With markets going up one day and down the next and no indication of when they’ll return to rationality, stock picking has gotten increasingly difficult. Particularly because anything that looks good or has solid prospects is immediately bid out of proportion. And then, no matter how hot the stock and how great its growth prospects, you know you can’t win with them.
In such times, it pays to have a strategy. Because somebody is making some gains out there and that person could easily be you. So you obviously want to round out the portfolio, by supplementing growth stocks with income-generating names.
One thing you don’t want to ignore is a company’s earnings profile. No matter how high the price is shooting, do remember to stick to the basics. How has the company done in the last quarter and why? How is it expected to do in the next few quarters (this could be tricky since many companies are withdrawing full-year guidance). Still, analyst estimates do help in this regard.
Another point, closely tied to performance, is returns. There are only so many ways you can make money from stocks. You either invest in those that you expect will appreciate in the future, or you invest in those that will generate some income.
So today, I’m taking a look at the income side and explaining why this income is less risky-
SpartanNash Company SPTN
U.S.-based SpartanNash Co (NASDAQ:SPTN)., through its Family Fare, No Frills, Bag 'n Save and Econofoods supermarkets, distributes food to military commissaries and exchanges and independent and corporate-owned retail stores located in 44 states and Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt.
5 Things I like about this company-
First, it has a Zacks Rank #1 (Strong Buy rating), value score A and VGM score A. The Zacks rank has been proven to generate positive returns over a one-month period. The value score indicates that it is attractive for investors looking to buy undervalued stocks that are likely to generate strong returns when market conditions improve. The good VGM (value-growth-momentum) score indicates that growth investors and momentum traders could also find it useful. All three are proprietary technologies with proven history.
Second, it operates in an attractive industry, i.e., the natural food products group, which is the top 12% of Zacks-classified industries (a position of 30 out of 250+ industries). It is not impossible to have winning stocks in weaker industries. But in general, industries with a positive position will have certain things going for them. Given the current level of uncertainties, to know this can be particularly useful to investors.
Third, both analysts covering the stock are positive about this company. As a result, its 2020 EPS estimate is up 32.2% from 60 days ago while its 2021 EPS estimate is up 12.3%.
Fourth, its dividend yields 4.1%, which is decent. Dividend stocks are attractive in volatile markets, especially if you didn’t overpay for the stock in the first place. We also need confirmation that it won’t have difficulty paying the dividend. So taking a look at the balance sheet we find that it recently raised a lot of debt but has been paying it down over the past year. The cash flow statement shows free cash flow improvements since December 2017, but it soared in the last quarter driven by strong operating cash flow. So there doesn’t appear to be any risk to the dividend.
Fifth, its P/B ratio is 0.99X and P/E 9.28X. So the stock is undervalued in terms of book value. In terms of P/E, it is trading just above its median value, but a significant discount to the S&P 500.
QEP Resources (NYSE:QEP), Inc QEP
Denver, CO-based QEP Resources is an independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company, in its current form, came into existence following the May 2010 spin-off of Salt Lake City, UT-based Questar Corporation’s unregulated exploration and production unit, as well as its gas gathering and marketing operations into a separate, independent and publicly traded entity.
Five things I like about this company-
First, it has a Zacks Rank #2 (Buy rating), value score A and VGM score A.
Second, it operates in the Oil and Gas - Exploration and Production industry, which is the 46th industry out of 250+ Zacks classified industries, or the top 18%.
Third, analysts covering the stock are positive about its near-term prospects. So after taking the 2020 EPS estimate down from 30 cents to 6 cents 60 days ago, they raised it back up to 30 cents (that’s a 400% increase). The 2021 estimated loss is down 3 cents.
Fourth, its dividend yields 5.7%. The company has been paying down its debt since 2018, and made a substantial reduction in the last quarter as well. However, heavy capital expenditures continue, which is why there is no free cash flow. In the last quarter, net cash from operations improved substantially over the comparable prior-year quarter, so there doesn’t appear to be any risk to the dividend.
Fifth, its P/B ratio is 0.11X and P/S 0.36X. The stock is undervalued on the basis of P/B and trading well below its median value over the past year on the basis of P/S.
Bank of Commerce Holdings (NASDAQ:BOCH) CA BOCH
Bank of Commerce Holdings is a financial service holding company that owns Redding Bank of Commerce, Roseville Bank of Commerce, a division of Redding Bank of Commerce and Bank of Commerce Mortgage, an affiliate of Redding Bank of Commerce and Roseville Bank of Commerce.
First, it has a Zacks Rank #2 (Buy rating) and a value score A.
Second, it operates in the Banks – West industry, which is the 37th industry out of 250+ Zacks classified industries, or the top 37%.
Third, the analyst covering the stock is positive about its near-term prospects. So after taking the 2020 EPS estimate down from 89 cents to 64 cents 60 days ago, he raised it up to 67 cents (that’s a 4.7% increase). For 2021, the EPS went from 60 to 66 cents (up 10%).
Fourth, its dividend yields 2.7%. The company generates positive cash flow, has low capex and debt. So there shouldn’t be an interruption in the dividend.
Fifth, its P/B ratio is 0.77X and P/E 11.0X. The stock is undervalued on the basis of P/B and trading below its median value over the past year on the basis of P/E.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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QEP Resources, Inc. (QEP): Free Stock Analysis Report
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SpartanNash Company (SPTN): Free Stock Analysis Report
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