They are attractive values to navigate the current economic context, with a ratio of less than 12 times earnings, a dividend yield of more than 3% and a consensus recommendation from analysts to buy their shares. They are, in a way, a delicatessen of the American stock market: Diamondback Energy, MetLife, Citizens Financial, Morgan Stanley and Fifth Third Bancorp.
The current moment in the world of finance could be summed up in this phrase: “The future is no more uncertain than the present”, attributed to Walt Whitman, the great American poet. In a context in which rising inflation, the consequences of the war in Ukraine, the paralysis of the Chinese economy due to the new confinements and the threat of recession are intermingled, it is normal for investors to ask these heights where to put your money.
For what it’s worth, mutatis mutandis, it’s worth remembering some of the investment advice Peter Lynch offered thirty years ago, when he was still running Fidelity’s successful Magellan fund, that still applies today. “Buy companies, not markets. Don’t try to time the market because no one can reliably predict interest rates or other macroeconomic trends,” Lynch told The New York Times in 1989.
And which companies with strong balance sheets are right now the icing on the cake: an attractive investment in a shaky market? Write down these names: Diamondback Energy, MetLife, Citizens Financial Group, Morgan Stanley, and Fifth Third Bancorp. All of them have a price/earnings ratio of less than 12 times; offer a dividend yield of more than 3%; the price/book ratio is below 1.5x and its shares receive a buy recommendation from the analyst consensus compiled by FactSet.
Diamondback Energy
It is an American company dedicated to the exploration and exploitation of unconventional oil and natural gas reserves in the Permian Basin of Texas. In 2021, it declared revenue of 5,567 million dollars and a net profit of 2,182 million -the highest to date-, according to Bloomberg data. For the current exercise, it is expected to double the earnings.
On the other hand, on the stock market, Diamondback shares registered an all-time high on Friday in the area of $152.66, and have accumulated a return of 41.5% so far this year. Since the minimum it marked in March 2020, at the beginning of the pandemic, the stock has appreciated almost 700%.
The hydrocarbon firm is a value prepared to resist current market circumstances. For its 2022 benefits, multiples of 5.7 times are paid, the market considers that its assets are worth more than what the company’s books reflect (1.37 times), and its dividends yield around 5%, according to the forecast this year.
MetLife
“MetLife’s results have held up better than its peers during the pandemic and we expect this trend to continue given the diversity of its business. In addition, higher interest rates should benefit overall margins and MetLife has ample capital flexibility to complement organic growth with equity,” says JP Morgan’s research team.
The insurance company billed 71,080 million dollars last year, its highest figure since 2014, and earned 6,554 million, the highest net profit in ten years (since 2011). Precisely, its 2022 benefits are listed on the stock market at 8.6 times and the profitability of its dividends is around 3.06% -above the profitability of the ten-year US bond-. For the market, the company is undervalued as reflected in its book value.
On the parquet, MetLife’s share broke a record on April 20, when it reached $72.44. Now it is trading in the area of 67 dollars and is 8% away from its maximum.
Citizens Financial Group
It is a Rhode Island-based bank that earned $2.319 billion last year – its biggest net profit since 2011 – although its shares have nearly wiped out everything it earned last year on the stock market. In January they registered an all-time high of $56.35, but now they are trading at $40. According to the consensus of analysts collected by FactSet, it presents a PER 2022 of 9 times, its payments rent 4.1% and the market undervalues its assets.
Morgan Stanley
It is one of the main financial entities in the US, which also broke a record on the stock market in February of this year, when its share reached 108.73 dollars (it is trading 20% below, at 85 dollars). Multiples of almost 11 times are paid for Morgan Stanley’s 2022 earnings, while its dividend yield is 3.57%. The bank is trading at a price above its book value (the ratio is 1.40 times).
Fifth Third Bancorp
It is one of the large North American regional banks, and earned 2.77 billion dollars in 2021 – its biggest profit in ten years. The stock reached $50.45 in January, its best level in five years. It stands out for a PER 2022 of 10 times and because its dividends yield 3.36%.
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