Cheap Large Cap Income Stock Analysts Love

Wall Street

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  • Each week, we screen for stocks that could be headed higher. This week, we focused on just four criteria. This demonstrates that stock screens can be relatively simple, although we are harnessing hours of Wall Street research to help us speed up our own search.

    To benefit from Wall Street’s research, we included analyst’s ratings in our screen. According to one study, more than 3,000 analysts work for more than 350 sell-side investment firms in the United States. They provide analysis, earnings forecasts, and buy and sell recommendations on individual companies.

    Analysts are biased and tend to rate stocks as buys. But, they do show a degree of conviction by ranking some stocks as stronger buys than others. In general, studies find that the strongest ranked buys do outperform the market, on average.

    We began our screen by focusing on only stocks that carry the highest ratings from analysts. Then, we narrowed the list by focusing on price.

    One study looked at how low priced, or cheap, stocks performed relative to more expensive stocks. The study found that cheap stocks delivered more than six times the average return of the more expensive stocks in a typical quarter.

    That’s why we limited our search for potential bargains by focusing on stocks priced at less than $10 per share. The reason we like cheap stocks is because these are the ones that have been proven to be most likely to deliver large gains.

    We required that the stock pay a dividend to help ensure we get paid while waiting for potential gains.

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  • One way to find stocks meeting these requirements is with the free stock screening tool available at FinViz.com. At this site, you could screen for a variety of fundamental factors, high levels of institutional ownership and bullish institutional transactions. An example is shown below.

    FINVIZ

    Source: FinViz.com

    Three Stocks Meet Our Strict Requirements

    Remember, there is no guarantee any stock will increase in value. Also, it is important to remember when we search for stocks using quantitative measures, our goal is to identify stocks that meet those criteria. The screens we develop could be used as the cornerstone of long term investment strategies but any individual stock in the list could be a winner or loser.

    Advanced Semiconductor Engineering, Inc. (NYSE:ASX) provides a range of semiconductors packaging and testing, and electronic manufacturing services in the United States, Taiwan, Asia, Europe, and internationally.

    The company offers packaging services, including various packages, such as flip-chip ball grid array (BGA), flip-chip chip scale package, advanced chip scale packages, and copper wire and silver bonding solutions.

    Further, it provides electronic manufacturing services in relation to computers, peripherals, communications, industrial, automotive, and storage and server applications.

    The company offers a yield of more than 3% and the stock has been in a strong up trend.

    ASX

    ICICI Bank Limited (NYSE: IBN) provides banking and financial services in India and internationally.  The company offers savings, salary, pension, current, other accounts; and fixed, recurring, and security deposits.

    In addition, the company offers life, health, travel, car, two wheeler, home, and student medical insurance products; pockets wallet; fixed income products, and investment products. Further, it provides portfolio management, trade, foreign exchange, locker, private and NRI banking, and cash management services; family wealth and demat accounts; commercial banking, investment banking, capital markets and custodial, project and technology finance, and institutional banking services, as well as Internet, mobile, and phone banking services.

    The stock offers a low yield, less than 1%, but is oversold on the long term chart using weekly data and could be positioned for short term gains.

    IBN

    Mitsubishi UFJ Financial Group, Inc. (NYSE: MTU) provides financial services in Japan and internationally.  Its various divisions offer banking financing, hedging, and investing solutions to retail, corporate, institutional, and governmental clients; and asset and liability management services.

    The stock offers a yield of approximately 2.4% and the chart is potentially bullish with an oversold stochastic.

    MTU

    Sumitomo Mitsui Financial Group, Inc. (NYSE: SMFG) is a Japanese bank with approximately 440 branch offices in japan; 18 branches, 20 sub-branches, and 4 representative offices internationally; and 54,947 ATMs. The company’s is also a leader in leasing segment offering equipment, operating, leveraged, aircraft, small-ticket, and automotive leasing.

    The yield is more than 3% and the chart shows a pattern similar to the other stocks highlighted above.

    SMFG

    Telefónica, S.A. (NYSE: TEF) provides mobile and fixed communication services primarily in the European Union and Latin America.

    The company’s mobile and related services and products comprise mobile voice, value added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services.  Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary and business oriented value-added; video telephony; intelligent network; and telephony information services.

    Additionally, it provides Internet protocol television (TV), over-the-top network TV, cable, and satellite TV, and pay TV services; M2M connectivity platforms; and financial and other payment, security, cloud computing, advertising, big data, and digital telco experience services.

    This company, headquartered in Spain, offers a yield of more than 5%. However, its chart is not as clearly bullish as the other highlighted companies are.

    TEF

     

    TEF is forming a basing pattern and momentum is tracking the price action. An up side breakout could carry the stock back towards its 52-week high near $13 before resistance is encountered.

    Any of these stocks could be a potential winner and all worth further research. If you are uncomfortable doing your own research, there is a TradingTips.com trading service, Triple-Digit Returnswhich uses a very specific system for choosing the right stocks to trade.

    Triple-Digit Returns looks for companies that are misunderstood and potentially undervalued, lost darlings, mergers or spinoffs that could benefit share holders, or companies that show signs of strong interest by insiders who know the company best and see value.

    This service provides a recommendation once a week. It could be used for trading or learning how to analyze stocks since each recommendation includes a detailed explanation of the company. To learn more, you can click here.