That means there is relative value to be found in almost every sector of the stock market. The other half is spread across seven of the remaining eight sectors. In case you’re wondering, those 10 stocks from just three sectors account for half of the entire S&P 500 companies with a perfect IDEAL score. Somewhat surprisingly, the financials sector has the most stocks with the highest possible IDEAL rating: Ameriprise Financial (NYSE: AMP), Comerica (NYSE: CMA), Morgan Stanley (NYSE: MS), Prudential Financial (NYSE: PRU), and Unum Group (NYSE: UNM). But now that its share price is 20% cheaper, this may turn out to be a great time to buy it. Of course, KHC got slammed five months ago when it took a $15 billion write-down. Only two stocks from the consumer staples sector also earn an IDEAL score of ten: Altria Group (NYSE: MO) and Kraft Heinz (NSDQ: KHC). That does not necessarily mean they are certain to rise in value, but it does suggest that the odds are more strongly in their favor. For example, the highest rated stocks in the energy sector include Haliburton (NYSE: HAL), Marathon Petroleum (NYSE: MPC), and Phillips 66 (NYSE: PSX), each earning a perfect IDEAL score of 10. Within each sector, some stocks score higher than others. Of the eleven GICS sectors that comprise the S&P 500, three of them - energy, financials, and consumers staples - have IDEAL scores above 5.0 suggesting they are undervalued. However, there is a considerable variance from one sector to the next. I also ignore the utilities sector due to the heavily regulated nature of its profit potential. I exclude the real estate sector from this exercise since REITs (real estate investment trusts) play by a different set of rules due to their tax-exempt status. The IDEAL system scores every S&P 500 stock in three categories: When the stock market gets frothy, I turn to my IDEAL Stock Rating System to help me identify undervalued stocks. The short answer is yes, if you know where to look for it. So it’s only fair to ask, is there any value left to be found in this market? That means in absolute terms, stocks are more expensive than they’ve ever been. As recently reported by Robert Rapier, every sector of the S&P 500 increased in value during the first six months of this year.Īll of the major market indexes hit record highs during the past month. The first half of 2019 couldn’t have gone much better for the stock market. Conversely, when profitability slows down, the less of an earnings multiple investors should pay. The faster profits are expected to grow, the bigger the premium investors are willing to pay for them. In theory, the current price of a stock reflects the present value of a company’s future profitability. Corporate profits are expected to decline by nearly 3% when companies release their Q2 results starting later this month. This article was originally published on this siteĪs my colleague John Persinos succinctly stated earlier this week, the stock market’s rich valuation is not supported by near-term earnings expectations.
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