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Cash is king in a bear market, as savvy traders know. But some S&P 500 companies also stockpiled enough cash to withstand whatever the coronavirus stock market crash might bring.

Nine companies in the S&P 500, including communications services giant Alphabet (GOOGL), and technology stalwarts Apple (AAPL) and Microsoft (MSFT), each hold net cash of $5 billion apiece or much more. Together these companies hold a total of $325 billion free and clear after subtracting total debt.

All told these S&P 500 non-financial companies are sitting on net cash and short-term investments of $592 billion. That leaves them with $325 billion — even after subtracting the $267 billion they owe in total debt. This Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith highlights companies prepared to handle what the coronavirus stock market crash may dish out.

And not surprisingly, these are among the best-run companies in the world. Eight of the nine S&P 500 companies command top-notch IBD Composite Ratings of 90 or higher. And Microsoft is one of the last U.S. companies to still carry the gold-standard AAA rating from S&P.

You shouldn’t be buying these stocks now. But you’ll at least know they have pockets deep enough to handle the coronavirus stock market crash.

You can’t say that for all firms.

Cash Is King In Tech

Given that nearly all S&P 500 firms will see massive slowdowns in their business, cash will determine who will be around for the recovery.

The information technology sector did a solid job adding to its cash pile during the historic economic expansion. And unlike many firms, it didn’t pile on deceptively cheap debt. That’s one reason the Technology Select Sector SPDR ETF (XLK) is down just 21.6% this year. The S&P 500 itself is down nearly 27%. The heavily indebted energy sector is down 61% this year.

Consider the nine S&P 500 companies with the most net cash. All but one, health care member Humana (HUM), are in the information technology, or closely related communication services, sectors.

S&P 500 Net Cash King: Alphabet

Alphabet doesn’t have the most cash at $120 billion. Apple has more (if you include its Treasury securities) at $207.1 billion.

But what makes Alphabet the cash king with $104 billion in net cash is it didn’t join the corporate debt bubble. Alphabet carries just $16 billion in total debt, a modest amount for a company its size. Apple, in contrast, carries $117 billion in total debt.

Alphabet’s debt is so low, it only paid $100 million in interest over the past 12 months. Just one year of adjusted cash flow of $48.1 billion is enough to pay its annual interest expense for 500 years.

No wonder shares are down less than the market, 18.5%, this year.

S&P 500 Tech: Financial Discipline

Microsoft’s prudent capital management is paying off now. The company, with an IBD Composite Rating of 98, is down just 8.9% this year.

Shares of Microsoft are skating through the coronavirus stock market crash despite major disruptions in its business. With $134 billion in cash and manageable debt of $87.1 billion, Microsoft is sitting on a net cash pile of $47 billion.

Keep in mind, too, by keeping its AAA rating intact, Microsoft’s annual interest expense is just $2.6 billion. That’s just a fraction of the $61 billion the company generated in adjusted cash flow the past 12 months. Even if cash flow falls, Microsoft has plenty of financial firepower.

Some tech companies like Nvidia (NVDA) shied away from debt even more. The graphics chip maker only has $2.6 billion in debt, while holding nearly $11 billion in cash.

Nvidia’s stock is down more than most of these cash-rich companies’ this year. But investors will at least take comfort these companies have cash in the bank.

They may need it.

S&P 500 Companies With The Most Net Cash

Source: IBD, S&P Global Market Intelligence, net cash based on most recent period, net cash is a company’s cash and short-term investments minus total debt. Apple’s cash includes long-term investments of $99.9 billion invested in U.S. Treasuries.

Author: Matt Krantz

Source: Investors: $325 Billion In The Bank: Nine Companies Ready For Any Crisis

The Coronavirus market crash is doing the unspeakable: Turning major stocks into pennies. Hope you sold like the pros told you to.

All told, 18 stocks in the broad S&P 1500, including consumer discretionary J.C. Penney (JCP), energy firms like Denbury Resources (DNR) and real estate firm CBL & Associates (CBL), are now trading for less than a buck. The S&P 1500 is a collection of small stocks in the S&P 600, midsize S&P 400 and large S&P 500 companies.

