What are we looking for?
The S&P 500 is currently trading within 3 per cent of its all-time high, but upward momentum has stalled in the past week, as large-cap tech stocks face continued pressure. Market volatility has surged. Despite the broader market’s challenges, select sectors are showing strength, offering potential upside for value investors seeking solid valuations.
The screen
Using Trading Central’s Strategy Builder, we screened the U.S. market for companies with strong valuations across sectors currently outperforming amid the tech sector’s downturn. We set a minimum market capitalization of US$10-billion and focused on utilities, consumer staples, real estate, financials, and healthcare – sectors that have been trending higher.
Our filter applied a price-to-earnings (P/E) ratio of 24 or lower, below the S&P 500′s P/E as of Sept. 4. We also integrated Trading Central’s Value Factor, based on the TC Quantamental Rating, which assesses earnings yield, price-to-book ratio, and free cash flow. A minimum Value Factor rating of 55 out of 100 was set, highlighting stocks with robust value potential.
Additionally, we screened for companies with a five-year historical earnings-per-share (EPS) growth rate of at least 10 per cent, offering insights into long-term earnings performance.
Year-to-date and one-year returns were also included in the analysis.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
At the top of our list is Unum Group UNM-N, a leading provider of workplace benefits and services in the insurance sector. With a market capitalization of US$10.25-billion and a strong TC Value Factor rating of 70 out of 100, Unum demonstrates strong value potential. The company’s five-year EPS growth rate is an impressive 22.26 per cent. Despite being just 7-per-cent below its all-time high, Unum has the lowest P/E ratio on our list, at only 8.1.
HCA Healthcare HCA-N, which owns and operates hospitals, surgery centres, and emergency care facilities, boasts the largest market capitalization on our list at US$101.76-billion. The stock has delivered the strongest one-year performance, soaring 43.6 per cent and reaching a fresh record high just last week. With a solid TC Value Factor rating of 66 out of 100 and a P/E ratio of 18.51, HCA Healthcare presents a compelling case for investors focused on both growth and value.
Everest Group Inc. EG-N a Bermuda-based global insurance underwriter has the highest TC Value Factor rating on our list at 71 out of 100. The company also has the highest five-year EPS growth rate on our list at 91.36 per cent and the second-lowest P/E ratio on our list at just 5.77.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.