Picking stocks whose market capitalization is worth more than $2 billion but less than 1.5 times book value increases the odds of discovering high-quality companies.
Another reason why investors may consider these securities is that they tend to represent profitable businesses as indicated by the positive ratings GuruFocus has assigned to them. This shows a higher chance that the investment will be successful.
Additionally, sell-side analysts’ recommendation ratings for such stocks range between hold and buy.
The first company under consideration is DuPont de Nemours Inc. (DD, Financial). Shares of the Wilmington, Delaware-based chemicals company closed at $68.15 on Friday for a market capitalization of $50.80 billion.
The price-book ratio of 1.23 is lower than the industry median of 1.38 and is ranked higher than 639 out of 1,162 companies operating in the chemicals industry.
The share price declined 10.4% so far this year, underperforming the S&P 500 Index by more than 28%. The Peter Lynch chart indicates the stock is not cheap.
The company has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10.
Wall Street recommends an overweight rating for shares of DuPont with an average target price of $81.86. Overweight means that the stock is predicted to outperform either its industry or the overall market within 52 weeks.
Currently, the company pays a quarterly dividend of 30 cents per common share, generating a 1.76% dividend yield as of Friday.
The second company is Seven & i Holdings Co. Ltd. (SVNDF, Financial). Shares of the Japanese owner of diversified retail stores closed at $38.27 on Friday for a market capitalization of $33.45 billion.
The price-book ratio of 1.45 is better than the industry median of 1.56 as it tops 193 out of 359 companies that operate in the grocery stores industry.
The stock is down 11.4% so far this year, underperforming the S&P 500 Index by nearly 30%. According to the Peter Lynch chart, the stock still seems affordable.
The stock has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10.
Wall Street recommends buying shares of Seven & i with an average target price of approximately $42.90 as of Oct. 4.
The stock has a forward dividend yield of 2.34% according to the share price at close on Friday.
The third company is Exor N.V. (OTCPK:EXXRF). Shares of the Amsterdam-based investment holding company closed at $62.5 on Friday for a market capitalization of $14.90 billion.
The price-book ratio of 0.93 is slightly below the industry median of 1.04 and outperforms over half of its competitors.
The stock is up nearly 15% so far this year, but it underperformed the S&P 500 Index by about 1%. The Peter Lynch chart indicates the stock is still cheap.
The stock has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10.
Wall Street recommends an overweight rating for shares of Exor and has set an average target price of $72.83.
The stock offers a 0.78% forward dividend yield as of Friday.
Disclosure: I have no positions in any securities mentioned.
Read more here:Ă‚
2 Falling Knives Expected to Rebound
Costco Declines Despite Posting 4th-Quarter Earnings Beat
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here