All the S&P 1500 trading for less than $1 were admittedly damaged goods ahead of the coronavirus market crash. Even before the crash, the average share price of the 18 was just 2.87.

But this coronavirus market crash is showing even weak stocks can get decimated further. These 18 S&P 1500 stocks are down another 80%, on average, this year.

Makes cash look supreme.

Energy Stocks Get Pounded

There’s no question energy is the center of the coronavirus market crash. The Energy Select Sector SPDR ETF (XLE) is down 58%, just this year. That makes the S&P 500’s energy sector the worst performer this year of the 11.

Energy is hurt from all sides. Transportation is grinding to a halt. And the price of oil on the Nymex is down 55% this year and off 39% this month. Even if some energy stocks stay over a dollar, they might slash their dividends.

Not surprisingly, energy companies are crashing through $1 like none others. Thirteen of the 18 S&P 1500 stocks trading for under a dollar are energy firms.

Take Denbury Resources. The small-cap energy firm’s stock collapsed to 27 cents. That’s down 81% this year from the $1.41 a share it started at this year. And it’s completely rational. Analysts think the company’s earnings per share will fall 70% to 12 cents this year. And even that might prove optimistic.

Small-Cap Debacle In Cornavirus Market Crash

Much of the coronavirus market crash pain is with small stocks. The small-cap focused S&P 600 and ETFs tied to it are down 39% this year. That’s significantly worse than the 21% drop in the large-stock S&P 500 and the linked SPY stock.

And it’s not surprising, all 18 of the S&P 1500 new penny stocks are small caps. That includes former large-cap J.C. Penney. The retailer is now trading for 42 cents a share, making it worth just $164 million. That’s a 63% decline, just this year.

If the coronavirus market crash continues, though, expect some midsize and large companies to drop below $1 next. Midsize energy firm Transocean (RIG) is the closest S&P 400 stock to $1. Shares are down 83% this year to 1.16.

And among the S&P 500, Noble Energy (NBL) is down 87% this year to 3.23.

So again, if you’re holding individual stocks, you need to cut your losses. Things can get worse.

S&P 1500 Stocks Now Trading For Pennies

Source: IBD, S&P Global Market Intelligence

Author: Matt Krantz

Source: Investors: Coronavirus Crash Reduces 18 Major Companies To Penny Stocks

Analysts are already slashing their S&P 500 profit forecasts for the current quarter. And the pain is pushing some individual companies deeper into the red.

Nine companies in the S&P 500, including Boeing (BA), Expedia (EXPE) and Under Armour (UAA), are now expected to lose money in the first calendar quarter. Many of the losses are associated with companies infected by slowdowns triggered (or worsened) by the coronavirus.

And all of these expected losses are notably worse than just a month ago, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Almost half of these S&P 500 companies were seen making money in the first quarter just a month ago.

S&P 500 Profit Getting Hit

Fears of the coronavirus are going viral. That’s prompting analysts to cut their profit views on the S&P 500.

Analysts now think S&P 500 companies will earn 3.3% less during the first quarter than they thought just two months ago, says John Butters of FactSet. Yes, it’s true, analysts usually cut S&P 500 earnings forecasts as quarters wind down. Just not by this much usually.

The past 20 quarters, analysts cut S&P 500 earnings estimates in the first two months by 2.6% on average. The 3.3% cut in estimates in the first quarter of 2020, though, matches the average cut over the past 15 years.

And that begs the question: Are even bigger reductions to S&P 500 profit estimates coming? “Have analysts been slow to react to the impact of the coronavirus and reduce EPS estimates even more for Q1?” Butters said. “Analysts may be waiting for more guidance from companies before revising estimates even lower for Q1.”

Successful investors know to own leading stocks with growing fundamentals.

But it’s important, too, to know where the biggest losses are to be felt.

Boeing: The Big S&P 500 Loser

The coronavirus travel slowdown is the last thing Boeing needed.

