Market Crash Value Hunting: Update

Surprisingly, many of the tickers from my April article are still great values

About a week after “Liberation Day”, I published a post on here called Market Crash Value Hunting in which I listed name brand stocks that had P/Es under 10. (For reference, a P/E of 10 means that the value of the stock is ten times earnings; to oversimplify, this means your return if earnings hold steady would be about 10%.) In the long bull market that began in about 2009-2010, there has been little opportunity to buy high-quality stocks at those multiples; investors have raised concern over the average market P/E being historically high, and there are certainly no values of that kind in Big Tech. I was excited by some of the opportunities, enough to buy one myself (Ford), and it seems like my readers were too, as Market Crash Value Hunting became one of my most read posts.

I thought it might be fun to check in with the stocks and see how they’re doing, as well as whether their P/Es are still reasonable. Let’s take a look:

• Delta Airlines: Up 13% since 4/9.

• Ford: Up 14% since 4/9.

• GM: Up 10% since 4/9.

• Comcast: Up 1% since 4/9.

• Fox: Up 5% since 4/9.

• T. Rowe Price: Up 5% since 4/9.

Also, the honorable mentions:

• United Airlines: Up 14% since 4/9.

• Pulte: Up 7% since 4/9.

• Lennar: Up 5% since 4/9.

• Halliburton: Down 1% since 4/9.

• Altria: Up 6% since 4/9.

• State Street: Up 19% since 4/9.

• HP: Up 3% since 4/9.

For comparison, the S&P 500 is up 11% since 4/9. All in, the value hunting portfolio has done slightly worse with an 8% gain, but it should be noted that on average, these stocks have a significantly higher dividend yield than the S&P 500, somewhat compensating for the disadvantage.

Part of the problem is that growth has outperformed value on the road back up: the NASDAQ is up 15% since the reference date, while Vanguard’s value fund is up 6%. While our slight outperformance versus the benchmark is pleasant, the mediocre performance of many of our picks is a testament to the patience required to be a successful value investor. If you’re constantly checking your stock price and then checking Nvidia and wondering why you’re doing worse, the Graham-Dodd-Buffett school of investing might not be for you.

But if it is, here’s some good news: most of the above stocks still trade at very reasonable values. This is a reminder that despite the overall high performance of the market, performance is really being driven by very few names (this article is somewhat old, but does a good job of explaining the phenomenon, which is still occurring today) and that there are good values if you know where to look.

Here are the stocks from the above list with P/Es still under 10:

• GM, P/E 7.2

• United Airlines, P/E 7.3

• Pulte, P/E 7.4

• Lennar, P/E 8.2

• Ford, P/E 8.5

• Comcast, P/E 8.7

• Delta Airlines, P/E 8.9

• Halliburton, P/E 9.1

• HP, P/E 9.6

• Altria, P/E 10

Some of these valuations, such as the airlines and auto companies, simply don’t make sense unless you think a recession is coming. As we’ve discussed in this newsletter, there’s no evidence for that. So in my view, they remain good values.

Disclosure: author is long Ford.