares of Bridgestone Corp. (OTCPK:BRDCY, Financial) were around $19.86 at close on Friday with a market capitalization of $28.07 billion.
The Japanese producer and seller of tires and rubber products has an earnings yield of 8.6% versus the industry median of 7.5% and a price-earnings ratio of 11.64 versus the industry median of 13.36.
Bridgestone also has a price-book ratio of 1.39 versus the industry median of 1.12 and a price-sales ratio of 0.89 versus the industry median of 0.56.
The stock price was up 3.5% so far this year. The closing price on Friday was 9.8% above the 52-week low of $18.08 and 2.8% below the 52-week high of $20.41.
The stock appears not expensive based on the Peter Lynch chart.
GuruFocus assigned a very positive financial strength rating of 7.1 out of 10 and a moderate profitability rating of 5 out of 10.
Analysts suggest holding shares of Bridgestone Corp. with an average target price of $20.37.
Disclosure: I have no positions in any securities mentioned.
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