It already been stung by problems with its latest jet, and analysts going into the year thought Boeing would lose 33 cents a share in the first quarter. Now analysts see Boeing losing twice that much: 88 cents a share. That’s a loss of $968 million, just in one quarter.

Keep in mind that in the same year-ago period, Boeing made $3.16 a share or $1.8 billion. Boeing shares are down 20% this year. They carry a nearly rock-bottom low IBD Composite Rating of 14, on a 1-99 scale with 99 best and 1 the worst.

Similarly, Expedia has been hit hard. Demand for new travel bookings is soft. Analysts now think the company will lose 56 cents a share, or $92 million, in the first quarter. That’s much worse than the 28-cents-a-share loss they were calling for a month ago. Shares are down 15% this year.

S&P 500 Companies Swinging To A Loss

The most jarring cases are S&P 500 companies that are seen losing money when a month ago they were projected to be profitable.

Energy company Occidental Petroleum (OXY) is a classic case. The price of oil is down nearly 25% this year. Occidental is now seen losing 9 cents a share in the first quarter, or $119 million. Just a month ago, the company was supposed to earn 30 cents a share during the quarter. Shares have fallen 24% this year.

Could S&P 500 Tech Earnings Tumble?

The fear is analysts are still too slow in cutting estimates. Especially in tech.

Tech companies get 13% of revenue from China, the most among the 11 S&P 500 sectors, says FactSet. And so far, 23 tech companies have issued negative first-quarter guidance, up more than 10% from the five-year average.

Even so, the estimate for first-quarter tech earnings growth is 6.1%. That’s up from 4.2% on December 31.

Could that mean more profit cuts are coming to the S&P 500? Wells Fargo Investment Institute late Thursday cut EPS estimates on U.S. large cap, developed market and emerging markets stocks.

“The market will definitely keep a close eye on both guidance from S&P 500 companies and EPS estimate revisions by analysts for S&P 500 companies over the next several weeks,” Butters said.

S&P 500 Companies Expected To Lose Money In The First Quarter

Source: S&P Global Market Intelligence (click on symbol for more analysis)

Author: Matt Krantz

Source: Investors: Nine Companies’ Losses About To Get A Whole Lot Worse

Laila Pence says her clients keep asking the same five retirement planning questions. You likely wonder the same things, too. And she has answers.

Story continues

Author: Matt Krantz

Source: Finance. Yahoo: $1.7 Billion Advisor Solves Five Burning Retirement Questions

Analysts predicted Amazon.com would be the fourth S&P 500 stock to hit a $1 trillion market value. And now, they’re calling for the fifth. You’ll need to be patient, though.

S&P 500 analysts peg Facebook’s (FB) market value to hit $701.3 billion in 12 months. That’s 21% higher than Facebook’s market value is now. Analysts think Facebook’s stock will hit 245.91 a share, up from Jan. 31’s close of 201.91.

If the forecasts are correct, that would make Facebook 13% more valuable than the next S&P 500 company on the list: Berkshire Hathaway (BRKA) in 12 months. Analysts think Berkshire will be worth $622.3 billion in a year’s time.

It would also follow Amazon.com (AMZN) hitting $1 trillion on January 31 after a blow-out quarterly earnings report.

Facebook At $1 Trillion: S&P 500 Investors Need Patience

But it could take awhile for Facebook to hit $1 trillion.

Assuming Facebook’s valuation stays the same, earnings would need to rise 43% to justify a $1 trillion valuation. It could take nearly three years for that to happen, based on current earnings forecasts from S&P Global Market Intelligence. Analysts think Facebook’s earnings will grow 8.5% in 2020, 17% in 2021 and 21% in 2022.

If Facebook’s market value hit $1 trillion, it would be the second member of the Communications Services Select Sector SPDR ETF (XLC) to pull it off. Alphabet (GOOGL) was the first.

