Stocks with large market caps are generally less volatile than those with small market caps. If stability is a concern for you, and if you're interested in finding potentially undervalued stocks for your portfolio, this list may be a great starting point for your search.
To create our list we started with a universe of large-cap stocks, or companies with market value above $10 billion, and applied the Graham Number.
According to Benjamin Graham, a former mentor of Warren Buffett and the so-called "Godfather" of value investing, the Graham Number is the maximum price that a value investor should pay for a given stock. A stock whose share price is below the Graham Number is considered to be undervalued or of good value.
It is a calculation for the fair-value price of a stock based on its earnings per share (EPS) and book value per share (the value of the company's assets divided by the number of shares).
The Graham Number = Square Root of (22.5) x (TTM EPS) x (MRQ Book Value per Share).
Note: The market does not price stocks based on the Graham Number, so share prices could increase significantly above the Graham Number, or fall far below it. This is also just one of many ways to value a stock.
The following is a list of the most undervalued large-cap stocks according to the Graham number. Do you feel these names offer the stability and growth potential you're searching for?
Use the list below, sorted by potential upside, as a starting-off point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
3. US Bancorp
5. Time Warner
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Becca Lipman does not own any of the shares mentioned above.
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