Top Five All-Around Value Stocks
Public Service Enterprise Group ( PEG) sells electricity and natural gas primarily in the northeastern and mid-Atlantic U.S. It has been rated a buy since November 2006. Third-quarter profit climbed 35% from a year ago to $507 million, or $1.97 a share. Public Service Enterprise Group generates 68% of its operating income from its power segment, which grew 63% year over year in the third quarter. The growth was powered by higher prices realized, an increase in power generation and lower generation cost. The company has also seen an increase in generating capacity from its nuclear power plants. Looking forward, PSEG has already locked in sales of the majority of its expected power input for the remainder of fiscal 2007 at higher prices. This, combined with high utilization of low-cost nuclear power plants and divestiture of the loss-making Lawrenceburg power plant, could help fuel growth. The rating is not risk-free. Public Service Enterprise Group is exposed to risks arising from the reliability of power plants and transmission and distribution equipment, along with related safety hazards. In addition, the company could be negatively affected by regulatory changes.
Total ( TOT), an integrated oil and gas company, has been rated buy since December 2005. The company's strengths can be seen in multiple areas, such as revenue growth, stock price performance, EPS growth, increase in net income and attractive valuation level. Total's revenue growth outpaces the industry average, driving higher earnings. Total has demonstrated a pattern of positive EPS growth over the past year, a trend that should continue. Third-quarter net income climbed 63% to $4.89 billion compared with the same period last year, while revenue rose 26% over the same time frame. Even though it has already enjoyed a nice gain in the past year, Total's stock still shows upside potential. These strengths outweigh the company's weak operating cash flow.
Hewlett-Packard ( HPQ), a technology products and services company, has been rated a buy since December 2005. The rating is based on the company's strong top- and bottom-line growth as well as its expanding margins. These positives are further supported by notable returns, reasonable leverage levels, and growth due to strategic acquisitions. Fourth-quarter net income climbed 28% from a year ago to $2.16 billion, or 81 cents a share. Revenue increased 15% to $28.29 billion, primarily bolstered by strong sales across all of the company's business segments.
Hess ( HES), which is involved in every aspect of crude oil and natural gas, from exploration to distribution, has been rated buy since November 2005. The company has shown steady top-line growth, with third-quarter revenue climbing 6.8% from a year ago to $7.51 billion, primarily because of an increase in production volumes and rising crude oil and natural gas prices. Net income increased 33% to $395 million, or $1.23 a share, mainly because of lower marketing expenses. The company's crude oil production volume increased 9.4% to 257,000 barrels per day, while the average realized crude price rose 11% to $65.26 per barrel (including hedging). Oil prices are trading at a record level, and they are also highly volatile and cyclical in nature. High oil prices may generate demand for low-cost alternatives, which could hurt demand for oil and gas products. Hess generates a significant portion of its profit from the production of oil and gas, apart from oil refining. Any unexpected sharp downturn in oil and gas prices may also affect the company's earnings.
Nike ( NKE) develops and sells footwear, apparel, equipment and accessory products. It has been rated buy since September 2006. The company's net income increased 14% year over year to $4.34 billion in the second quarter of its fiscal 2008, mainly due to strong growth in international markets, healthy performance across its product lines, and favorable currency impacts. With signs of weakness in the U.S., Nike has adjusted to focus on emerging markets, and international sales increased 18%, accounting for more than half of its total sales in the second quarter. In October, it acquired Umbro, a leading U.K.-based soccer apparel retailer. The acquisition is expected to significantly expand the company's global leadership in soccer, which is a key growth category for Nike. Nike is not risk-free. The overall environment for athletic products remained soft toward the close of 2007. Any failure to adjust to changes in consumer tastes and respond to customer demand could have a negative impact on Nike.
Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could impact the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.