S&P 500 Sectors With The Biggest Weightings

But when it comes to market value giants, the Technology Select Sector SPDR ETF (XLK) rules. It holds the two most valuable S&P 500 stocks — by far. Analysts think Microsoft (MSFT) will be worth $1.48 trillion in 12 months, or 14% more than it is now.

And Apple (AAPL) is seen being valued at $1.42 trillion in a year, or a boost of 5%, in 12 months. Microsoft and Apple combined would be worth $2.9 trillion, or 9% of the S&P 500’s forecasted value of $31.4 trillion in 12 months.

Why does all this matter? Market values determine how much of each stock and sector is held in popular index funds like the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ).

Which ETFs Own The Most Facebook?

Betting on Facebook’s rise comes with peril. You should always consult with the fundamental and chart trends before buying. Analysts are also expecting Facebook to undergo above average price volatility.

Another approach is using ETFs to diversify. The XLC is the ETF with the largest weighting in Facebook stock at 20.4%. Next is Direxion Daily Communication Services (TAWK) at 17% and then Fidelity MSCI Communication Services (FCOM) at 15.9%.

Within larger ETFs, Facebook is nearly 2% of SPY stock and 4.6% of QQQ.

S&P 500 Stocks Expected To Be Most Valuable In 12 Months

Click on ticker symbol for more information
Source: IBD, S&P Global Market Intelligence, * YTD through Jan. 31, 2020

Author: Matt Krantz

Source: Investors: What’s The Next $1 Trillion Stock After Amazon?

A 10% return is typical for the S&P 500 — for an entire year. But some S&P 500 stocks are already up that much or more and January is only half over.

Talk about a strong start to the year. Ten stocks in the S&P 500, including six with strong IBD Composite Ratings of 80 or higher, are up 10% or much more this year so far. That’s impressive given the SPDR S&P 500 ETF Trust (SPY) is up just 2% in 2020 so far.

Some of the highest rated stocks to rally are information technology stock Salesforce.com (CRM) and Akamai (AKAM). Also, industrials Northrop Grumman (NOC) and TransDigm (TDG) are going into 2020 strong.

That’s according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

You could wait a year for a 10% return, but who has the time for that?

S&P 500 Sectors: Tech, Communication Services Resume Leadership

The same sectors that pushed the S&P 500 to a more than 30% total return in 2019 are still in charge.

The Communication Services Select Sector SPDR ETF (XLC) is the year’s top-performing sector so far. It’s up 4.1%. And just behind with a 3.8% gain is the Technology Select Sector SPDR (XLK).

Analysts remain bullish on these sectors’ members growth prospects in 2020. And just behind is the Industrial Select Sector SPDR ETF (XLI).

Tech and industrials are where many of the top stocks with high IBD ratings are coming from.

Salesforce: A ’99’ S&P 500 Stock Up Big

Salesforce, an online sales tool, is a stock investors want to buy. The company sports the highest possible 99 IBD Composite Rating. And that’s due in part to the stock’s 11.3% rise so far this year to 181.06. But also its strong fundamentals.

Salesforce’s revenue this fiscal year is expected to top $17 billion. If it delivers, that would mark 28% top-line growth. Meanwhile, adjusted earnings per share is seen hitting $2.90 in fiscal 2020, up 5.5% from 2019.

The company reports its next quarterly results on Feb. 26. Analysts have a 193.76 12-month price target on the stock.

Defense Industry Powers S&P 500 Industrials

The threat of political tension in the Middle East has put the defense industry in motion.

The Invesco Aerospace & Defense ETF (PPA) is already 5.2% higher this year. That’s largely due to some massive moves by the leaders. TransDigm is up 10.7% and has a Composite Rating of 94. And then there’s Northrop Grumman, up 10.6% and with a Composite Rating of 92.

And as their Composite Ratings show, there’s fundamental strength along with the chart action. Northrop Grumman is expected to post 10% growth in adjusted earnings for 2019 and 13% in 2020. Revenue is to strike north of $36 billion in 2020, up 6%.

