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This is the Value Investor podcast with Tracy Reinek. All things value, all the time.
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Welcome back value investors. So the market has taken off again. The bulls are back and they're charging and you know what that means. The growth stocks are also surging. But what about the value stocks? This week I wanted to take a look at some true value stocks and by that I mean not simply stocks that have sold off so they've gotten cheaper or maybe they're cheap in like one area, you know, like a pe, but nothing else is cheap or a peg, but nothing else is cheap. I wanted to look at some of our, you know, mainstays that we've looked at as value investors for many years and kind of to see what's going on with some of these value stocks right now. So the key areas, as many of you know, are the hated industries, right? So it's always been the banks, but the banks aren't really that cheap anymore. A lot of the banks hitting new all time highs or certainly 52 week highs even in the regional banks, they've had nice rallies here. And while some of those are on the cheaper side, there's not a lot of cheapness going on on the bank side anymore. I know it's kind of crazy, right, to think about it, but I still like the bank areas and I will be doing some podcasts in the banks as we move forward. But the banks are off my list now. What about housing? I thought about doing this podcast on the housing industry and by that I mean the home builders, which we haven't covered in a while because they've been in a recession for I guess this is three years now. Three years going on. Four years, is that right? 23, 24, 25. No, this is the fourth year now. Four years of a recession. They've managed it well. You know, none of them are panicked or anything like that. And the stocks have not really crashed down like you would think in a recession, but sales are way down and the margins on many of them have collapsed now back into the bearish levels. But you know, they're hanging in there and they will be a good turnaround play when we finally do bust out of this recession, which may be next year, I'm not sure. But I'm going to talk about the homebuilders and housing as we get closer to to next year because the hope trade is really going to be on with those and some others in that area include the appliances like Whirlpool, maybe some decking like tracks what's going on with that those areas. What's going on with furniture? Wayfair just had a blowout quarter and usually the furniture only does well when the housing is because you'll buy new furniture when you buy the new house. But maybe people are just renovating. They are tired of their pandemic era of home style and they're switching out some things inside the home now that it's been six years since we all had to rush out and buy desks because kids were being homeschooled, you know, over the zoom. And just like outdoor furniture, maybe we're replacing that. Maybe we're tired of those lamps. Now we're getting rid of that. So that could be. I've followed the furniture companies, not really Wayfair, but the others like Ethan Allen and Williams and Sonoma, R.H. and Haverty Bassett. I followed all of those for the last couple of years and it has been pretty depressed. The foot traffic just really isn't there. They're hanging in and they cut costs. Some of them are even expanding during this down period because they know it's not going to last forever. But I was surprised by the Wayfarer results. And so I'm going to be taking a closer look at those as we go forward this year because maybe next year is when we really will see a breakout and people buying that furniture again seven years after the pandemic. But so those two areas are out and so what else does that leave us? Well, energy. And I've talked about them many times. They do show up in my screens. They have number one ranks usually on the refining side. We covered Valero. Marathon Petroleum just had a great quarter as well. All the refiners are in the golden age. The oil producers, it's been very good results from them as well because oil was mostly over $80 in the second quarter a barrel. So they've been doing very well there with great free cash flows. But I've covered those a couple times and those earnings are coming down. So many of them don't have good ranks right now. But we'll see as we go through the year with the energy. So what does that leave us? What else is a true value? Well, how about the autos? Yeah, we've talked about them on and off recently. At least the auto manufacturers like GM and Ford has shown up in some of my screens and the numbers were looking pretty good with some of those. But what about the parts manufacturers that goes into the autos? So they usually do run together. What about the retailers on autos? I know everybody's into Carvana, but I was thinking more like a Penske or a Sonic Automotive or a Lithium motors. What is happening on the retail side? Is anyone still buying cars? I know it. The sales are still down. So I'm going to look at the autos today and I'm going to start with the part side. I'm going to start with Lear. Lear Corp. Ticker. L as in Larry, E as in Edward, A learner. And they do seating and E systems. So the connectivity in the car, when your car is connecting to WI fi, it's bringing up those maps. It does all of those two things. So these are vital components. Lear has been