Here Are 10 of the Cheapest Stocks in the S&P 500 By Andrew Bary June 23, 2020 11:35 am ET Order Reprints Print Article Text size Tiffany Hagler-Geard/Bloomberg One way to play a potential revival in out-of-favor value investing is a classic approach: buying stocks with low price-to-earnings ratios. Barron’sscreened the S&P 500index for the 10 companies with the lowest P/E ratios based on projected 2020 earnings and market values above $5 billion, using FactSet. All 10 companies have P/E ratios below eight, and some of them also look inexpensive based on low price-to-book ratios. The group includes some well-known companies like ViacomCBS (ticker: VIAC), Walgreens Boots Alliance (WBA), Prudential Financial(PRU), and MetLife(MET). All these stocks have been hit this year, with the average decline among the 10 at nearly 30%. There are some high yielders among the names. Telecom provider CenturyLink(CTL) carries a dividend of about 10%, Prudential yields 7%, and investment manager Invesco(IVZ) has a dividend of 5.6%. Value stocks are doing poorly this year, thanks to losses in financial, energy, and industrial stocks. The iShares Russell 1000 Growth(IWF) exchange-traded fund is up 9% year-to-date, against a 15% decline in the iShares Russell 1000 Value ETF (IWD). Bargain Stocks Here are the 10 companies in the S&P 500 index with market values above $5 billion with the lowest price-to-earnings ratios. Company / Ticker Recent Price 2020E EPS 2020E P/E YTD Change Mylan/ MYL $16.16 $4.39 3.7 -20% Lincoln National/ LNC 69.60 8.36 4.7 -33 ViacomCBS/ VIAC 23.69 3.77 6.3 -44 MetLife/ MET 37.32 5.39 6.9 -27 Prudential Financial/ PRU 63.09 9.20 6.9 -33 Invesco/ IVZ 11.09 1.53 7.2 -38 Discovery/ DISCA 22.15 2.96 7.5 -32 HP Inc. / HPQ 16.78 2.15 7.8 -18 CenturyLink/ CTL 10.15 1.29 7.9 -23 Walgreen Boots Alliance / WBA 44.13 5.62 7.9 -25 Note: Price and YTD Change data as of June 19. Estimates are for calendar 2020. E=Estimtate. Sources: FactSet; Bloomberg If an investor had purchased the 20% of the S&P 500 with the lowest P/E ratios at the start of the year, the return would have been negative 23% through Friday, against a 3% drop in the S&P 500 index. With the return gap so wide between value and growth, value is cheap historically and may finally be poised to outperform. Traditional media plays like ViacomCBS and Discovery(DISCA) are out of favor as investors worry about cord-cutting, recent hits to advertising, and the effect of streaming services on their bottom lines. Both ViacomCBS and Discovery, however, are favored by J.P. Morgan analyst Alexia Quadrani, who recently wrote that ViacomCBS “is simply not priced appropriately for the ultimate value of its content and brands.” The shares, at around $23, trade for little more than six times projected 2020 earnings of $3.77 a share. She has an Overweight rating on ViacomCBS and lifted her price target to $32 from $27 a share. Discovery trades around $22, or less than eight times projected 2020 earnings of $2.91 a share. Quadrani noted recently that Discovery’s cable channels TLC, Food Network, and HGTV have been doing well as “consumers seek out comfort TV.” She has an Overweight rating and a $28 price target. Life insurance stocks like Prudential, MetLife, and Lincoln National(LNC) have been hit by the sharp drop in interest rates, higher claims from Covid-19 related deaths, and sales disruptions from the virus. The insurers have complex balance sheets and may incur charges to their book value as a result of the low-rate backdrop, which depresses investment income. But the insurers have emphasized their financial strength and their stocks appear inexpensive. MetLife, at $37, and Prudential, at around $63, trade for about seven times projected 2020 earnings. Both are valued at a fraction of book value. Mylan(MYL), a leading generic drug company, will roughly double in size assuming it completes its merger with Pfizer’s Upjohn, which has an off-patent branded and generic drug business. The deal is expected to close in the second half of this year. Mylan is contending with a tough environment for U.S. generic drugs, but the Upjohn deal should broaden its portfolio. Mylan, at around $16, trades for just four times projected 2020 and 2021 earnings. Shares of HP(HPQ), at around $17, are depressed because of concerns that the work-from-home trend will crimp the company’s lucrative printer business. Write toAndrew Bary at andrew.bary@barrons.com https://www.barrons.com/articles/th...STS_technology&refsec=hp_INTERESTS_technology
If VIAC came down to 20.50, would buy as it in uptrend but recent too strong pull up, requires more of retracement for me to buy in and hedge entry.