S&P 500 Energy Companies Swim Upstream

Analysts are bullish on the S&P 500 energy sector this year. But so far, the sector at large hasn’t delivered. The Energy Select Sector SPDR ETF is down 1.1% this year. And that makes it the year’s second-worst sector after materials.

But some beat-up bounces have stood out. A major oil discovery near South America greased Apache shares, sending them up 31%. But with the energy exploration company seen losing nearly $600 million in 2019 ($48 million excluding charges), the fundamentals aren’t there. Apache’s IBD Composite Rating is just 53.

CAN SLIM growth investors, though, know its best to focus on the leaders. And there are plenty of those to choose from this year.

S&P 500 Stocks Already Up 10% Or More This Year

Author: Matt Krantz

Source: Investors: These 10 Big Stocks Are Already Up 10% (Or More) In 2020

A funny thing happened during President Donald Trump’s tenure in the White House. Despite his general criticism of them, California-based technology companies in the S&P 500 are thriving.

The S&P 500’s 31 California-based tech companies are up 108% on average since Trump was inaugurated on Jan. 20, 2017. All three of the top stocks since Inauguration Day are California-based techs: Advanced Micro Devices (AMD), Fortinet (FTNT) and ServiceNow (NOW). This according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. AMD and ServiceNow are both members of IBD’s Leaderboard list of top stocks.

See All The Most Promising Stocks On Leaderboard

In fact, the Technology Select Sector SPDR ETF (XLK) is up 82% since Inauguration Day, topping all 11 S&P 500 sectors. These tech-charged gains easily surpass the 42% gain of the SPDR S&P 500 ETF Trust (SPY) from Trump’s inauguration.

Trump often directed criticism toward larger tech companies in California during his campaign. And Trump’s role in the markets and economy is again front-and-center following his impeachment by the U.S. House of Representatives.

But data show why investors know to watch fundamentals — not politics.

California’s S&P 500 Tech Stocks Dominate Under Trump

Looking further still, tech has done even more remarkably well with Trump in the White House. Seven of the top 10 S&P 500 stocks during the Trump Administration are in the tech sector. And five of those tech-stock winners are based in California.

The Golden State and Trump have tangled on multiple occasions, including his singling out of several of the largest companies based there. Trump scolded Apple (AAPL) for its global manufacturing network, Alphabet (GOOGL) for its online search filtering and Facebook (FB) for its role in affecting political elections.

And yet, shares of Apple, Alphabet and Facebook all powered higher under Trump. Apple is up 133% and is now the S&P 500’s most-valuable company. Alphabet is up 64% since his inauguration and Facebook 61%. It’s important to note Trump is far from the only politician to criticize these companies, especially Facebook.

Advanced Micro Devices, though, is the top Trump winner so far. Shares are up an astounding 342% since the inauguration. The Santa Clara, Calif.-based chipmaker is benefiting from an easing of trade war worries.

AMD is also seen as being a winner in an expected semiconductor industry recovery in 2020. AMD earnings per share are seen jumping 77% in 2020 to $1.10. Strong fundamentals and stock gains give AMD stock an IBD Composite Rating of 87.

Trump’s Favored S&P 500 Stocks And Sectors Languish

Meanwhile, Trump’s more favored sectors and industries haven’t performed nearly as well.

The Materials Select Sector SPDR Fund (XLB) is up just 19.2% from inauguration day and the Industrial Select Sector SPDR ETF (XLI) is up 28.4%.

Energy stocks, too, have done notably poorly. Four of the 10 worst performing S&P 500 stocks since Trump’s inauguration are in the energy sector. Cimarex Energy (XEC), a Denver-based oil and gas exploration company, dropped 63% since inauguration. The company’s earnings per share is seen falling 44% in 2019 to $4.10.

And don’t forget the U.S. automakers, which Trump took great interest in during his campaign. Their shares have lagged, too. Shares of automaker General Motors (GM) are up just 0.4%, while Ford Motor (F) is down 23.8%. Ford’s 2019 earnings per share are seen falling nearly 5% to $1.24.

What About Amazon.com?

