President Trump’s announcement of reciprocal tariffs, followed by a 90-day pause, caused major swings in the U.S. stock market. The S&P 500 dropped 9% in the first week of April, marking its worst week since 2020. It then rebounded 5.7% the next week, the best since 2023. A major one-day gain came last Wednesday after Trump paused most tariffs, which boosted investor confidence.
Yesterday, markets were lifted by exemptions from reciprocal tariffs on items like smartphones, semiconductors and solar cells. This led to a strong tech rally and extended last week’s gains. However, the S&P 500 remained below its level from April 2, before the tariffs were announced. Uncertainty around a potential global trade war still worries investors and economists. In such volatile times, value investing stands out as a smart, stable strategy for long-term gains.
Alibaba Group BABA, Fresenius Medical Care AG FMS, Helix Energy Solutions Group Inc. HLX and Heritage Insurance Holdings, Inc. HRTG are a few solid high-value picks with high earnings yields.
Value investing means buying stocks that are priced below what they are really worth. It works on the idea that markets often misprice stocks, giving investors a chance to buy low and profit later. One simple tool value investors use is earnings yield. It shows how much profit a company makes for each dollar of its stock price.
Earnings yield, expressed in percentage, is calculated as (Annual Earnings per Share/Market Price) x 100. It is the reverse of the price-to-earnings (P/E) ratio. A high earnings yield may mean the stock is undervalued. A low yield could mean the stock is too expensive.
Investors can also use earnings yield to compare stocks with bond returns like the 10-year Treasury yield. If the stock market's earnings yield is higher than the bond yield, stocks might be more attractive. With regard to this, earnings yield can be more illuminating than the traditional P/E ratio, as the former facilitates the comparison of stocks with fixed-income securities.
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here we discuss four of the 42 stocks that qualified the screening:
Alibaba: The company has cemented its position as the undisputed e-commerce powerhouse in China and is rapidly expanding its international presence. Alibaba operates through seven segments — China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others.
The Zacks Consensus Estimate for BABA’s fiscal 2025 and 2026 earnings implies year-over-year growth of 2.1% and 23%, respectively. EPS estimates for the current and next fiscal year have moved up by 8 cents and 59 cents, respectively, over the past 60 days. Alibaba currently sports a Zacks Rank #1 and has a Value Score of B.
Fresenius Medical: It is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Fresenius Medical recently launched the newest version of its home dialysis machine, NxStage Versi HD with GuideMe Software.
The Zacks Consensus Estimate for FMS’ 2025 and 2026 earnings implies year-over-year growth of 27.1% and 9.1%, respectively. EPS estimates for the current and next year have moved up by 10 cents and 9 cents, respectively, over the past 30 days. Fresenius Medical currently sports a Zacks Rank #1 and has a Value Score of A.
Helix Energy: It is an international offshore energy company. Helix Energy provides specialty services to the offshore energy industry, with a focus on their growing well intervention and robotics operations.
The Zacks Consensus Estimate for HLX’s 2025 and 2026 earnings implies year-over-year growth of 42% and 28.2%, respectively. EPS estimates for the current and next year have moved up by 12 cents and 14 cents, respectively, over the past 60 days. Helix Energy currently sports a Zacks Rank #1 and has a Value Score of A.
Heritage Insurance: It provides personal and commercial residential insurance products. Heritage Insurance’s focus on rate adequacy, selective underwriting and profit-oriented underwriting criteria while restricting new business in over-concentrated markets or products poises it well for growth.
The Zacks Consensus Estimate for HRTG’s 2025 and 2026 earnings implies year-over-year growth of 21% and 28.6%, respectively. EPS estimates for the current and next year have moved up by 64 cents and 73 cents, respectively, over the past 60 days. Heritage Insurance currently sports a Zacks Rank #1 and has a Value Score of A.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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Fresenius Medical Care AG & Co. KGaA (FMS) : Free Stock Analysis Report
Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
Heritage Insurance Holdings, Inc. (HRTG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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