NEW YORK ( TheStreet) -- The third week of earnings season is now upon us, and investors appear to be bracing for more "Chipotle-esque" surprises.But if they were paying enough attention, they would have realized that Chipotle's ( CMG) results were not much of a surprise at all. While earnings can be an excellent time to buy undervalued stocks, on the flipside, the slightest miss in execution will punish those who are priced for perfection, as was the case for Chipotle. This punishment does not necessarily mean that the company is suddenly worse than prior to the announcement. It does, however, bring to the forefront one of the most important aspects of investing: valuation. In this article, we will to look at four stocks that are currently trading at valuation levels that suggest buying and selling. We are buying McDonald's ( MCD), Halliburton ( HAL) and Texas Instruments ( TXN), while placing a sell order on Netflix ( NFLX). Let's look at the case for each one and see if you agree.
Meanwhile, Halliburton has demonstrated on a consistent basis not only that it can beat analysts' expectations, but that it also understands the importance of delivering on the bottom line. With that in mind, the company is scheduled to report its second-quarter earnings Monday before the market opens, and Wall Street is expecting earnings per share of 75 cents on revenue of $6.96 billion. I would be buying ahead of earnings. I don't expect any downside surprises as the company has either met or beaten analysts' estimates in each of the previous four quarters, including a 4-cent beat in the first quarter. With the stock trading at $30 and its price-to-earnings ratio low at 9, it really becomes a challenge to not see a tremendous value, particularly given the fact that the stock is down almost 50% since its 52-week high last summer. Value investors should certainly make a play at current levels. Fair market value for the stock appears to be at least 33% higher, in the mid-$40s.
With the stock trading at $27.25 and considerably below its fair market value, I would be adding shares here ahead of the report. From an investment standpoint, I see 30% more upside in the stock by the end of the year. When comparing its recent earnings and free cash-flow valuations, I remain convinced that the stock is trading at a considerable discount to future earnings potential, even as it offers a respectable dividend yield.