One of Trump’s favorite corporate targets is Amazon.com (AMZN). Trump and Amazon.com CEO Jeff Bezos have indirectly clashed several times. The company is also challenging the government’s recent decision to award a large cloud-computing project to Microsoft (MSFT).

Amazon.com is a consumer discretionary stock based in Seattle, so it’s not in this analysis. But it is thriving. Shares of the company are up more than 120% since Trump’s inauguration. And profit next year is seen soaring more than 30% in 2020.

Looks like being on Trump’s foe list isn’t as scary as it might seem.

Best S&P 500 Stocks Since Trump’s Inauguration

IBD, S&P Global Market Intelligence

Author: Matt Krantz

Source: Investors: The 10 Stocks Thriving Under Trump Will Surprise You

If you own Apple, you’re pretty proud of your 77.7% gain this year. Just know that gain pales next to the very best S&P 500 stocks this year.

It’s hard for AirPod-wearing Apple (AAPL) investors to believe it, but 11 S&P 500 stocks this year delivered Apple-beating gains. These top stocks include mostly information technology stocks like chip companies like Advanced Micro Devices (AMD), and chip-making companies such as Lam Research (LRCX) and KLA (KLAC). This is according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

And they didn’t beat Apple by just a little bit. AMD, which sports an 87 IBD Composite Rating, is up 131.7% this year. That’s a real difference. Had you invested $10,000 in AMD, rather than Apple, you would have made 54% more, or $5,390.

You might want to take your AirPods out for a second.

Tech Sector Isn’t Just Apple

Apple is the S&P 500 king of technology in terms of market value. And its stock, with its 87 IBD Composite Rating, is no slouch.

This year, Apple’s stock created nearly $500 billion in new shareholder wealth. That’s an astounding amount, if you consider $7.1 trillion in stock market wealth was created in total this year, says Wilshire Associates. That means just Apple is responsible for roughly 7% of the money made in the stock market this year.

But when you consider the Technology Select Sector SPDR Fund (XLK) is up nearly 46% in 2019, you’d expect many of the big winners to hail from the top-performing sector.

And they did. Seven of the 11 S&P 500 stocks that topped Apple are all in the information technology sector.

Advanced Micro Devices (AMD)

S&P 500 Leader: AMD

No matter how great Apple’s stock was, AMD’s was even better. Much of the rally is due to higher hopes for revenue and profit in 2020. Analysts see computer sales picking up, but also demand for cloud computing to stoke demand for AMD’s products.

AMD’s adjusted earnings are expected to jump 77% in 2020 to $1.10 a share. Meanwhile, analysts are calling for revenue to climb 27%, making it one of the fastest-growing S&P 500 companies in 2020.

And investors don’t have to wait long for the profit boom. Earnings per share at AMD leapt 38% in the just-completed September quarter. That snapped two straight quarters of EPS declines.

It’s a similar story of cyclical chip demand growth for other players in the semiconductor, industry like Lam Research, KLA, Applied Materials (AMAT) and Qorvo (QRVO).

Qorvo, a maker of circuits for mobile devices, gets an extra boost from the growth of high-speed 5G wireless networking in 2020. Most of the gains aren’t seen materializing until the fiscal year ended March 2021. Analysts are calling for fiscal year 2021 earnings to jump 16% on 7.6% higher revenue of $3.4 billion.

S&P 500 Winners Beyond Tech

Tech was the year’s winning theme, but there was more to the S&P 500 story. Even consumer discretionary stock Target (TGT) topped Apple with its 94% gain this year. The retailer’s 94 Composite Rating also beats Apple’s.

Target is winning from its hybrid approach of blending its online retail reach with its physical presence. In many ways, Amazon is having to emulate Target by opening stores and shifting inventory to local warehouses. Target’s earnings per share are seen rising 18% to $6.40 in 2020 on 4% higher revenue.

That’s not to detract from Apple investors’ win. But it’s important to know Apple’s not the only game in town.

