Growth vs. value investing is one of Wall Street's great ongoing debates -- neither side ever maintains a clear performance lead over the other for too long. For the most part, 2010 belonged to growth investors, with the companies expected to continue their fast-paced upward momentum by and large outpacing the market's bargains. But by late year, value stocks had closed much of the gap -- and if history is any indication, the upward trend might continue in 2011.
Many experts are forecasting an ongoing recovery from the recession in the coming year, which bodes particularly well for value stocks. Typically, when an economy exits a recession, investors turn their attention to the stocks that took a beating in the lean times, looking to purchase higher returns at a discount.
Right now, there are quite a few cheaply had large-caps that could offer substantial gains to value-seeking investors.
Tom Jacobs, lead advisor for Motley Fool Special Ops, sees promise in several behemoths, including Johnson & Johnson, which could see upside from the oncoming wave of baby boomer retirees, and Costco, a retailer that retained a more affluent consumer base than its competition these past few years.
And according to Jim Collins, editor of the OTC Insight newsletter, big banks JP Morgan and Bank of America are "undervalued names where a lot of money will be made over the next three years."
So, which large-cap companies are considered to be the most undervalued? To find out, we started with a universe of the 150 largest listed companies by market cap. We then crunched the numbers and identified the companies that are undervalued relative to their competitors when comparing ratios like price to earnings (P/E), price to earnings growth (PEG) and price to cash flow (P/CF).
But remember, any method of determining value is an inexact science at best -- so before you add any of these to your own portfolio, you'll have to do your own homework first. (Click here to access free, interactive tools to analyze these ideas.)
|
Company |
Market Cap |
P/E Ratio (Most Recent Quarter's Earnings) |
PEG Ratio |
P/CF Ratio |
|---|---|---|---|---|
|
International Business Machines (NYSE: IBM) |
203.56B |
9.8 vs. industry average at 16.15 |
1.3 vs. industry average at 1.34 |
9.68 vs. industry average at 34.83 |
|
Wal-Mart Stores (NYSE: WMT) |
198.37B |
14.66 vs. industry average at 18.89 |
1.33 vs. industry average at 1.39 |
9.37 vs. industry average at 11.9 |
|
Coca-Cola (NYSE: KO) |
147.61B |
6.46 vs. industry average at 12.03 |
1.43 vs. industry average at 1.53 |
5.8 vs. industry average at 8.14 |
|
Intel (Nasdaq: INTC) |
121.38B |
9.22 vs. industry average at 14.5 |
0.9 vs. industry average at 1.56 |
6.6 vs. industry average at 11.33 |
|
Hewlett-Packard (NYSE: HPQ) |
105.77B |
11.05 vs. industry average at 13.95 |
1.2 vs. industry average at 1.21 |
7.05 vs. industry average at 11.57 |
|
Goldman Sachs (NYSE: GS) |
85.2B |
10.99 vs. industry average at 15.79 |
1.06 vs. industry average at 1.28 |
6.85 vs. industry average at 14.58 |
|
McDonald's (NYSE: MCD) |
80.4B |
16.41 vs. industry average at 19.78 |
1.64 vs. industry average at 2.68 |
16.19 vs. industry average at 16.56 |
|
Banco Bradesco (NYSE: BBD) |
71.6B |
4.81 vs. industry average at 14.45 |
0.53 vs. industry average at 1.32 |
4.01 vs. industry average at 12.9 |
|
Visa (NYSE: V) |
53.4B |
15.23 vs. industry average at 16.15 |
0.94 vs. industry average at 1.34 |
14.04 vs. industry average at 34.83 |
|
UnitedHealth Group (NYSE: UNH) |
46.35B |
11.27 vs. industry average at 17.5 |
1.01 vs. industry average at 1.28 |
8.54 vs. industry average at 12.6 |
Valuation data and industry comps sourced from Fidelity. The list has been sorted by market cap.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top 6 stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.
