The stock market may be experiencing some volatility as it continues to push up against new highs, but that doesn’t mean there aren’t some good values still to be found. A rising market tide lifts all boats, but some stocks are sporting supremely discounted valuations anyway.
Although waiting for a major correction would give you a chance to find more stocks with cheap valuations,here are three companies that are bargains right now.
Top Financial Stocks To Invest In Right Now: Wal-Mart Stores, Inc.(WMT)
Investors looking for the perfect stock during retirement should aim for a relatively stable company with competitive advantages that’s returning consistent value to shareholders. Few companies can claim to do those things as well as Walmart and over the past decade Walmart has consistently repurchased shares and increased its dividend.
While Walmart’s dividend increases have slowed recently as the company made key acquisitions, its fiscal year 2019 increase to a quarterly $0.52 dividend is still a healthy 2.4% yield. It was the 45th consecutive year the company increased its dividend and during fiscal 2018 the retail juggernaut returned a staggering $14.4 billion to shareholders in the form of dividends and share repurchases – rest assured, Walmart will consistently return value to shareholders.
Walmart has also made smart moves to invest in its future, especially its 2016 Jet.com acquisition and 77% stake in Flipkart in May. Initially, the investing community believed that Walmart vastly overpaid for Jet.com, an unproven e-commerce business, in a desperate attempt to do something with its online sales. It took barely a year for investors to come around to its e-commerce moves, and Morningstar.com estimates Walmart can grow online sales 35% annually to boost online sales from 5% of total sales during fiscal 2018 up to around 15% within three to four years.
With more than 11,700 stores in 28 countries and 2018 revenue of $500 billion, Walmart is a powerhouse in scale, pricing power, and distribution. Don’t be surprised if it’s one of a few, if any, that will challenge Amazon.com with e-commerce and grocery delivery. In the meantime, it will continue to dish massive value to shareholders through dividends and share repurchases.
Top Financial Stocks To Invest In Right Now: Magellan Midstream Partners L.P.(MMP)
Magellan is a large and diversified midstream partnership. While it doesn’t produce oil, it is a vital cog in the oil industry, helping to move the energy source from where it is produced to where it eventually gets used.
The partnership is among the most financially conservative players in the midstream space. Its debt-to-EBITDA ratio is at the low end of the industry and its distribution coverage is currently being targeted at a solid 1.2 times. Add in a business that is over 85% fee-based and the partnership’s generous 5.5% yield looks easily sustainable. That’s the core reason why income investors should like Magellan right now — a large and safe distribution.
However, the midstream partnership also has plans to spend roughly $1.7 billion on capital projects between 2018 and 2020 (with additional projects waiting in the wings). Most of these projects either have customers lined up or are at facilities where demand indicates a need for expansion. In other words, Magellan is also taking a conservative approach to its growth spending. These capital outlays, meanwhile, should support distribution growth of as much as 8% a year through 2020.
A little history adds even more allure here. Magellan has increased its distribution every quarter since its IPO — including right through the deep energy downturn that started in mid-2014. Magellan tends to trade at a premium to its peers, but remains around 20% off of the highs it reached when oil prices were peaking. With oil coursing through its midstream veins, Magellan is a name that conservative income investors should be looking at very closely today.
Top Financial Stocks To Invest In Right Now: Exxon Mobil Corporation(XOM)
The energy sector has seen a lot of volatility in recent years, with oil prices having plunged from triple-digit levels all the way down below the $30-per-barrel market before rebounding convincingly. Yet crude oil hasn’t regained all of its lost ground, and nervousness about the tenuous nature of the energy market’s recovery has left even shareholders in industry stalwart ExxonMobil unconvinced about the industry’s future.
Even as the oil giant’s dividend has continued to rise, share prices at ExxonMobil have dropped, and that’s been enough to give the stock an attractive 4.1% dividend yield right now.
ExxonMobil’s major stumbling block has been that it has had increasing difficulty finding ways to replace production, having fallen behind some of its most prominent rivals in pursuing new lucrative projects. The oil giant has long been an industry leader, and it has the financial capacity and determination to use its position as leverage to get involved in deals that smaller companies can’t afford to pursue.
It could take a while for ExxonMobil’s earnings results to catch up to its ambitious plans, but eventually, the company is in a good position to make good on its strategic promises to its core investors.
Top Financial Stocks To Invest In Right Now: LGI Homes, Inc.(LGIH)
I’m overgeneralizing a little bit, but most new homes can be lumped into three distinct categories: starter homes, move-ups, and luxury. Most homebuilders will have a blend of these homes in their inventory, a few will focus on the luxury market, but LGI Homes focuses pretty much exclusively on the starter home market and has built its business to specifically cater to the demographics of these customers.
LGI is much more of a no-thrills builder than its peers. It doesn’t offer several premium package options like kitchen or bathroom upgrades or several different architectural designs. Instead, it focuses on a few more cookie-cutter designs that can be built relatively quickly and keep costs down such that LGI can sell more affordable homes. The company also targets land purchases, lot purchases, or lot agreement contracts in places that are away from metro areas but have easy access to highways and are close to retail and employment centers. This buying strategy is also a way to provide a lower price point on entry homes.
Management also uses a more targeted marketing approach to reach its buyer demographic. It specifically seeks out first-time buyers and renters with its marketing campaigns that offer move-in ready homes that don’t require a down payment and offers them at comparable rates to rentals in the area with the possibility of building equity. It has been an incredibly successful tactic, as new homes sold has increased 10 times over the past decade.
LGI isn’t without flaws. It carries a rather high debt load compared to its peers, and targeting buyers with no down payment might give some investors the chills because of potentially questionable customer creditworthiness. These two things suggest that if we were to see a housing market swoon, LGI Homes could be one of the first to suffer.
The one thing I can say to assuage these concerns is that LGI Homes was one of the few homebuilders to remain profitable every year since 2003, so management has handled a tough market crash before. Also, there is a lot of pent-up demand from millennials putting off their first home purchase, and high housing prices in the conventional markets are likely going to push first-time buyers into these more friendly price-point abodes. With shares of LGI trading at just 10.7 times earnings, LGI stock could be a great pickup.