7 shares sold at a discount at the end of January

Concentrating discounted stocks – that is, the so-called value investing approach is not really popular these days. Instead, the interest is mostly on momentum.

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

These investors have targeted heavily sold stocks to raise epic pressures. The result is that there have been huge pushes with companies like GameStop (NYSE:GME), AMC Entertainment Holdings (NYSE:AMC), Koss (NASDAQ:KOSS) and Blackberry (NYSE:BB).

But whenever there is that level of speculation, the markets are probably close to peaking. And if that’s the case this time around, investors might want to look into the value games.

So which ones look interesting at the moment? Well, let’s take a look at seven otherwise familiar names:

• IBM (NYSE:IBM)
• Morgan stanley (NYSE:MRS)
• 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)

The last few years have seen significant gains from legacy tech companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Adobe (NASDAQ:ADBE). But some have been left behind. One is IBM.

IBM stock peaked at $ 180 in February 2017 and hasn’t been close for the next four years. The shares are trading for less than $ 120 a piece, bringing the current market cap to around $ 106 billion.

The main reason for this? It’s really simple: revenues are declining. In fact, the latest earnings report was another example, with revenue of around 6% to $ 20.4 billion.

OK, in light of this, why would it be a good idea for investors to consider IBM stocks? There are several reasons. First, IBM plans to split its managed infrastructure services business, which should help streamline operations. Then the company made some bold acquisitions – like Red Hat – to revitalize its line of technology products.

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 stock, it is selling at a reasonable valuation. The forward price / earnings ratio is 10.8x. The dividend yield is also 5.43%, which is one of the highest in the tech industry.

Morgan Stanley (NYSE: MS)

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

Yet MS shares are still trading at an updated valuation. Consider that the forward price / earnings ratio is only around 12.08x.

This is reasonable given the potential growth opportunities. With interest rates at their lowest and the booming market for IPOs and SPACs (Special Purpose Acquisition Companies), the environment is quite favorable.

In the most recent quarter, profits jumped 51% to $ 3.39 billion, or $ 1.81 per share, and revenue rose 26% to $ 13.64 billion. There was strength in all the activities of the company.

However, the biggest bright spot has been the investment banking division. Revenue soared 46% to $ 2.30 billion. About $ 1 billion came from stock offers.

Granted, IPOs can be choppy. But for the most part, the momentum is particularly strong – and that should be a nice source of growth for the new year.

Morgan Stanley has also been aggressive with mergers and acquisitions. To this end, the company acquired E * TRADE and Eaton Vance. There will not only be cost synergies, but also increases in the top line.

The company is also stepping up its buybacks of MS shares. The most recent authorization is for $ 10 billion.

Oracle (ORCL)

Oracle has been lagging behind in its move to the cloud, which has certainly been a drag on ORCL stock. But in recent years, the company has made the transition from its various platforms. And yes, that should be key to getting Oracle back on the path to growth.

Components of the cloud story include NetSuite, which is a fast-growing ERP (Enterprise Resource Planning) system, Fusion (middleware technologies), and Gen2 (for infrastructure). These platforms have seen great growth ramps – and have good long-term prospects.

So what about the core business of databases? Yes, it came under pressure from upstarts like MongoDB (NASDAQ:MDB). But Oracle has made tremendous progress. At the heart of it all is the stand-alone database.

Oracle CTO and Co-Founder Larry Ellison said in the latest earnings call: “It’s definitely the cloud first. It is the only database that actually does both transaction processing and query processing. The processing of requests was therefore much faster than Snowflake, the current darling of the market. And at processing transactions, we’re much faster than anyone else. “

Meanwhile, ORCL stock is trading at a cheap valuation – at least relative to other tech traders – with a forward price / earnings multiple of 14x. The dividend yield is also acceptable at 1.657%.

Ameriprise Financial (AMP)

The revenues of financial advisory operators are expected to increase from $ 57 billion to $ 200 billion over the next decade. One of the driving forces is the digitization of industry. But there is also the impact of the baby boom generation, which has 75 million inhabitants. This group will require more services to meet retirement needs (such as finding ways to live off their current assets).

Such trends are definitely good news for Ameriprise Financial. The company is one of the largest financial advisory firms. It has over $ 900 billion in assets under management and has over two million clients.

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

AMP stock is also selling at a discount, with the forward PE being 11x. As for the dividend, it is 2.1%.

Cisco Systems (CSCO)

Last year, investors saw Cisco Systems shares drop about 6% while S&P 500 Index gained more than 18%. Then again, growth stammered as competition intensified and there were delays due to the Covid-19 pandemic.

But as with the new year, things are likely to improve for CSCO stock. Analysts expect continued improvement in operations after the company beats consensus estimates in the first quarter of the fiscal year. The company is moving towards recurring software and subscription business models. Second quarter results are expected on February 9.

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

Regarding the valuation of Cisco, it is at relatively low levels, at least for the large technology operators. The forward price / earnings multiple is 14.3x and the dividend yield is 3.2%.

Verizon Communications (VZ)

The mainstream mobile phone business in the United States is quite saturated. But it’s still a great source of cash flow. Look at Verizon.

In the first nine months of last year, cash flow was $ 32.5 billion, up from $ 26.7 billion in the same period in 2019. There are currently around $ 94.1 million. of subscribers.

But in the coming years, Verizon is poised to get a boost from its 5G network. And it won’t just be a question of consumer offers. On the contrary, the opportunities for business customers can be even greater. One key will be the development of edge network systems to enable Internet of Thing (IoT) applications, such as in the factory.

The valuation of the VZ share is also at updated levels. The forward price / earnings ratio is 10.88x and the dividend yield is 4.6%. In addition, the company has 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 escalating 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.

One company that looks attractive is therefore Lockheed Martin, which has the advantage of massive scale. Consider this to be the largest defense contractor in the United States

In the most recent quarter, revenue rose 7.3% to $ 17.03 billion and profits rose 20.6% to $ 6.38 per share. The big source of business is the massive F-35 program.

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

Regarding LMT shares, the valuation is at a reasonable 12.2 times the expected earnings. The dividend yield is also 3.3%.

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

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