New Trade for July 17th, 2023

While growth stocks have largely led value stocks over much of the past 15 years, a rotation into value could already be underway. Value outperformed growth by more than 20 percentage points in 2022, as measured by the Russell 1000 Growth and Value indexes, leading to the belief that a rotation to value had begun. While value has trailed growth in 2023, some investors see it as a temporary setback in an early inning for value leadership. 

The current market presents an enticing opportunity for value investors. When the overall stock market drops, even high-quality companies with strong fundamentals see share prices fall. Plus, value stocks tend to be better established and less volatile compared to growth stocks.  

Today’s recommendation is not only trading at an attractive valuation but also could be well positioned for success in a cooling economy.

Albemarle Corp.  (ALB)

Albemarle Corp. develops, manufactures, and markets chemicals for purposes ranging from various consumer electronics to construction and medicine. ALB‘s robust lithium segment successfully produces lithium carbonate, chloride, and hydroxide. It also deals in bromine and hydro-processing catalysts for clean fuel.

Albemarle expects to deliver revenue growth in the range of 35% to 55% for 2023. Additionally, the company has guided for 20% to 30% annual growth in lithium sales volume through 2027. As of March, the company reported net-debt to EBITDA of 0.4. With high financial flexibility, there is ample headroom for aggressive expansion. 

At a forward price-earnings ratio of 9.8, the stock looks undervalued. The current consensus among 29 polled investment analysts is to buy ALB stock.  A median price target of $273.55 represents a 17% increase from the current price.  

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