With the S&P 500 down 7% year to date, we thought it would be helpful to present five companies with reasonable valuations that are bucking the market trend. Value stocks have had a good start to the year as investors are rotating out of higher-priced growth stocks into value. If this trend persists, the companies we highlight in this report may continue to do well even if the broader market continues lower.
This week’s scan results in two Financials (insurance companies), a Consumer Staple, Consumer Discretionary, and one in the Basic Materials sector. All five stocks are deep value options.
As shown below, each stock is up at least 10% this year but remains below its respective 52-week highs. In fact, three of them are at least 10% below their 52-week highs. All of the companies are trading above key moving averages, a feat that is not very common today- especially outside of value sectors.
Company Summaries (all descriptions courtesy Zacks)
TRINSEO PLC is a materials solutions provider and manufacturer of plastics and latex binders. It serves automotive, consumer electronics, appliances, medical devices, packaging, footwear, carpet, paper and board, and the building and construction sector.
TSE gave up quite a bit of gain in 2021 before it formed a local bottom in late August through September. In December, the stock began forming a series of higher highs and higher lows, which has led to the stock gaining 10.2% YTD. Even considering its recent outperformance, TSE remains 26.5% below its 52-week high.
Abercrombie & Fitch (ANF)
Abercrombie & Fitch Co. operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East.
Despite delivering the second-highest YTD return of the screen results (14.67%), ANF is the second furthest from its 52-week high (-17.79%). December 2021 was rough for the stock, which found a bottom in January and has been on a tear since. Decreasing volume on this rally warrants caution. It could signal that buyers are reaching short-term exhaustion, especially with the stock retreating from two standard deviations above its 20-dma.
Headquartered in Chattanooga, TN, Unum Group (UNM) was created following the Jun 1999 merger of Provident Companies, Inc. and Unum Corporation. Along with disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits, and related services.
UNM trades at the lowest P/E on the list and has delivered the highest YTD returns (19%). The stock has been recovering from a rough period in 2021, which leaves UNM 11.3% below its 52-week high. Recently heightened volatility has expanded its Bollinger bands, with the stock is trading nearly two standard deviations above its 20-dma. UNM may look for support at the 20-dma before retesting the 50-dma if that fails.
Prudential Financial (PRU)
Headquartered in Newark, NJ, Prudential Financial Inc. was founded in 1875. Through its subsidiaries and affiliates, this financial services leader offers an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services.
Not only is PRU surviving the storm, but it appears to be thriving in it. PRU is trading 6.2% below its 52-week high as it retests support at the 20-dma. If that holds, the stock may try breaking to new highs. If the 20-dma fails, however, the next stop will likely be the 50-dma.
Tyson Foods (TSN)
Headquartered in Arkansas, Tyson Foods Inc. was founded in 1935. It is the biggest U.S. chicken company and produces, distributes, and markets chicken, beef, pork as well as prepared foods.
In a similar fashion to PRU, TSN is doing quite well YTD. In contrast to the first three stocks we covered, PRU and TSN remained in clear uptrends throughout 2021 and are now adding to that performance. If the stock can’t find support at its 20-dma, TSN may attempt to fill the recent gap up before testing its 50-dma.
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry, and/or economic trends. Investment themes may not always represent our current forecast.
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.