Tags: cheap | stocks | contrarians

Barron's: 10 Cheap Stocks for Contrarians

Barron's: 10 Cheap Stocks for Contrarians
(Diamant24-stocks/Dreamstime)

By    |   Friday, 31 July 2020 09:00 AM

There are few more contrarian ways to invest now than buying companies with low price-to-book ratios, Barron's advised savvy bargain hunters.

Rather than the highest-flying stocks, sometimes the best stocks to buy are the ones that everyone else is selling, US News and World Report recently explained.

Barron’s recently screened the S&P 500 using FactSet for stocks with the lowest price-to-book ratios and selected the 10 cheapest ones that have market values of $5 billion or more.

Most of them trade for 40% to 50% of book value. All 10 stocks have been hit hard this year with an average decline of almost 40%.

“Buying depressed stocks with low price-to-book ratios is a classic value investing approach that harks back to famed 20th-century value investing pioneer Benjamin Graham and long was a popular way to find bargains. The idea was that investors could get a dollar’s worth of assets for 50 cents and eventually the market would close the gap,” Barron’s said.

“But as growth-stock investing has crushed value strategies in recent years, the idea of buying stocks with low price-to-book ratios has fallen from favor,” Barron’s said.

The approach increasingly is seen as a relic of a different time and a recipe for buying stocks that more likely will be losing, value “traps” rather than attractive investments.

A low price-to-book strategy, however, is so unpopular now that it finally may start to work.

Here are the 10 stocks that Barron's found in the S&P 500 index with the lowest price/book ratios and market values above $5 billion.

  1. Lincoln National (LNC)
  2. Prudential Financial (PRU)
  3. American International Group (AIG)
  4. Carnival (CCL)
  5. Diamondback Energy (FANG)
  6. Capital One Financial (COF)
  7. Citizens Financial Group (CFG)
  8. Molson Coors Beverage (TAP)
  9. Loews (L)
  10. MetLife (MET)

Meanwhile, a large investor that embraces contrarianism has made big changes in its U.S.-traded investments, including shares in large pharmaceutical companies in the second quarter, Barron's also reported.

Hexavest of Montreal, which manages nearly $10 billion in assets, sold nearly all its Walmart stock (ticker: WMT), and slashed positions in Merck (MRK) and Pfizer stock (PFE) in the quarter, Barron's said. Hexavest, which is 49% owned by Eaton Vance (EV), also bought more Eli Lilly stock (LLY).

However, some respected financial minds are sending strong warning signals about the market's future.

Investment guru Jim Chanos warns savvy stock-pickers that the seemingly endless soaring market is near the end. “Trouble’s coming, I don’t know when, but it’s coming,” the short-selling legend who just cashed in a roughly $100 million winning bet recently told the Financial Times.

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Barron’s recently screened the S&P 500 using FactSet for stocks with the lowest price-to-book ratios and selected the 10 cheapest ones that have market values of $5 billion or more.
cheap, stocks, contrarians
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2020-00-31
Friday, 31 July 2020 09:00 AM
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