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The Zacks Analyst Blog Highlights: Owens-Illinois, Discovery Communications, Qorvo and Express Scripts

For Immediate Release

Chicago, IL - June 23, 2016 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Owens-Illinois, Inc. ( OI ), Discovery Communications, Inc. ( DISCA ), Qorvo, Inc. ( QRVO ) and Express Scripts Holding Company ( ESRX ).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Wednesday's Analyst Blog:

4 Stocks to Buy on Yellen's Valuation Warning

In her testimony before a Senate panel, Fed Chair Janet Yellen issued a warning about stocks being overvalued. This was in keeping with the views expressed by the central bank in its policy report submitted to Congress before the Fed Chair's testimony.

This is not the first time that Yellen has weighed in on equities being overvalued. The Fed Chair had expressed similar concerns about biotech and social media stocks two years earlier. Given the state of the markets and economy, it may be a good idea to add value stocks to your portfolio at this time.

Fed, Yellen Sound Valuation Alarm

In her testimony before the Senate panel on Tuesday, Yellen said that valuations were a matter of concern because of investor pessimism about corporate earnings. In other words, stock prices are on a slippery slope because of the dismal expectations about corporate earnings.

The Fed Chair's comments echoed similar fears expressed in the central bank's monetary policy report. In the report the Fed said forward price to earnings were at significantly higher levels compared to their medians over the last 30 years. Market watchers believe that the central bank has clearly stated that valuations of financial assets had increased because of the low interest rate environment.

Were Similar Concerns Justified in the Past?

Concerns about stocks being overvalued were nearly identical to those expressed two years earlier, though they centered on specific sectors. The Fed's monetary policy report issued in Jul 2014 had sparked concerns about "substantially stretched valuations" in Internet and biotech stocks.

At that time, Fed Chair Yellen had stressed that the Federal Reserve doesn't have a target for equity values; instead the central bank tries to figure out if valuations are outside historical norms. But what actually happened in the space of these two years?

During the period between Jul 15, 2014 and Jun 22, 2016, the Global X Social Media Index ETF gained 8.9% while the iShares NASDAQ Biotechnology ETF increased 2.5%. During the same period, the S&P 500 index advanced 5.6%. This means that the Fed Chair was correct about biotech stocks, since they underperformed the broader market.

However, a broader market decline did not follow and social media stocks actually gained over time. But this doesn't mean Yellen got it wrong. For instance, 20 years ago, the redoubtable Alan Greenspan had wondered if the market was suffering from "irrational exuberance."

After three years, the Nasdaq lost nearly 78% of its value. Given the multiple concerns the economy is combating now, a slide could come much sooner. It is worth remembering that Yellen has expressed concerns about weak business investment and below target inflation levels.

Our Choices

According to Thomson Reuters DataStream, the forward price-to-earnings ratio is currently at 16.47. In comparison, the median value for the last three decades is 14.86. If one takes the Fed's and Yellen's comments into consideration, picking stocks with lower forward price to earnings would make a lot of sense.

At the same time, it may be a good idea to consider options with good PEG ratios. Our selection is also backed by a good Zacks Value Score and Zacks Rank.

We narrowed down our choices with the help of our new style score system .

Our research shows that stocks with a Value Style Score of 'A' or 'B' when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.

Owens-Illinois, Inc. ( OI ) with its subsidiaries is presently the largest manufacturer of glass containers in the world.

Owens-Illinois holds a Zacks Rank #1 (Strong Buy) and has a Value Style Score of 'A'. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 8.38 and a PEG ratio of 0.78.

Discovery Communications, Inc. ( DISCA ) offers original and purchased programming in the U.S. and more than 200 other countries with over 100 television networks.

Discovery Communications holds a Zacks Rank #2 (Buy) and has a Value Style Score of 'A'. It has a P/E (F1) of 12.21 and a PEG ratio of 0.81.

Qorvo, Inc. ( QRVO ) is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications.

Qorvo holds a Zacks Rank #2 (Buy) and has a Value Style Score of 'B'. It has a P/E (F1) of 13.76 and a PEG ratio of 0.92.

Express Scripts Holding Company ( ESRX ) is the largest pharmacy benefit manager (PBM) in North America.

Express Scripts Holding holds a Zacks Rank #2 and has a Value Style Score of 'A'. It has a P/E (F1) of 11.76. It has a PEG ratio of 1.01, lower than the industry average of 1.14.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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OWENS-ILLINOIS (OI): Free Stock Analysis Report

DISCOVERY COM-A (DISCA): Free Stock Analysis Report

QORVO INC (QRVO): Free Stock Analysis Report

EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report

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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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