I like to call it a “sociological grey area” in the stock market: The players exchange notes, looking at market trends and prospering businesses, as they typically do. But, I’ve found that over the last couple of years, investors aren’t categorizing stocks through the indexes and sectors as frequently. Many now must embrace data-supported areas of strength within the underlying business— to extract value. While some industries are more substantial during inflationary periods than others, many investors simply take more comfort in how much the quarterly dividend payouts are, as opposed to what the business does.
We have growth stocks, value stocks, small and big caps, blue chips, seasonals, etc., and these labels help investors cater their portfolios to how the overall market is doing. A short-term perspective: Prices are down, buy. When they rebound, sell. That’s not wrong— it’s just a shorter-term approach than what would be used elsewhere. Here’s the cool part: Many stocks fit into several categories. Growth stocks, for example, can combine well because they are frequently traded at bargain prices compared to their actual value. Once the value aspect comes into play, control is more in the investor’s hands. One can sell and make a profit, hold (and watch for a better chance), or just chill and enjoy those dividend checks.
Join me in breaking down three stocks that each are considered undervalued, priced at a discount, yet show signs of maturity and poise while awaiting an upswing. The dividends are just icing on the cake. The experts agree that we should buy and hold onto these tickers:
Ares Management Corp (ARES)
Ares Management Corp (ARES) is an alternative asset manager with offices in the U.S., Asia, and Europe. ARES’ Tradable Credit branch administers various investment funds, including commingled and independently managed accounts for investment firms. ARES generally invests in undervalued companies with shared control. ARES also invests in new initiatives and asset repositioning. ARES was created in 1997 by founder and still-running CEO Antony Ressler and is based in Los Angeles, CA.
Based on the past twelve months, ARES has been operating with almost $1 billion in leveraged free cash flow, a market cap of $19.58 billion. It has brought in revenue of $3.43 billion, from which the firm profited $1.4 billion. ARES has an even beta figure of 1.1, making it no more or less susceptible to volatility than its industry peers. ARES shows a forecasted income of $883 million for the current quarter at an EPS of $1.06 per share. Regarding year-over-year growth, ARES posts revenue and earnings margins of 159.83% and 153.47%, respectively. ARES has a dividend yield of 3.68%, with a quarterly payout of 61 cents ($2.44/year) per share. Analysts have given ARES a consensus median price target of 86.50, with a high of 103.00 and a low of 78.00. While the price is down by 18.83% year-to-date, a potential upside of 55.30% sounds good. For analysts, this only further cements ARES’s buy rating.
Coca-Cola Co (KO)
The Coca-Cola Co (KO) is a world-renowned beverage company that manufactures, promotes, and distributes a variety of nonalcoholic beverages across the world. KO sells soft drinks, flavored and improved water, sports drinks, juice, dairy, plant-based beverages, coffee, and energy drinks. KO also provides beverage concentrates and syrups to fountain merchants such as restaurants and corner shops. Coca-Cola, Diet Coke, and a wide variety of other brand names are sold by KO. It works through an independent bottling partner network, wholesalers, retailers, distributors, and bottling and distribution operators. KO was established in 1886 and is based in Atlanta, GA.
For the current quarter, KO is projected to show $9.9 billion in sales, with an EPS of 45 cents per share. For Q3 2022, analysts and their projections lost to KO’s reported revenue and EPS surprises of 8.34% and 5.75%, respectively. Despite its intimidating $275 billion market cap, KO shows a very secure beta measure of 0.59 and an assuring P/E ratio of 24.5x. For the last twelve months, KO has been working with a profit margin of 25.23%, an operating margin of 28.90%, and a return on equity margin of 41.03%. KO has a dividend of 2.77%, with a quarterly payout of 44 cents ($1.46/year) per share. Analysts have conceded on a median price target of 67.00 for KO, with a high of 77.00 and a low of 61.00. Although it’s a constrained range, KO’s price target suggests a 21.15% increase over the most recent price. The recommendation from analysts is that KO should be bought and held.
US Bancorp (USB)
U.S. Bancorp (USB), a wealth management holding company, provides financial services to individuals, corporations, governmental agencies, and other institutions in the U.S. USB provides savings and checking accounts, time certificate contracts, borrowing services such as standard credit products, and credit card services. USB also offers corporate and buying card services, trust services, merchant processing services, investment management, mortgage banking, brokerage, and leasing services. USB is available through a network of over 2,300 banking locations, primarily in the Midwest and Western areas of the U.S. USB was established in 1863 and is based in Minneapolis, MN.
USB’s stock is down by 23.14% YTD, but it’s tough to see why. USB has an impressive market capitalization of $67 billion, a volatility-safe beta score of 0.99, and price ratios that shouldn’t exactly have investors alarmed: P/E (Price to Earnings) of 10.25x; P/S (Price to Sales) of 2.7x, and P/B (Price to Book) of 1.7x. USB shows forecasted sales of $6.6 billion at an EPS of $1.12 per share. USB’s EPS, as reported over twelve months, is $4.19 per share, and the firm has either met or exceeded analysts’ quarterly earnings projections for about a year. USB has been working with a net profit margin of 29.04% and an operating margin of 38.64%. USB has a current dividend yield of 4.43%, with a quarterly payout of 48 cents ($1.92/year) per share. Analysts who provide annual price projections have given USB a consensus median price target of 52.00, with a high of 70.00 and a low of 44.00. The estimate offers USB a potential price increase of 62.10%. Analysts have weighed in for a while, and many already hold USB shares. The consensus, though, still leaves USB with a buy rating, and given that even hitting the bottom of the analysts’ price range would still be an increase, maybe we should perk up a little.
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