These 8 portfolio stocks look cheap, but only some are worth buying | Wilnesh News
The holiday shopping season is over. At least when it comes to stock picking, the desire to find bargains is as strong as ever. A recent analysis of our portfolio showed we own several cheap stocks, including one of the newer ones, Bristol Myers Squibb . Still, we’re not necessarily rushing to put them all in our shopping carts. Not all good deals are created equal. What We Found Our analysis (“screen” in Wall Street parlance) starts with all 35 stocks in the portfolio. The goal is to narrow the list to stocks that meet certain valuation criteria and then apply a layer of fundamental analysis to identify those we believe are worth pursuing. Here are three characteristics we screen for: 1. Their current forward P/E based on 2025 earnings forecasts is lower than their average P/E over the past five years. 2. Their current forward P/E is lower than the S&P 500 combined, which means they are absolutely cheap. 3. They are also cheaper than the S&P 500 when adjusted for growth. To calculate this, we divide the price-to-earnings ratio by the three-year annual earnings growth forecast, based on the FactSet earnings consensus forecast. This gives us a metric called the PEG ratio. We do this for every stock in our portfolio and for the S&P 500 Index. Earnings for the S&P 500 rose 7.3% year over year. We found eight stocks in our portfolio that fit the above criteria: Bristol-Myers Squibb, Coterra Energy, DuPont, GE Healthcare, Constellation Brands, Alphabet, Nextracker, and Stanley Black & Decker. Here’s a look at them and how they stack up on each metric. Simply looking at the numbers and concluding that all eight stocks are immediate buys is a highly quantitative way of thinking and arguably misleading. Sometimes cheap stocks are cheap because their upside potential is limited, meaning they are what’s called a “value trap.” That’s why we then took a more qualitative approach to refining the list, picking out stocks that are not only cheap but, in our opinion, have a strong fundamental case for the new year. Our Position Here’s a closer look at our view on all eight stocks. Bristol-Myers Squibb: As the second newest addition to our portfolio (Goldman Sachs is the newest), we clearly like this name heading into 2025. It underestimated the potential for upside from management’s moves to replenish its drug pipeline, most notably last year’s $14 billion acquisition of neuroscience company Karuna Therapeutics. The key assets acquired from Karuna recently received FDA approval and are being sold under the Cobenfy name. It is an antipsychotic drug used to treat schizophrenia, a notoriously difficult disease to crack. Cobenfy prescription drugs will be key to driving share prices in the year ahead, and we expect sales estimates to be revised upward. Coterra Energy: We discussed whether to overweight the stock prior to the December monthly meeting but ultimately decided not to do so. U.S. LNG exports have driven demand for the commodity, supporting prices, which is key for the stock. Unfortunately, the Biden administration’s moratorium on new LNG licenses appears to be having a negative impact this year, and it’s too early to tell what President-elect Donald Trump’s policy changes will mean for commodity prices. Nonetheless, we remain invested in Coterra as it benefits from growing data center energy needs. We also like to keep energy stocks in the portfolio as a hedge. The idea is that rising energy prices will put pressure on other parts of the market but benefit producers like Coterra. DuPont: Expected to complete its spin-off into three independent companies by the end of 2025, DuPont is undoubtedly a stock worth paying attention to. DuPont stock currently trades at a discount, but we believe the combined value of DuPont’s parts is more valuable than the combined company. Therefore, patient investors should be rewarded as we approach the official divestment of our water and electronics businesses. Our sum-of-the-parts price target of $100 per share represents substantial upside from current levels of approximately $77. GE Healthcare: While the company’s medical imaging solutions are excellent, we can’t be too optimistic about the stock yet due to its presence in China. Unless China turns around or becomes so small that it doesn’t matter to earnings, we can’t justify putting new money into GE Healthcare. Of course, the flip side is that the current discount to the stock price could turn it into a coiled spring if China starts to emerge from the woods. Until then, however, we may see some value traps. Constellation Brands: The possibility of higher tariffs on Mexican imports is a risk under Trump’s reelection as president. However, offsetting the weakness we’ve seen in the peso, Constellation’s large brewery under construction in Mexico will be paid for by the end of next year – from then on, we