Over the past decade, the market has primarily been driven by high-flying growth stocks, but that appears to be changing with value stocks now taking charge. And I’ve got three great value picks to share with you below, so keep reading.
The rotation into value stocks from growth started last fall as pharmaceutical companies announced positive trial results for their vaccines. This indicated that the economy would begin to rebound with an improving macro-outlook. Value stocks tend to outperform during these times.
Value stocks got another boost over the past six weeks as markets have become volatile as bond yields increased, putting pressure on growth stocks. An improving economic outlook is typically tied to continuously rising bond yields and higher inflation expectations, making it a perfect time for value shares to shine.
That’s why I am recommending buy-rated stocks such as Magna International, Inc. (MGA), POSCO (PKX), and Bunge Limited (BG).
Magna International, Inc. (MGA)
MGA is one of the world’s largest and most-diversified auto suppliers. It manufactures auto interiors, engine parts, interior and exterior trim, body structures, mirrors, electronics, sunroofs. Its capabilities are so diversified, the company even designs and assembles complete vehicles. The company has been growing in leaps and bounds due to takeovers from competitors and consolidation of smaller companies.
MGA is benefiting from disruptive technologies such as powertrain electrification and autonomous technologies. The U.S. election result was another win for the company due to the administration’s policies that would subsidize electric and autonomous vehicle technologies. Plus, automakers are consolidating their purchases with fewer suppliers, making MGA the primary beneficiary since their offerings are so broad.
The company has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. MGA has a Value Grade of B, which makes sense since with a forward P/E of 11.49. The company also has a price-to-cash-flow ratio of 12.2, well below the industry average.
The firm has a Sentiment Grade of A, which means Wall Street analysts love the stock. According to the StockNews Price Target feature, thirteen out of eighteen analysts have a Strong Buy or Buy rating on the stock. We also grade MGA on Growth, Momentum, Stability, and Quality. You can find those grades here.
MGA is ranked #9 in the A-rated Auto Parts industry. You can find other top stocks in this industry by clicking here.
PKX is the largest steel producer in South Korea, controlling 40% of South Korean domestic market share. It is also one of the top steel producers globally. PKX mainly produces flat steel and stainless steel from its two integrated steel facilities. The company is exposed to the auto, shipbuilding, home appliance, engineering, and machinery industries.
The company is poised to benefit from an increase in steel demand as COVID worries die down. An improving economy creates demand from steel-consuming industries such as automotive, shipbuilding, and construction. PKX should also see increased steel orders from China due to their local stimulus policies and faster project approvals. Plus, the company benefits from economies of scale as its two primary integrated steel mills are the largest in the world.
PKX has an overall grade of A or a Strong Buy rating in our POWR Ratings system. It also has a Value Grade of A with a trailing P/E of 15.13 and a forward P/E of 10.12. The company has a Stability Grade of B, indicating that its price returns and growth are stable. To access all of PKX’s grades (Growth, Momentum, Sentiment, and Quality), make sure to click here.
PKX is ranked #10 in the A-rated Steel industry. For other top-ranked stocks in this industry, click here.
Bunge Limited Bunge Limited (BG)
BG is a global agribusiness and food company with operations along the farm-to-consumer food chain. Its agribusiness segment generates roughly two-thirds of profits and includes the largest oilseed processing capacity globally.
The company has a large footprint in South America, which is expected to increase grain merchandising volumes. BG’s movie into edible oils also gives the company more room for growth going forward. Plus, since BG is a major processor of soybeans, which are crucial in animal feeds, the company should see gains as emerging economies consume more meat. In the near-term, though, the firm should see increased profits from higher crop prices.
BG has an overall grade of B or a Buy rating in our POWR Ratings service. The company also has a Growth Grade of A, which isn’t surprising as its earnings are forecasted to soar 210.4% year over year this quarter. BG also has a Value Grade of B, making this a growth at a reasonable price (GARP) stock. Its trailing P/E is quite low at 9.8, and its forward P/E is 12.22.
You can see BG’s other grades (Momentum, Stability, Sentiment, and Quality) at this link. BG is ranked #7 in the Agriculture industry. You can find other top stocks in this industry by clicking here.
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MGA shares were unchanged in after-hours trading Thursday. Year-to-date, MGA has gained 22.47%, versus a 4.57% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
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