3 Stocks For Value Investors To Buy As Market Reaches New High
Zacks Investment Research | Nov 28, 2019 07:06AM ET
The stock market closed at a record high today as the DJIA rose over 42 points and the S&P 500 gained 0.4%. The optimism in the equity market was ignited by the better-than-expected GDP growth in the third quarter, after Q3 domestic GDP was revised higher to 2.1% from a previous reading of 1.9%
This helped Wall Street feel better about the general health of the US economy, as U.S.-China trade war optimism continues. The strong domestic economy has fueled the stock market’s historic run that, in turn, has inflated the valuation of many big-name stocks.
As equities continue to climb higher, let’s take a look at a few stocks with more buyer-friendly valuations.
Citigroup (NYSE:C) is coming off a third quarter where it saw its revenue grow around 1% and its earnings climb 20%. The top and bottom-line growth was driven by a strong global consumer banking segment that popped 2% higher to $8.66 billion. Citigroup also saw its business improve in the EMEA region, with revenue up 6%.
Citigroup’s stock currently trades around 9X its forward earnings, which is below the industry average of 12X. The firm also pays out a quarterly dividend with a 2.7% yield that can anchor returns in times of broader market turbulence.
The bank stock sits at a Zacks Rank #3 (Hold) and has made a solid run in 2019 as its shares have climbed over 45% to outpace industry peers such as JP Morgan (NYSE:JPM) , Bank of America (NYSE:BAC) , and PNC (NYSE:PNC) .
Sonic Automotive (NYSE:SAH) is a stock that has been on an absolute tear in 2019 as its shares have soared over 143%. The automotive retailer is also coming off a third quarter where its total sales spiked 9.4% and its earnings grew 83%. Its EchoPark business continued its impressive success with a 67.9% hike in sales in the third quarter. The EchoPark business is on track, according to management, to bring in over $1 billion in fiscal 2019, which can bolster SAH’s bottom-line.
EchoPark’s provides what the company describes as bringing “Costco-like (NYSE:C) deals” to consumers through pre-owned vehicle lots. Our Q4 consensus estimates forecast earnings to rise 15.8% to $0.88 per share and for sales to rally 7.4% to $2.77 billion.
SAH stock trades for about 13X its forward earnings compared to the industry average of 12X forward earnings, which is still respectable considering the massive run the stock has been on in 2019. The company also pays out a dividend with a 1.21% yield and has an average EPS surprise of 31.6% over the last for quarters. Plus, Sonic Automotive has had its earnings estimates revised higher recently to help earn the stock a Zacks Rank #1 (Strong Buy).
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AbbVie (NYSE:ABBV) has been riding the success of Humira for a long time, which has been its highest revenue-generating drug in recent years. However, the large cap pharma has not sat idly by as Humira’s US patent nears its expiration date. The company has been actively developing a strong pipeline of next-generation immunology and oncology drugs, such as Imbruvica and Venclexta to treat blood cancer and Skyrizi to treat psoriasis.
In addition to the moves the firm has made in immunology and oncology, AbbVie announced in June that it would acquire Allergan (NYSE:AGN) , which is known for its blockbuster drugs such as Botox and Restasis. The continued efforts to expand its drug pipeline should bode well for the company as it weens itself off its cash cow.
AbbVie trades for about 9X its forward earnings, which is well below the industry average of 15X forward earnings. The large cap pharma firm also pays out a dividend with the highest yield on this list at 4.88%, which further cements the stock’s value. Our fiscal 2019 estimates call for a top-line gain of 1.74% to $33.32 billion and a 12.9% bottom-line jump to $8.93 per share.
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