around forever. It works with all of the major auto manufacturers and they've already reported, so that's good. So right now there are number three hold. So I'm not surprised by this. But they do have an A for style scores for value. They also surprisingly have an A for growth and an A for momentum. So they have an A overall vgm. That's why I wanted to look at the autos because I really did feel like the earnings could be turning around in the next couple of years here. So forward PE is just 8.4. It has a PEG ratio of 4,6 because the earnings are expected to jump 15.7% this year and then next year 16.3%. But I'm not going to lie, the sales are pretty anemic because the auto sales are still in the seller. So when those still remain down, it's very hard for them to grow. On the sales side, they're just waiting for the auto sales to turn around. But the consumers are just holding onto their cars. Right. Given the price of cars and the interest rates, if you're going to take a loan, an auto loan out, you really don't want to, so you're holding on. So their sales are up only 2% this year, but the last two years it has been in the negative. So that is an improvement off of what we've seen. But next year in 2027, looking for 4.5%. And so they're starting to pick up a little bit of momentum there. And so I'm liking all of that because that's when you start to see some of the turnarounds. So why the turnaround in the earnings this year? Well, these are very well managed companies. They've been in the game a long time. They know when we go into cycles like this, they cut costs, they improve their margins by cutting costs and just running a lean machine. And that's what they're doing right now. So two estimates are actually up for the year in the last week. One is down. So the analysts getting a little bit, you know, adjustments there, but the trend is for higher. So we're looking for 1488. We were looking for just 1456, 90 days ago. So it is higher. And the most accurate estimate, the most recent one, is looking for 14.99. So that's higher than the consensus and that is bullish. So the analysts still more bullish on this year even though sales remain, you know, kind of just flat. They're not terrible, but they're not great either. There's not been a buying auto boom going on next year though. On the earnings, another big double digit gains. We have one that's lower in the last seven days. So someone's just kind of getting in line there. And we're looking for 1702 that is down from 1722 in that seven day period because that most accurate estimate is looking for 1680. So again the analysts just kind of getting in line and trying to figure out next year. And maybe they were getting a little too bullish about next year. But this is nice earnings growth and it's nice to see this turnaround on the higher sales next year if we get it. So I like the auto parts makers here because autos are going to improve and the stocks are cheap, as I mentioned. So in addition to that low PE and PEG ratio, what else do we have here? We've got a price to sales of just 0.26 and a price to book of 1.2. So all of this is classic value here. And you know how much we like classic value here on this channel. They also pay a dividend to keep you around. Dividend is $3.08 and it's yielding 2.5% right now. So a pretty nice dividend. Shares are off the lows from last year when things were looking pretty grim in autos. So now that we have seen this improvement in the consensus, the stock is up. But this year, 2026, kind of just treading water. It fell in the Middle east. Conflict began. It has rebounded. It's around its 52 week highs occasionally, but has pulled back a little bit recently. So this why it remains cheap. Not that exciting to get into, but that's how value investing is. We look for those cheap stocks, we look for the turnaround in the earnings, we look for well managed companies. It's got the dividend, so you're covered there. And then we wait for the street to figure it out. And they did figure it out last year. But now they've grown tired of this trade. But they won't be tired for forever. So that's Lear, Ticker, Lea. Now let's switch over to the auto retailers. And I did pick Lithia over some of the others because it is like a pure play. It doesn't have trucking like Pen Ski and some of these other areas like logistics. It is just auto sales. And they do do all the brands. Ticker is Ellis and Larry, as in Adam D as in David Ladd. And these shares are kind of trading near their five year highs. So they're off of 2026 lows and trying to break out because again, there does seem to be some turnaround happening in the auto side. So they also have reported earnings and they beat again. So 2026 earnings expected to be up 4.3%. Again, not as many people buying cars right now. But that is expected to change because 2027 we have a jump up to 16.9%. And also remember with the auto retailers, they do do repairs and all of that too. So some of that can pick up the slack. If nobody's actually buying new or used cars, then we are taking them in for repairs so they can make money off of that area as well. So we are looking better for next year. It looks like just even looking at these two companies that a lot of people expect this kind of auto recession to be over by next year. So that would have been a couple of years in a recession as well for the autos, just like the home builders. And eventually you do come out of it. Eventually you