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Finding Value in a Record Market

Wednesday, November 06, 2019 08:00 AM | Michael Fowlkes

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Finding Value in a Record Market

All of the major indexes are trading at record highs as the bulls continue to drive stocks higher.

There is once again renewed optimism of a possible trade deal between the U.S. and China, with both sides signaling a partial trade deal could be made by the end of November. The markets are pricing in the optimism, which creates risk in the event that one or both sides sour on the partial deal and walk away from negotiations. This would not be the first time optimism has been short-lived in the lingering trade war.

The Federal Reserve is also helping to boost the market with three interest rate cuts so far in the year. Lower rates should help offset a slowing economy which is being created, in part, by the trade war. If a deal is reached while rates are falling the market has significant upside potential.

For investors, it has been a great year, but it is also a time of caution as stocks continue to hit new highs and valuations become a concern.

It is a good time to keep you money at work in the market, but also a time to make sure you are looking for the best value possible just in case the market starts to correct and low value stocks will be hit the least.

The following stocks are each trading at 52-week or all-time highs, but continue to present good value for investors looking for stocks with additional upside potential.

Apple (AAPL)

Tech giant Apple (AAPL) hit a new all-time high in today's trading at $258.19. The stock has moved steadily higher through the year. Apple has done a fantastic job growing its services division which has helped the company in a period of slowing iPhone sales. The iPhone remains the company's biggest revenue stream, but its rapidly growing services segment is catching up and has Wall Street excited about the future growth prospects of the company even as the saturated smartphone market impacts iPhone sales. Apple is also vulnerable to the trade war with China since it has extensive manufacturing operations in the nation and relies on the Chinese consumer for iPhone sales. Apple has been granted exceptions from some tariffs, but the trade war has kept shares from their true potential and if a deal, or even partial deal, is reached in the next few months the stock should really rally. AAPL is trading at 17 times future earnings. Analysts expect Apple to continue to grow profits at an annual rate of 9.9% over the next five years. Analysts have an average price target of $257.67 on the stock.

AutoNation (AN)

Auto deal AutoNation (AN) hit a new 52-week high in today's action at $53.17. The stock has posted steady gains over the course of the year as the company despite a small earnings miss at the end of October. Third-quarter earnings of $1.11 per share missed the consensus by a penny, but revenues were better than expected. The market focused on the sales beat and pushed the stock to its new 52-week high. While AN is currently trading at its 52-week high, there appears to be a lot of value in the stock which is currently trading at just 12 times earnings. AutoNation is expected to grow profits at a modest 2.1% per annum over the next five years and the stock is currently trading at just 12 times earnings. Analysts have an average price target of $45.20 on the stock.

BB&T Corp. (BBT)

Regional bank BB&T Corp. (BBT) is coming off a mixed third-quarter report mid-October with earnings topping estimates and sales falling slightly short of the consensus. The company posted quarterly earnings of $1.07 per share, topping the $1.03 forecast, and up from $1.03 during the same period last year. Interest rate cuts by the Federal Reserve will have an impact of interest income banks are able to generate, but the market is expressing optimism that the rate cuts will boost the overall economy which in turn will lead to higher profits for the banking sector. BBT hit a new all-time high in todays at $55.65. The stock is now trading at under 14 times earnings. Looking ahead analysts expect the bank to grow earnings at an annual rate of 9% over the next five years. With earnings behind it, the stock should continue to build on recent gains as long as bullish sentiment remains in the overall market. Analysts have an average price target of $56.77 on the stock.

JetBlue (JBLU)

Airliner JetBlue (JBLU) traded up to $19.89 in today's action for a new 52-week high. The stock is coming off a better than expected third-quarter report with better than expected numbers on both the top and bottom lines. Oil prices have fallen since earlier in the year, but have started to recover over the last month. Like all transportation stocks, JBLU is vulnerable to oil prices, but with the stock trading at just 10.3 times earnings it remains a solid value even as shares hit new highs. JBLU shares are currently trading at just 10.3 times earnings and forecasts call for profits to grow at an annual rate of 22% over the next five years. The strong growth forecast could be negatively impacted if oil prices start to spike, but if the company is able to keep pace with future estimates the stock should continue to build on its recent gains. Analysts see additional upside in the stock with an average price target of $21.58.

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