These 23 undervalued stocks promise high returns

The daily development of the German stock index Dax is shown on the exhibition board on the Frankfurt Stock Exchange. dpa

US stock markets fell last week as investors worried about long-term inflation.

Julian Emanuel, Evercore’s chief strategist, does not expect a recession, but expects more volatility.

Emanuel believes that these 23 stocks should perform well due to their low prices and high dividends.

Stock prices fell late last week as investors prepared for the latest US Inflation Report. When it was released, it confirmed some of their worst fears.

The U.S. Bureau of Labor Statistics said Friday that inflation hit a 41-year high in May, with prices rising 8.6 percent. Investors had hoped the price rise would slow after peaking in March and falling slightly in April. If inflation slowed, many believed that the US Federal Reserve (FED) would take a break from raising interest rates and that the economy could do better.

But inflation continues. This means that interest rate hikes are likely to last longer and that the economy is likely to weaken further.

The losses obliterated the slight recovery in equities in recent weeks, with the leading US index S&P 500 recently 20 percent below its highest level in January. Julian Emanuel, chief strategist at investment bank consulting firm Evercore, nevertheless believes the shares will return soon.

The turbulence of recent months is part of an ongoing “high volatility cycle” that will last about six years. Given the high volatility and tightening of monetary policy, Emanuel recommends investors buy weak stocks, sell rising stocks, hold cash and hedge with option strategies.

In a recent note to his clients, he explains that overall stock market valuations will fall and that value stocks that are cheaper based on metrics like price-to-earnings multiples would perform better.

“After 15 years of underperformance, we predict that rising interest rates, rising inflation and continued growth will cause value stocks to take the lead over growth stocks in 2022. We expect this trend reversal to be measured in quarters or years,” he said.

Of these 23 stocks, Emanuel expects them to perform better during the year as they are traded at lower values ​​than usual and can provide investors with solid returns in the form of dividends.

Shares are ranked from highest to lowest based on their estimated price-to-earnings ratio for 2022. The lower the price-to-earnings ratio, the cheaper a stock is considered to be. The free cash flow and the dividend, ie. the ratio between the dividend and the share price as a percentage, each refers to the last 12 months.

23. MGM Resorts International

Market Insiders

Ticker: MGM

Industry: entertainment, hotels

Share return: 17.1 percent

Free cash flow return: 7.4 percent

Estimated PER 2022: 33.3

Source: Evercore

22. MetaPlatforms

Market Insiders

Ticker: META

Industry: communication services

Share return: 9.7 percent

Free cash flow return: 6.5 percent

Estimated P / E for 2022: 16.3

Source: Evercore

21. Charter communication

Market Insiders

Ticker: CHTR

Industry: communication services

Share return: 18.3 pct

Free cash flow return: 8.9 percent

Estimated P / E for 2022: 15.9

Source: Evercore

20. Quest Diagnostics

Market Insiders

Ticker: DGX

Industry: healthcare

Share return: 14.6 percent

Return on free cash flow: 7.8 percent

Estimated P / E for 2022: 14.8

Source: Evercore

Market Insiders

Ticker: LSXMA

Industry: communication services

Share return: 6.2 percent

Free cash flow return: 9.6 percent

Estimated P / E for 2022: 13.4

Source: Evercore

18. LKQ

Market Insiders

Ticker: LKQ

Industry: car parts

Share return: 8.2 percent

Free cash flow return: 6.7 percent

Estimated P / E for 2022: 12.8

Source: Evercore

17. Laboratory Corp. by America Holdings

Market Insiders

Ticker: LH

Industry: healthcare

Share return: 7.0 percent

Free cash flow return: 7.4 percent

Estimated P / E for 2022: 12.4

Source: Evercore

16. Morgan Stanley

Market Insiders

Ticker: MS

Industry: finance

Share return: 10.9 pct

Free cash flow return: 37.3 percent

Estimated P / E for 2022: 11.2

Source: Evercore

15. Bank of America

Market Insiders

Ticker: BAC

Industry: finance

Share return: 9.6 percent

Free cash flow return: 8.5 percent

Estimated P / E for 2022: 10.9

Source: Evercore

14. Bank of New York Mellon

Market Insiders

Ticker: BK

Industry: finance

Share return: 12.5 percent

Free cash flow return: 16.9 percent

Estimated P / E for 2022: 10.2

Source: Evercore

13. Marathon Petroleum

Market Insiders

Ticker: MPC

Sector: Energy

Share return: 14.7 percent

Free cash flow yield: 6.9 percent

Estimated P / E for 2022: 9.6

Source: Evercore

12. Celanese

Market Insiders

Ticker: CE

Industry: materials

Share return: 6.2 percent

Free cash flow return: 7.4 percent

Estimated P / E for 2022: 8.8

Source: Evercore

11. NVR

Market Insiders

Ticker: NVR

Industry: housing

Share return: 12.3 pct

Free cash flow return: 7.3 percent

Estimated P / E for 2022: 8.7

Source: Evercore

10. Discover financial services

Discover financial services
Market Insiders

Ticker: DFS

Industry: finance

Share return: 11.7%

Free cash flow return: 17.2%

Estimated P / E for 2022: 7.3

Source: Evercore

9. Nucor

Nucor Markets Insiders

Ticker: DFS

Industry: materials

Share return: 12.5%

Free cash flow return: 14.6%

Estimated P / E for 2022: 4.9

8. Fidelity National

Source: Evercore

Fidelity National
Market Insiders

Ticker: FNF

Industry: finance

Share return: 7.8%

Free cash flow return: 28.8%

Estimated P / E for 2022: 6.9

Source: Evercore

7. Marathon Oil

Marathon oil
Market Insiders

Ticker: MRO

Industry: energy

Share return: 6.6%

Free cash flow return: 12.1%

Source: Evercore

Estimated P / E for 2022: 6.6

6. Capital One Financial

ConocoPhillips
Market Insiders

Ticker: served

Industry: finance

Share return: 21.1%

Free cash flow return: 14.8%

Estimated P / E for 2022: 6.2

Source: Evercore

5. Synchrony Financial

Synchrony Financial
Market Insiders

Ticker: SYF

Industry: finance

Share return: 2.30%

Free cash flow return: 33.9%

Estimated P / E for 2022: 6.1

Source: Evercore

4. Builder First Source

Builders First Source
Market Insiders

Ticker: BLDR

Industry: Industry

Share return: 18.1%

Free cash flow return: 16.3%

Estimated P / E for 2022: 5.3

Source: Evercore

3. Lennar

lennar
Market Insiders

Ticker: LEN

Industry: consumer goods

Share return: 9.9%

Free cash flow return: 8.0%

Estimated P / E for 2022: 4.9

Source: Evercore

2. Steel dynamics

Steel dynamics
Market Insiders

Ticker: STLD

Industry: raw material

Share return: 10.6%

Free cash flow return: 10.5%

Estimated P / E for 2022: 4.1

Source: Evercore

1. Pulte Group

PulteGroup
Market Insiders

Ticker: PHM

Industry: consumer goods

Share return: 12.9%

Free cash flow return: 8.2%

Estimated P / E for 2022: 4.1

Source: Evercore

This article is translated from English to German. You can find the original here. PC

Disclaimer: Equities and other investments are always associated with risk. A total loss of invested capital can also not be ruled out. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. Nor do they replace professional advice.

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