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What are we looking for?

With the S&P 500 dropping below its 20- and 50-day moving averages, showing a bearish market trend, we’re focusing on finding defensive value stocks. We’re using a simple approach to find undervalued stocks with potential for growth despite the current market conditions.

The screen

We used Trading Central Strategy Builder to search for companies in the U.S. market that are indicating the best value using traditional value investing criteria.

We began by setting a minimum market capitalization threshold of US$10-billion. We’re focusing on large-cap names owing to the greater stability and safety that they offer.

The screen filtered for stocks indicating a price-to-earnings ratio of 20 or less, which is below the P/E of the S&P 500 index, which sits at 25.

Next, we incorporated two quantitative filters: the TC Quality Factor and TC Value Factor ratings, requiring a minimum rating of 55 out of 100. These ratings reflect the company’s strength compared with peers in their industries. The Quality Factor assesses financial strength, including profitability, balance sheet robustness, and earnings quality. Meanwhile, the Value Factor examines metrics such as earnings yield, price/book ratio, and free cash flow.

Finally, we screened for companies showing a five-year historical earnings-per-share growth rate of at least 10 per cent to provide a long-term view of how the company has increased its earnings.

We have also included year-to-date, and one-year returns.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

Defensive value stocks

RANK COMPANYTICKERMKT.CAP. ($Bil) RECENT PRICE ($)P/ETC VAL.FCTR.RTNGTC QLT.FCTR.RTNGDIV.YLD (%)EPS.GRTH 5-YR (%)1Y PERF. (%)YTD PERF. (%)
1Bunge Global SABG-N14.86105.497.0982822.5155.4293.9
2Suncor Energy IncSU-N48.5938.078.2558664.2325.5422.718
3Renaissancere Holdings LtdRNR-N11.41221.934.1467640.7260.484.58.1
4eBay IncEBAY-Q25.6250.229.4955782.1815.2713.112.7
5Marathon Oil CorpMRO-N15.8227.610.8157631.5914.6912.213.3
6Interactive Brokers Group IncIBKR-Q11.7111.0519.2664590.9219.9927.727
7Entergy CorpETR-N22102.949.373754.3819.11-5.70.5
8Raymond James Financial IncRJF-N25.49122.415.2656631.4815.7625.98.6
9Loews CorpL-N16.2473.911.6358620.3425.8827.23.8
10The Cigna GroupCI-N98.16347.7419.955571.6210.5335.111.6

Source: Trading Central

Topping our list is Bunge Global SA BG-N, a global agribusiness and food company. The stock has the second-lowest P/E on our list at just 7.09. The TC Value and Quality factor ratings are the highest on our list at 82, which is very strong compared with its industry peers. EPS growth is at 55.42 per cent over the past five years, the second-highest on our list.

The company with the lowest P/E on our list is RenaissanceRe Holdings Inc. RNR-N, a global provider of reinsurance and insurance, which has a P/E of just 4.14. The company has the highest five-year EPS growth on our list at an impressive 60.48 per cent.

Health care company The Cigna Group CI-N has the largest market cap on our list at US$98.1-billion. The stock price has gained 35 per cent over one year, the highest on our list, and is trading within 5 per cent of its record high, set on March 28.

Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 16-per-cent annualized return compared with 12 per cent for the S&P 500 index.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/05/24 6:40pm EDT.

SymbolName% changeLast
BG-N
Bunge Ltd
+2.55%106.42
SU-N
Suncor Energy Inc
+0.87%40.65
RNR-N
Renaissancere Holdings Ltd
+0.13%228.97
EBAY-Q
Ebay Inc
-2.78%52.9
MRO-N
Marathon Oil Corp
+3.48%26.45
IBKR-Q
Interactive Brokers
+0.47%128.6
ETR-N
Entergy Corp
-1.48%107.53
RJF-N
Raymond James Financial
-1.84%123.54
L-N
Loews Corp
-0.98%74.02
CI-N
The Cigna Group
+0.18%333.21

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