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Debt-Ceiling Standoff Awakens Value Investors

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DTE Energy (DTE)

Company Profile: DTE Energy is the parent company of three Michigan-based regulated utilities and four non-regulated subsidiaries.

AFAM's Target Price: $64.05

Potential Upside From Current Levels: 27%

Clark's Take: Michigan continues to experience tough economic times, but Clark believes the state's struggles are slowly subsiding. As regional economic activity stabilizes and capital expenditures level off, Clark and his firm expect that DTE's management will have the opportunity for periodic dividend increases over the next several years. DTE shares currently have a dividend yield of about 4.7%.

"We like DTE's attractive earnings growth profile and the overall constructive regulatory framework in its home state," Clark says. "The 4.7% dividend yield compares favorably to that of its regulated utility peer group, which yields an average of 4.2%."

Wal-Mart (WMT - Get Report)

Company Profile: Wal-Mart is the world's largest retail chain.

AFAM's Target Price: $76.12

Potential Upside From Current Levels: 44%

Clark's Take: Wal-Mart is a U.S.-based company, but with an international presence in Argentina, Brazil, China, Japan, Mexico and South Africa, among other locations, Clark says the company has attractive long-term growth opportunities.

"That said, shares have been sluggish as investors have been focused on the missteps that occurred on the domestic side over the last couple of years," Clark says. "We are encouraged by management's strategy to return to 'the glory days' in the U.S., anchored by efforts to aggressively re-emphasize 'Every Day Low Prices,' increase product offerings and improve the price-match guarantee program.

Clark also notes Wal-Mart's attractive valuation. The stock trades at less than 12 times forward earnings estimates and carries a price-to-sales ratio of 0.44, both 40% below the 10-year averages. The stock also offers investors a 2.7% dividend yield.

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