Screening for stocks that more than double the earnings return that 20-year high-quality corporate bonds grant to their holders (an average monthly spot rate of 3.48%) increases the likelihood of finding value opportunities.
The 20-year high-quality corporate bonds represent corporate loans issued by triple-A, double-A and single-A companies. The following stocks are trading their earnings for less than 14.37 times their price, according to the earnings yield (which is the inverse of the price-earnings ratio).
CNH Industrial
Shares of CNH Industrial N.V. CNHI closed at $11.01 on Tuesday for a market capitalization of $14.87 billion. The U.K.-based producer and seller of farm and construction equipment and vehicles has an earnings yield of 7.2% versus the industry median of 7.3% and a price-earnings ratio of 13.95 versus the industry median of 13.69.
The stock has gained 35% in the past five years through Oct. 29. However, the share price is still affordable according to the Peter Lynch chart.
GuruFocus assigned a 4 out of 10 rating for the company's financial strength and a 6 out of 10 rating for its profitability.
The stock grants a forward dividend yield of 1.83% as of Tuesday.
Wall Street recommends an overweight recommendation rating for shares of CNH Industrial with an average target price of $11.84.
Textron
Shares of Textron Inc. TXT closed at $47.11 on Tuesday for a market capitalization of $10.75 billion. The Providence, Rhode Island-based industrial conglomerate with interests in aerospace and defense industries has an earnings yield of 7.8% versus the industry median of 4.3% and a price-earnings ratio of 12.87 versus the industry median of 23.35.
The stock price is up 13.44% over the past five years, but shares still seems to be cheap according to the Peter Lynch chart.
Textron has received a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10 from GuruFocus.
Holding shares of the company grants a forward dividend yield of 0.17% as of Tuesday.
The stock has an overweight recommendation rating and an average target price of $56.21 per share.
Huntington Ingalls Industries
Shares of Huntington Ingalls Industries Inc. HII closed at $222.57 on Tuesday with a market capitalization of $9.2 billion. The Newport News, Virginia-based designer and builder of U.S. military ships has an earnings yield of 7.3% versus the industry median of 4.3% and a price-earnings ratio of 13.78 versus the industry median of 23.35.
The stock appears to be cheap based on the following Peter Lynch chart, despite a 110.33% rise in its share price in the past five years.
GuruFocus assigned the company a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10.
As of Oct. 29, the stock offers a forward dividend yield of 1.55%.
Shares of Huntington Ingalls Industries have an overweight recommendation rating and an average target price of $247.07.
Disclosure: I have no positions in any securities mentioned.
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