do need that new car even though we are holding them for longer. But you can't hold forever, right? You just, you just can't. 2026, again, we're looking for 3,490 and three estimates are higher in the last seven days. So I'm assuming that's after the last earnings report and that it was better than expected because that's up from 3,419 before the earnings. The most accurate estimate is looking for 3561 now. And so that's much higher than the 3490. So it is getting more bullish here. Now they did have a big beat in the second quarter, 1003 versus 867. So you know that is promising and that is being priced into what is happening on the full year. Now when you get a beat that that's big. But the third quarter is also up. Third quarter consensus looking for 932 and that's up from 907. One estimate is higher there as well. 2027 maybe they gave some insights that they think this demand is going to hold because three estimates are higher in the net last week for 27 as well. And we're looking for 4078 for 27 with the most accurate at 4166. So that is bullish as well. And we're seeing the turnaround in revenue for next year like we saw with Lear. So this year expected just 1.7%. Next year 4.2. So looks like next year is when everybody's pricing it in. But I've seen this before in housing where everybody thought okay, next year's the year we're finally coming out of it. And then it just didn't happen. So we don't know. They want to be optimistic and they want to be optimistic about cars as well. But we're just going to have to wait and see. But we do like as investors to see this turnaround and where things are going now. Lithia is a number three. Just like learning it's a B for value. But we do have the F for growth going on with Lithia. But we do have the A for momentum as the stock has rallied quite a bit in the last couple of weeks and is trying to hit that new all time high. But it's trading at right now 368. The 52 week high is at $439. So a little bit off but it is going in the right direction. If you have been a shareholder, you have seen a nice little rally here. So we have a PE of 10.6. We have a peg of just 0.8. Those are cheap. And values we have a price to sales ratio of 0.2. Very cheap. Any price of sales one or under means we're only paying 22 cents for every dollar worth of sales here. So we are getting it cheap price to book 1.3. These are all cheap. I look for a price to pick up three or less. So as we would expect, it is quite a value here. And looking at some of the others, Penske it is similarly cheap. So they're all pretty cheap here. Lithia though, VGM score of C. Pepinsky, VGM score of a B. So they must be doing a little bit better in one or two of the categories. But they're a number three as well. So we're going to get mostly number threes. But with this earnings changing, I'm kind of surprised we're not seeing maybe a 2 on Lithia here, but it is a recent earnings report so we'll see as time goes on. So that's Lithia ticker lad. And then I am going to finish up with General Motors because it now has reported and remember I was really bullish on it earlier in the summer because the numbers just looked really good on General Motors and it was dirt cheap. So it's a number three. It already has reported, as I mentioned, it's an A for value, it's a B for growth, an A for momentum and it's got the A on the VGM score. It's trading right around its five year high now. So its chart is a little different than the other two because it has been rallying since early 2025 really. And now in this recent earnings report it is breaking out again. So forward PE is just 6.6 with a PEG of just 0.4 because earnings now expected to be up 25.4% this year and another 10% next year. But the sales side like we saw with Lear and Lithia is still on the slow side. So sales only expected to be up 0.4% but next year 2.7. And so they're cutting costs, they're running the company well to get those margins up enough where the earnings are expected to see this nice jump. So we do have one estimate up in the last seven days with 10 estimates up in the last 30 days and five are up for the current quarter. Nine are up for next year. We do have one estimate down though for all three of those in the last 30 days. So that's after the most recent earnings because there's always somebody who maybe again was just too bullish so they had to cut it back a bit. So we're looking for 1329. That's up for from 1271 for the full year in the last 90 days. So that's a nice little gain there. The most accurate estimate is looking for 1336. So that's a little above the consensus, which we like to see and is bullish. Next year we're looking for 1465. That's the 10, the 10% earnings growth again. And nothing wrong with 10%, especially with a stock that's cheap will take it. So 10 earnings growth again for next year, 1465, the most accurate estimate is looking for 14.91. So they're pretty bullish. They did beat by 44 cents, so we're liking that. And is that mostly priced in? It's a little More bullish on the full year. So they might have guided higher there. I'm thinking they did. And so we're doing even a little better than what the Beats are, and that is bullish as well. So General Motors ticker, GM is still cheap. Stock is breaking out. But when you're getting it this cheap, you don't care if it's breaking out because we're still getting the earnings and the sales at a deep discount here. And people are buying into this story, but