2022 will be a tough year for the US stock market, with all three major indices including the S&P 500, Dow Jones and NASDAQ posting their worst losses since the 2008 financial crisis. The index snapped his three-year winning streak and recorded an annual drop for the first time since 2018. The S&P 500, Nasdaq and Dow Jones have fallen about 20%, 33% and 9% respectively over the last year. The war between Russia and Ukraine, the devastated supply chain system, his super-hawkish Fed, stubborn inflation and recession fears have roiled markets.
To curb sticky inflation, the Fed has hiked interest rates seven times in 2022, raising the benchmark rate to a range of 4.25% to 4.50%. This is the highest interest rate in 15 years. The central bank has suggested holding rates longer until 2023 and not cutting them until 2024. Many analysts expect the stock to fall to new lows before rebounding in the second half of 2023.
Value investment is the way to go
Value investing can be one of the most effective investment approaches in this hair-trigger market. This strategy basically aims to profit from investing in stocks with strong fundamentals that appear to be trading at a discount to their intrinsic value. Value investors identify stocks that are undervalued in the stock market and trade below their true value when their stock price rises toward their true value reflecting true fundamentals. You can make a profit by purchasing
While PER is generally considered one of the most popular valuation metrics, there is another interesting ratio that you can consider to find compelling value stocks. And that’s the earnings yield. Consider unlocking portfolio value with these four high yielding stocks — Hillen Brand Co., Ltd. (hello – free report), Sociedad Kimika y Minera (SQM – free report), Reinsurance Group of America, Inc. (RGA – free report) and modine manufacturing company (mod – free report).
Understanding Earnings Yield
Information about certain key financial parameters is very important for a wise investor looking to invest money in bonds or stocks. He one of such important parameters is the profit margin. Earnings yield is measured as (annual earnings per share/market price) x 100. When comparing similar stocks, stocks with higher earnings yields are more likely to offer better returns, but other factors remain constant. When comparing stocks, if other factors are similar, stocks with high earnings yields are considered undervalued and stocks with low earnings yields are considered overpriced, so pick them.
While this ratio is essential for tracking undervalued stocks, it is also useful for comparing stocks to the market and bonds. This ratio is very useful when comparing market index performance to 10-year Treasury yields. If the market index yield is higher than his 10-year Treasury yield, then the stock can be considered undervalued relative to the bond. This shows that investing in the stock market is a better choice for value investors. Investing in a Treasury-bill is risk-free. However, there are always caveats to investing in stocks. Therefore, we recommend adding a risk premium to the government bond yield and comparing it to the stock or broader market earnings yield.
winning strategy
have set Earnings yield of 10% or more is a primary screening criterion, but it alone cannot select stocks that have the potential to generate solid returns. So I added the following parameters to the screen:
Estimated EPS growth over the next 12 months for the S&P 500 and above: This metric compares 12-month forecast EPS to 12-month actual EPS.
Over 100,000 average volume per day (20 days): A high trading volume means that the stock has sufficient liquidity.
Current price $5 or more.
Purchased stock: Stocks with a Zacks Rank of 1 (strong buy) or 2 (buy) are known to outperform their peers in all types of market environments.you can see See the full list of today’s Zacks #1 ranked stocks here.
our recommendations
Here we discuss 4 of the 93 stocks that passed the screening.
Hillenbrand is a global, diversified industrial company with multiple market-leading brands serving a variety of industries around the world. HI’s portfolio consists of two business segments: the Process Equipment Group and Batesville. Currently, the company is #1 in the Zachs Rank with a B Value Score.
HI’s Zacks consensus forecast for fiscal 2023 earnings suggests 8.14% year-over-year growth. Hillenbrand’s consensus mark for his EPS for fiscal 2023 was revised upward by 20 cents in the last 60 days. The company beat expectations in each of his four subsequent quarters, with an average surprise rate of 3.6% for him.
Sociedad Kimika: The Chile-based company manufactures and sells lithium and its derivatives. Sociedad Quimica sells its products in over 60 countries around the world. The stock is currently #1 on the Zachs Rank with a B Value Score.
SQM’s Sachs consensus forecast for 2023 revenue suggests 17.6% year-over-year growth. Sociedad Quimica’s 2023 EPS consensus mark was revised upward by 36 cents over the last 30 days. The company beat expectations in three of his four subsequent quarters and missed once. The average surprise rate was 37.4%.
Reinsurance Group of America: Timberlake-based Reinsurance Group of America is a leading global provider of traditional life and health reinsurance and financial solutions with operations in the United States, Latin America, Canada, Europe, the Middle East, Africa, Asia and Australia. Provider. The stock ranks #1 on Zacks and has an A Value Score.
RGA’s Zacks consensus forecast for 2023 earnings suggests 3% year-over-year growth. Reinsurance Group’s 2023 EPS consensus mark was revised upward by 13 cents over the past 30 days. The company beat expectations in three of his four subsequent quarters and missed once. The average surprise rate was 49.7%.
Modine Manufacturing: Modine Manufacturing operates primarily in a single industry, the manufacture and sale of heat transfer equipment, including heat exchangers for cooling all types of engines. The mod is currently #2 on Zacks Rank with an A Value Score.
The MOD’s Zacks consensus forecast for fiscal 2023 earnings suggests 43.1% year-over-year growth. Modine Manufacturing’s consensus mark for EPS for fiscal 2023 was revised upward by 6 cents in the last 60 days. The company beat estimates in each of his four subsequent quarters, with an average surprise rate of 62% for him.
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Disclosure: Zack Investment Research officers, directors and/or employees may own or sell short securities and/or hold long and/or short positions in the options described in this document. there is. Affiliated investment advisors may own or sell short securities and may have long and/or short positions in the options described in this material.
Disclosure: Zacks portfolio and strategy performance information is available at: https://www.zacks.com/performance
