Pfizer, Dell Top the List

Drug giant Pfizer ( PFE) is busy selling its nutrition division and spinning off its animal health business. And with all that going on, the stock still remains cheap, says Mark Finn portfolio manager for the T. Rowe Price Value Fund ( TRVLX ).

"Similar companies trade at much higher multiples than Pfizer, so we expect an unlocking of value through these two transactions and while we wait, we have a stock that trades at 9 times forward earnings and has a 4% dividend yield," says Finn.

The $12.6 billion fund, which garners 3 stars from Morningstar, is up 4% over the past 12 months. Over the past three years, the fund has returned an average of 27.4% annually, outpacing 90% of its Morningstar rivals.

Finn is also a fan of tech-giant Dell ( DELL), which he says trades cheaply despite the large amount of cash the company generates.

"We expect that the server business will get back on its feet as the Taiwan flood disruptions are addressed and the parts become more available. So we expect a long runway for Dell and we expect the stock price to reach the mid-to-high twenties," says Finn, who also likes chemical maker LyondellBasell ( LYB), which he says will benefit from low natural gas prices.

"Lyondell has a tremendous cost advantage. We believe this means the long term earnings potential for Lyondell is more like $7 to $8. The stock is currently trading around $40 which should allow for some multiple expansion over time," says Finn.

Finally, Finn is positive on the oil refiners, despite the industry being shunned by investors in recent years. According to Finn, the drop in U.S. oil production has caused large oil companies such as Sunoco to close down their refinery businesses. But now that oil production is increasing Finn says refiners like Valero ( VLO) stand to benefit.

"Valero will benefit both from the spike in oil supply as well as its ability to ship the finished refined product out through the Gulf of Mexico," says Finn.
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