S&P 500 Stocks That Beat Apple This Year

IBD, S&P Global Market Intelligence

Author: Matt Krantz

Source: Investors: Are These 11 Hot Stocks Even Better Than Apple?

Cheap stocks are harder to find — with the S&P 500 up 24% this year. But top-rated S&P 500 stocks with low valuations are still out there. In fact, Warren Buffett already owns two.

Nine stocks in the S&P 500, including top Buffett holdings Synchrony Financial (SYF) and United Airlines (UAL) as well as industrial United Rentals (URI) and biotech Biogen (BIIB), are cheap relative to the market and carry high IBD Composite Ratings. The stocks are predominantly in the financial and industrial sectors.

All of these stocks trade for 10.5 times or less their adjusted diluted earnings per share the past 12 months and carry IBD Composite Ratings of 85 or higher, according to an Investor’s Business Daily analysis of data from MarketSmith and S&P Global Market Intelligence.

That’s a rare combination.

S&P 500: Searching For Value

Value stocks are pulling ahead of growth as investors seek safety if corporate earnings sputter. Finding stocks with low valuations, though, is tougher than it was. Following the rally this year, S&P 500 stocks now trade for a median of 21 times earnings.

Only 40 stocks in the S&P 500 carry price-earnings ratios of less than 10.5.

Why? The market costs more than it did. The S&P 500 trades for 20.3 times historically adjusted earnings the past 12 months, says S&P Dow Jones Indices. That’s 8% higher than the index’s average valuation, measured this way, of 18.8 since 1988.

But chasing stocks just because they’re cheap isn’t a winning stock strategy. Prudent investors know it’s best to own leading stocks, not necessarily the cheapest ones. It’s better to buy high and sell higher than get stuck owning a bargain-priced dud.

And that’s why it’s also important to also find S&P 500 stocks carrying a high Composite Rating. A Composite Rating of 85 or higher is a sign the stocks are outpacing 85% of all stocks when it comes to the most important stock-picking criteria.

United Rentals: Cheap S&P 500 Stock With A Perfect 99

Cheap stocks don’t have to be laggards. Take United Rentals, which rents out industrial equipment like backhoes and boom lifts.

The stock trades for just 10.3 times the $14.46 a share it earned over the past 12 months. That’s quite a discount even to Deere (DE), which is valued at nearly 17 times its trailing earnings.

And United Rentals is no laggard either. Shares are up 44.9% just this year. That blows away the 26.1% gain by the Industrial Select Sector SPDR ETF (XLI) this year.

And United Rental’s earnings per share is seen jumping nearly 19% this year. No wonder it wins IBD’s perfect 99 Composite Rating, which factors in both stock-price strength and earnings growth. And next year? Analysts forecast earnings to jump another 5%.

Synchrony Financial And United: Buffett’s Cheap Stocks

Remember the days of single-digit price-earnings ratios? They’re still here with many financials.

In fact, five of the nine top-rated stocks with low valuations are in the financial sector.

Take credit card issuer Synchrony Financial. The shares trade at a price-earnings ratio of just 6.7. And that’s following a blistering 56% gain this year. Just for context: The Financial Select Sector SPDR ETF (XLF) is up 25% in 2019 so far.

That no doubt catches the eye of famed investor Warren Buffett. Buffett owns, through his Berkshire Hathaway (BRKB), 3% of Synchrony’s shares outstanding. That stake, worth $772 million, makes Berkshire the sixth largest owner of the stock.

Synchrony also has the fundamentals to back up its stock price gains. The company’s earnings are expected to jump nearly 14% this year. All told, Synchrony sports a 93 Composite Rating.

In addition to Synchrony, Buffett also owns a giant 8.7% stakes in United Airlines. His position, worth $2 billion, makes Berkshire the airline’s second-largest owner.

This impressive bull market is pushing the S&P 500 higher. But don’t assume all stocks are overvalued.

Buffett doesn’t.

Author: Matt Krantz

Source: Investors: 9 Top Stocks Are Still Dirt Cheap — Including Two Warren Buffett Owns

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