7 stocks sold at a discount when January comes to an end

Nowadays, it is not very common to focus on the sale of discounted shares – that is, the so-called value investment approach. Instead, interest is mainly in the momentum.

For the most part, this approach was … well … Crazy! The phenomenon of Reddit investors has taken Wall Street by storm – and has even threatened the stability of billion-dollar hedge funds.

These investors are targeting stocks that are heavily shorted to generate epic squeezes. The result is that there has been a huge increase in companies like GameStop (NYSE:GME), AMC Entertainment Holdings (NYSE:AMC), Koss (NASDAQ:KOSS) and Blackberry (NYSE:BB)

But whenever there is this level of speculation, markets are probably close to peak. And if that is the case this time, investors may want to look at games of value.

So, which ones look interesting now? Well, let’s take a look at seven other familiar names:

• IBM (NYSE:IBM)
• Morgan Stanley (NYSE:in)
• Oracle (NYSE: ORCL)
• Ameriprise Financial (NYSE:AMP)
• Cisco Systems (NASDAQ:CSCO)
• Verizon Communications (NYSE:VZ)
• Lockheed Martin (NYSE:LMT)

Shares sold at a discount: IBM (IBM)

In recent years, we have seen strong gains from old technology companies, such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Adobe (NASDAQ:ADBE) But some have been left behind. One is IBM.

IBM’s stock reached a high of $ 180 in February 2017 and was nowhere near the next four years. The shares are trading for less than $ 120, bringing the current market capitalization to around $ 106 billion.

The main reason for this? It is very simple: revenues are decreasing. In fact, the latest earnings report was another case in point, with revenues of around 6% to $ 20.4 billion.

OK, in light of that, why would it be a good idea for investors to consider IBM’s shares? There are several reasons. First, IBM plans to break up its managed infrastructure services business, which should help to streamline operations. Next, the company has made bold acquisitions – as for Red Hat – to reinvigorate its technology product line.

Then there is the capacity for R&D. The company has invested heavily in key areas such as artificial intelligence (AI), hybrid cloud and quantum computing.

As for IBM’s shares, they are being sold for a reasonable valuation. The future price / profit index is 10.8x. The dividend yield is also 5.43%, one of the highest in the technology sector.

Morgan Stanley (NYSE: MS)

Since the end of October, Morgan Stanley has been in rally mode. The shares went from $ 48 to $ 68.

However, MS shares are still being traded at a discounted valuation. Consider that the future price-earnings ratio is only about 12.08x.

This is reasonable in the light of potential growth opportunities. With interest rates at the lowest levels and the expanding market for IPOs and SPACs (special purpose acquisition companies), the environment is quite favorable.

During the last quarter, earnings increased 51%, to $ 3.39 billion, or $ 1.81 per share, and earnings increased 26%, to $ 13.64 billion. There was strength in all the company’s businesses.

However, the biggest highlight was the investment banking division. Revenues increased 46% to $ 2.30 billion. About $ 1 billion came from stock offers.

It is true that IPOs can be unstable. But for the most part, the momentum is particularly strong – and this should be a good source of growth for the new year.

Morgan Stanley has also been aggressive with M&A. To this end, the company acquired E * TRADE and Eaton Vance. There will be not only cost synergies, but also increases in revenue.

The company is also increasing its repurchases of MS shares. The most recent authorization is up to $ 10 billion.

Oracle (ORCL)

Oracle has been a laggard in its move to the cloud, which has certainly been an obstacle to ORCL’s actions. But in recent years, the company has transitioned from its various platforms. And yes, it must be instrumental in getting Oracle back on the growth path.

Components for the history of the cloud include NetSuite, which is a fast-growing ERP (enterprise resource planning) system, Fusion (middleware technologies) and Gen2 (for infrastructure). These platforms have seen good growth paths – and have good long-term prospects.

