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Be Your Own Santa: 4 Incredible Value Stocks to Buy

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Let's face it, with the third-quarter earnings just round the corner, a rosy second half and continued momentum in 2016 seem to be no less than a dream.

The S&P 500 plunged 6.9% in the third quarter to 1,920, worse than the 14.3% drop in third-quarter 2011.

Investors must be thinking that the worst is over, as October, November and December are historically the strongest months for stocks.

The S&P 500 gained more than 4% in fourth-quarter 2014 and 10% in fourth-quarter 2013. In 2011, the index plunged 14% in the third quarter, but made up for it with 11% gain between October and December.

No wonder, some traders started referring to the fourth-quarter bump as a Santa Claus rally!

According to Bespoke, though history shows fourth quarters to be mostly positive for stocks, the odds are lower when the S&P is negative year-to-date post the third quarter.

It is currently down 6.7% year-to-date.

In simpler terms, it is not enough to simply rely on the calendar while making investment decisions. You have to look at fundamentals as well as the current scenario to predict a rally.

The Current Scenario

After the worst quarter in four years, we believe that the stock market has very slim chances of bouncing back strongly in the fourth quarter this year given that several headwinds persist.

The Fed's inaction raised doubts about the U.S. outlook as well. After all, if the U.S. economy still needs crisis-era interest rates after seven years of growth, then it must be fairly fragile in the face of emerging global challenges. Markets were jittery in the run-up to this month's Fed meeting and the situation has only worsened since then.

The most worrying factor is, without a doubt, the slowing Chinese economy. At the same time, the market faces a possibly dismal earnings season, with profits expected to shrink. China does have the potential to negatively impact - directly or indirectly - the corporate outlooks.

China, which reports its GDP in the third week of October, will be a major focus for investors, particularly after the Fed blamed the weakness in the country for not hiking rates in September.

The other major factor affecting the markets is the possibility that the Fed could raise interest rates for the first time in nine years at either of the meetings to be held on Oct 28 and Dec 16.

This could mean volatility at that time.

Considering the headwinds, we doubt that there will be a significant Santa Claus rally this year.

But don't fret and don't flee. Days like these are when money is minted on the market. March ahead and scoop up strong stocks that will sail through this volatility. Don't be emotional, instead be a smart investor and fortunes will find their way into your portfolio. This is the time to be your own Santa!

With the stock market being in a correction mode, now's the time to look for the best value bargains as they hold much promise.

How to Be Your Own Santa

Forget the red coat and the white beard. All you need is our new style score system. This system helps you choose stocks with bright prospects, and their attractive valuations serve as the perfect opportunity for investors to cash in on anticipated growth.

Please note that the Zacks Style Score for value takes into account all valuation metrics to give us an actionable metric that helps identify stocks truly trading at a discount to intrinsic value. Back-tested results show that stocks with Style Scores of 'A' or 'B' when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) handily beat other stocks.

Based upon the above criteria, we have selected four stocks that could be promising picks for fourth-quarter 2015.

All the stocks below carry a Zacks Rank #1 and a Value Style Score of "A."

Cal-Maine Foods, Inc. CALM

Cal-Maine is one of the largest producers and distributors of fresh shell eggs in the U.S.

Right now, the company has a forward P/E of just 4.7x, which means that investors are paying $4.7 for each dollar in expected Cal-Maine's earnings this year. Compared with the industry at large, this is favorable as the overall space has an average P/E of 18.80x.

Over the past 60 days, the stock witnessed positive estimate revisions, while the Zacks Consensus Estimate climbed 37.3% to its current level of $11.55 a share for the current year.

Braskem S.A. BAK

Braskem is one of the biggest petrochemical operations in Latin America and among the five largest private companies in Brazil.

Over the past 60 days, the stock witnessed positive estimate revisions, which led the Zacks Consensus Estimate to climb 25.8% to its present level of $1.17 per share for the current year.

What's more, this stock has a P/E of only 7.17, as against the industry P/E of 10.70.

Jabil Circuit Inc. JBL

Jabil Circuit, Inc. is a worldwide independent provider of electronic manufacturing services.

Currently, Jabil has a forward P/E of 9.85, lower than the industry P/E of 12.40.

Over the last 60 days, the stock witnessed positive estimate revisions, which led the Zacks Consensus Estimate to climb 17% to its present level of $2.27 a share for the current year.

AerCap Holdings N.V. AER

AerCap is an integrated global aviation company with a leading market position in aircraft and engine leasing, trading and parts sales.

Over the past 60 days, the stock witnessed positive estimate revisions, which led the Zacks Consensus Estimate to move up 11.9% to its present level of $6.09 a share for the current year.

This stock has a P/E of just 6.2, as against the industry P/E of 11.90.

Happy Holidays!

The holiday season is here. Given the current scenario, you might think that it won't be a happy on.

Make it happy - just stick to the fundamentals and be your own Santa!

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JABIL CIRCUIT (JBL): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

AERCAP HLDGS NV (AER): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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