The popularity of value stocks relative to growth has waned in recent years, but many investors still like to focus on value investing, or investing in stocks considered undervalued based on traditional valuation metrics like price-to-earnings (or P/E) and price-to-book.
Yet while there are scores of value and deep value opportunities out there, you may want to figure out which value stocks are in the “Green Zone.”
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to your positions. View any move into the “Red Zone” as a warning sign to exit your position for now.
With this, let’s take a look at three value stocks to buy, each of which is currently in the “Green Zone.”
Comcast (NASDAQ:CMCSA) has been in the “Green Zone” for over four weeks. Shares in the telecommunications and media giant have performed well this year, rising by a total of 22.77%. Yet even after this solid move higher year-to-date, CMCSA remains firmly in the value stocks category.
At current prices, CMCSA stock trades for 11.2 times forward earnings. Yes, to many, this relatively low valuation may be justified. Last quarter, the company reported a surprise loss of broadband internet customers. The “cord cutting” trend continues to drive much uncertainty over Comcast’s legacy cable and cable networks businesses.
Still, as its Peacock streaming platform keeps growing at a rapid clip (year-over-year growth of 80%), and subscription price increases are forthcoming, Comcast may be well-positioned to report stronger results in the coming year. TradeSmith’s volatility quotient for CMCSA is 19.97%, which makes it a medium risk stock.
JPMorganChase (NYSE:JPM) has been in the “Green Zone” for over a month. Shares in this leading banking institution have been on a strong upward trajectory lately, but even after this extended rally, this remains one of the “Green Zone” value stocks.
JPM stock trades for only 9.6 times earnings. This multiple is below JPM’s average valuation over the past ten years (11.9 times earnings). Rising interest rates have of course played a role in this, yet if rates begin to come down in 2024, JPMorganChase could experience a re-expansion of its forward multiple.
Although sell-side forecasts call for JPM to report an earnings decline, it’s not a lock that this will happen. With this bank beating on earnings four quarters in a row, results could still come in better than currently expected. TradeSmith’s volatility quotient for JPM is 19.98%, which makes it a medium risk stock.
ConocoPhillips (NYSE:COP) has been in the “Green Zone” for more than five months. Sliding crude oil prices have resulted in a more sideways performance for shares in the energy giant lately, but if you’re looking for value stocks to buy, consider it still well-worth considering.
Why? While COP stock (at 12.5 times forward earnings) trades at a premium to other large integrated oil and gas companies, this valuation may be more than reasonable. Sell-side forecasts call for earnings to rise by around 14.5% next year, with the top end of estimates calling for even higher levels of earnings growth.
Back in November, ConocoPhillips reported an earnings beat. The company also hiked its dividend by 14%, and also remains committed to returning cash to investors through its share repurchase program. TradeSmith’s volatility quotient for COP is 29.4%, which makes it a medium risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
TradeSmith’s mission is to put easy-to-use, technology-based tools into the hands of individual, self-directed investors. TradeSmith began as a simple way to track portfolios using trailing stops and has evolved to become a powerful suite of risk-management and portfolio analysis tools.