could see changes to cash flow, by making Shareholders benefited from dividend increases and share buybacks. Yes, we’ve seen younger consumers move away from alcoholic beverages in recent years, but beer remains a growth area for the category. Divesting its struggling wine and spirits portfolio is another potential catalyst on the horizon. Alphabet: The ugly duckling’s mood has certainly improved over much of the past year. Reasons for the improvement include the resilience of Google search, the momentum of YouTube and Google Cloud, and the potential upside of Waymo, which has proven to be a leader in self-driving cars. All in all, Alphabet is on solid footing as it enters 2025, especially considering its stock price remains attractive earnings-wise despite a 14% gain in December. However, chasing chess like this is not our style. While we await more clarity on the company’s AI monetization strategy, we maintain our “Hold” 2 rating on the company. Nextracker: This is another thorny issue we debate before our monthly meetings because it looks cheap; our on-screen results underline this. Still, the fundamentals for overweighting the stock remain unclear. Although Nextracker is launching an American-made product and Trump is not an enemy of solar energy, he is not its biggest supporter either. On the contrary, Trump has said that when it comes to energy, his view is “Drill, baby, drill.” So, for now, it’s difficult for Nextracker to continue moving higher, especially since its earnings are so volatile. In other words, with Trump back in the White House, it’s hard to see a catalyst that could make this program worthy of new funding. Stanley Black & Decker: While we feel the share price is too low to sell now – and we have a 4% dividend payout at current levels – as CEO Don Allan said in a recent We don’t want to buy this stock, as the previous report told us. Add to that the Fed’s latest thinking that rates need to stay higher for longer, and it’s hard to be overly optimistic about that, even if our screens show it looks based on Wall Street’s earnings growth estimates Very attractive. Our current rating of 3 means we want to wait for strength before selling. Heading into 2025, Bristol Myers Squibb, DuPont and Constellation Brands are three penny stocks that members need to keep a close eye on. If the stock price consolidates near current levels. The stock’s valuation is attractive, but chasing momentum is not our style and we prefer to sell on big swings like we did at the end of the year. We actually did book some profit on Alphabet earlier this month. Just because we don’t recommend buying these other stocks right now doesn’t mean ignoring them entirely. It’s still worth keeping an eye on them as they’re already cheap, which means they’re likely to bounce back with any positive updates. Likewise, we eliminate some stocks that are attractive on the basis of valuation due to fundamental concerns (such as higher long-term interest rates), and investors should remember that stocks that are “expensive” by our criteria can still offer strong potential for upside. In other words, the 27 names in the portfolio that failed to pass all three stages have reasons for being owned. In some cases, a stock may look expensive based on profit forecasts for the next 12 months, but will perform much better in the coming years. In other cases, this is exactly what happens to stocks of best-in-class companies in bull markets – they trade at a premium. Costco is a great example, as are the other stocks on our core holdings list. None of these 12 stocks pass this screen, but the reason they fail is the same reason they are core holdings: They are all the best in their respective fields, and when you want to own the best stocks, you usually Will choose the best stocks to hold. It’s not that these stocks are all having a phenomenal year in 2024 — looking at you Danaher and Linde — but that they are best-in-class in their respective fields because they offer best-in-class products and are backed by the world’s First class management team. That’s why keeping up with our daily commentary is more important than a screen like this, which only represents a snapshot in time. Not all cheap stocks are worth buying, and not all expensive stocks are worth selling. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.
On August 29, 2024, the logo of the pharmaceutical company Bristol-Myers Squibb (BMS) appeared on the facade of the company’s Munich headquarters in Munich (Bavaria).
Matthias Balke | Image Alliance | Getty Images
The holiday shopping season is over. At least when it comes to stock picking, the desire to find bargains is as strong as ever.
A recent analysis of our portfolio revealed that we own several cheap stocks, including one of our new additions Bristol-Myers Squibb. Still, we’re not necessarily rushing to put them all in our shopping carts. Not all good deals are created equal.