What about the central database business? Yes, this was pressed by beginners like MongoDB (NASDAQ:MDB) But Oracle has made considerable progress. At the center of this is the Autonomous Database.

Oracle CTO and cofounder Larry Ellison said in the last earnings conference call: “It is certainly the cloud first. It is the only database that actually processes transactions and queries. Therefore, query processing was much faster than Snowflake, the darling of the market. And in processing transactions, we are much faster than anyone. “

Meanwhile, ORCL’s shares are being traded for a cheap valuation – at least compared to other technology operators – at a 14x multiple future / profit price. The dividend yield is also 1.657% acceptable.

Ameriprise Financial (AMP)

Financial advisory operator revenues are expected to range from $ 57 billion to $ 200 billion over the next decade. One factor for this is the digitization of the industry. But then there is the impact of the Baby Boom generation, which has a population of 75 million. This group will require more services to help with retirement needs (such as finding ways to live on your current assets).

These trends are definitely good news for Ameriprise Financial. The company is one of the largest financial consulting companies. It has more than $ 900 billion in assets under management and more than two million customers.

Ameriprise Financial is also a highly disciplined organization. Over the past eight years, earnings per share have almost tripled and the company has returned a significant $ 15 billion to shareholders.

AMP shares are also being sold at a discount, with PE at 11x. The dividend is 2.1%.

Cisco Systems (CSCO)

Last year, investors saw shares in Cisco Systems fall about 6%, while the S&P 500 Index earned over 18%. Then again, growth erupted as the competition heated up and there were delays because of the Covid-19 pandemic.

But as for the new year, things are likely to be better for CSCO’s actions. Analysts expect continuous improvement in operations after the company overcomes consensus estimates in the first fiscal quarter. The company is moving to recurring software and subscription business models. Second quarter results expire on February 9.

However, the WebEx videoconferencing business may be the biggest driver. Cisco has made considerable updates to the platform, which should help drive growth. Some of the new features include real-time language translation, speech enhancement and transcriptions.

As for Cisco’s assessment, it is at relatively low levels, at least for large technology operators. The future price / earnings multiple is 14.3x and the dividend yield is 3.2%.

Verizon Communications (VZ)

The consumer mobile phone business in the US is quite saturated. But it is still a great source of cash flow. Just look at Verizon.

During the first nine months of last year, cash flow reached US $ 32.5 billion, compared to US $ 26.7 billion in the same period in 2019. Currently, there are about 94.1 million subscribers.

But in the coming years, Verizon is ready to receive a boost from its 5G network. And that will be more than just consumer offers. At the very least, the opportunity for business customers can be even greater. One key will be the development of cutting-edge network systems to enable Internet of Things (IoT) applications, such as on the factory floor.

The valuation of the VZ stock is also at discounted levels. The future price / earnings ratio is 10.88x and the dividend yield is 4.6%. In addition, the company increased the payment for 13 consecutive years.

Lockheed Martin (LMT)

With the new Biden administration, there will likely be more pressure on the defense budget. Another factor is the growing budget deficits.

However, for large defense contractors, there is likely to be continued growth – especially since there are still considerable national security risks to be addressed.

So a company that looks attractive is Lockheed Martin, which has the advantage of being large-scale. Consider it the largest US defense contractor

During the last quarter, earnings increased 7.3% to $ 17.03 billion and earnings rose 20.6% to $ 6.38 per share. The big source of business is the huge F-35 program.

But there are also other important factors. In fact, the company recently acquired Aerojet Rocketdyne for $ 4.4 billion. The company is a developer of hypersonic technology, essential for missiles and space systems.

With respect to LMT’s shares, the valuation is at a reasonable value of 12.2 times the future earnings. The dividend yield is also 3.3%.

On the date of publication, Tom Taulli did not hold (directly or indirectly) any position in any of the securities mentioned in this article.

Tom Taulli (@ttaulli) is the author of several books on investment and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics such as Python and COBOL.