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Alberto Abaterusso
Alberto Abaterusso
Articles (1751) 

These Large-Cap Stocks Offer High Earnings Yields

Travelers tops the list

October 20, 2019 | About:

In order to find value opportunities, investors should search for large-cap stocks with earnings yields that are outclassing 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, which are unlikely to have financial problems, implying a very low investment risk for their holders.

According to the Federal Reserve Bank of St. Louis, these bonds are rewarding their holders with a 3.48% monthly spot rate.

As a result, value investors may be interested in the following companies as they have a price-earnings ratio of less than 19.2 and an earnings yield of more than 1.5 times the return on the 20-year bonds. The price-earnings ratio is the inverse of the earnings yield.

Shares of The Travelers Companies Inc. (NYSE:TRV) closed at $141.36 on Friday for a market capitalization of $36.81 billion. The New York-based insurance company has an earnings yield of nearly 7% compared to the industry median of 6.5% and a price-earnings ratio of 14.37 versus the industry median of 15.5.

The stock has gained 18% year to date. The closing price on Friday was 27.3% above the 52-week low of $111.08 and 9.7% below the 52-week high of $155.09.

According to the Peter Lynch chart, the stock does not appear to be expensive.

GuruFocus assigned a rating of 3 out of 10 for the company's financial strength and a 6 out of 10 rating for its profitability.

Shares of Travelers have a hold recommendation rating with an average target price of $148.47 per unit.

Shares of Humana Inc. (NYSE:HUM) closed at $289.26 on Friday for a market capitalization of $39.08 billion. The Louisville, Kentucky-based health care plans company has an earnings yield of 6.34% versus the industry median of 5.8% and a price-earnings ratio of 15.78 versus the industry median of 17.19.

The stock has been fairly flat so far this year. The closing price on Friday was 28.2% above the 52-week low of $225.65 and 23% below the 52-week high of $355.88.

According to the Peter Lynch chart, the stock does not appear to be expensive.

Humana has a rating of 5 out of 10 for its financial strength and an 8 out of 10 rating for its profitability.

Wall Street issued an overweight recommendation rating for shares of Humana with an average target price of $326.91.

Shares of Canadian Natural Resources Ltd. (NYSE:CNQ) closed at $25.3 on Friday with a market capitalization of $29.96 billion.

The Canadian oil and gas explorer and producer has an earnings yield of 12.02% and a price-earnings ratio of 8.32.

The stock has increased nearly 5% so far this year. The closing price on Friday was 15.8% above the 52-week low of $21.85 and 25.6% below the 52-week high of $31.77.

The stock appears to be cheap based on the Peter Lynch chart.

GuruFocus assigned a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10.

Wall Street issued a buy recommendation rating for shares of Canadian Natural Resources with an average target price of $33.47.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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