not in all realms. So they're buying the auto makers, but they're not buying the parts guys yet. And Lear still cheap. And then they're kind of buying the auto retailers, which does make some sense if you see the turnaround happening. But they're just not into the parts. Maybe the parts are just too boring. So in addition to the PE and the PEG being super cheap, price to sales is just 0.4. So we are getting paying well, it's 42. We're paying 42 cents for every dollar worth of sales for General Motors. And the price to book is at 1.2. So no doubt that it's very cheap. And dividend it is paying $0.72 and that's yielding just 0.8%. So we're not getting paid as much to be our patients here with General Motors. But you are still getting something. And we'll take it. We'll take something. Right? So these are just three in this area I could have done. You know, Ford, they've already reported. Toyota has always been one of my favorites on the auto side and they've shown up in our screen many, many times. On the part side, there's Magna, we've talked about them out of Canada. MGA is their ticker. Pretty sure it's mga. Yeah, Magna mga. And their earnings looking much like Lears. You know, everybody's just kind of waiting for the ultimate turnaround. They're well managed, they earnings are expected to be up, but the sales side isn't totally there yet. But by the time the sales side is there, everybody's going to be in it and the stocks will not be as cheap. So what is happening with those stocks? I wanted to take a quick look. Year to date, lear is up 6.1. That's not too bad. General Motors 9.5 and Lithia, the best of the three at 11.1 year to date over the last month as we're getting these earnings in and some are spiking, some are not. Lear is actually down 4.6% in the last month General Motors is up 15.2 and that is on the earnings. And then Lithia also got a big bump up on its earnings and is now up 22.9%. But it's well off of that bump bump at the end of July when it reported it was up over 40% in the last month now up just about 23%. So it's not a bad place to be for value investors. Take a look. Check it out. I know some of you just can't deal with autos and I get it. I don't own any right now either. I have owned some retailers off and on. I have owned some of the automakers, specifically Toyota in the past. I haven't really owned the parts guys in a long long time. So maybe all of us need to take a look again at the auto side. It is one of the genuine cheap areas and it does appear to be coming out of its multi year recession now but remains cheap. So this is the best of all worlds. It's got good VGM scores and style scores even for the growth side of things because we have seen this turnaround. So take a look. Look at Lier Ticker Lea Lithia Ticker La D General Motors Ticker gm. You can take a look at Magna mga that's another one. Penske is P A G P as and Paul ag. Toyota is just tm. But if you click on the industry when you get into one of these on Zacks.com you can click on it under industry rank and you can see others that are in that industry there and get some more ideas. The auto domestic audio auto is in the top 36% on the Zacks Industry Rank right now it's ranks 87th out of 245. So that is a good sign that it's in the top 50% now that means the earnings are on the rise. That's how we get the higher industry rank. And so this is just the autos on domestic autos. Let's take a look. I'm going to look real quick at the automotive retail. So that's the flip side. The retailers are in the bottom 21%. 194 out of 245. And then on the parts side, let's see. This is an auto well original equipment automotive original equipment is lears industry and it is in the bottom 27% as well. So I guess we shouldn't be surprised to see GM is the one of the stocks that is really busting out and looking very bullish. Overall and the other two are not yet and that could be because industry rank hasn't quite gotten there yet either. So keep all these in mind again and you will get dividends with each of them. Lithia what was that one? They've been shareholder friendly in the past. I know Lithia is 0.6% yield now $2.28 on Lithia. So again keep them on your watch list. I am going to and stay tuned for future episodes that can cover the banks again. Energy Home Builders these are all our areas right now but the autos the hottest area for value stacks right now. So be sure to subscribe to get all of our podcasts. Get us on YouTube on Zach's podcast there. We're on Apple, Spotify, Amazon Music, just about anywhere you can get podcasts. But get us somewhere and I'll see you again next week with some more
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value Stocks this material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice or a recommendation to buy, sell, or hold a security. Do not act or rely upon the information and advice can given in this podcast without seeking the services of competent and professional legal, tax or accounting counsel. Publication and distribution of this podcast is not intended to create and the information contained herein does not constitute an attorney client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, company sectors or markets identified and described were or will be profitable. All information is current as of the date herein and is subject to change without notice. Any views or opinions include expressed may not reflect those of Zack's investment research as a whole.