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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 there's a lot going on on Wall street right now with Iran war. We have impacts on energy and other commodities and it's kind of upended a lot about what we thought might be happening in 2026, or has it? As you know, I run Zach's Value Investor portfolio here. And so we've been in the thick of it with everything that's going on with the stock market weakness and just seeing what areas are holding up fairly well which are not, as you might imagine, if you own anything like an airline stack or a cruise stock stock, you've had a little bit more difficulties because they have fuel that is going to be, you know, spiking in costs. But for some other stocks that and companies that are in areas that might not have as much exposure to what's going on in the Middle east, at least not yet, then maybe that's been an overreaction in what's been going on. So one of the big stories of 202026 that I've been talking about since 2025 has been the AI infrastructure stocks. And I'm not going to cover those today, but they have been holding up well in this market uncertainty and the sell off and the weakness. It appears that the software stocks which were selling off for most of the last three to six months are still selling off now, but the AI infrastructure stocks holding up as those data centers continue to be built, regardless of what's happening anywhere else. So I didn't want to necessarily cover the direct AI infrastructure stocks that we've covered before. I'm going to keep that for another episode as the year goes along. But I did want to talk about the old economy stocks that have suddenly found themselves in, in the midst of a what I would consider to be like a rebound and an uptick in their business. Some of it is AI related because they happen to be in an area that can translate into what is needed for the data center build out. Some of it is in other old economy areas that have just been really beaten down. I've talked about some of these and one of the big ones is of course, the banks, but I'm not talking about them today. But another one has been transportation. It has literally been in what the people in the industry have called a recession, great recession or even a depression over the last couple of years. And this hasn't been getting much, much news really. But in the transportation side, it's not the airlines that have been getting hit, so maybe that's why it's not getting much play. But the rails haven't been that great, and the trucking side of things has been really terrible. Some of that is because of the manufacturing recession we've been in since 2023, which looks like it's starting to turn as well. So not surprising when you have manufacturing coming back out of the darkness after several years, and then you're going to have the transportation following it. Now, I'm sure you're wondering, how is the transportation going to be impacted, especially trucking, with what's going on in the Middle east with diesel prices and just energy prices in general spiking. Yes, they are being impacted, but so far they are just pushing it along to their customers. So they're doing those fuel surcharges that have been popular in the past, where they just tack on the extra cost and then make, you know, their customers pay it. And then their customers have to decide if they're going to pass it along to their customers, which is probably us, actually. So that's going to all move down the chain. But the freight analysts don't believe that this spike in diesel, at least right now, is going to impact very much in the story of the transportation finally coming out of this depression, basically. So I want to talk about a couple stocks in these areas today because I'm finding that they're working in Zach's Value Investor. They're kind of hidden gems out there nobody's really talking about. And I think they're going to do well the rest of this year in 2026 and into 2027. Now, whether or not they're super cheap on a classic, we're going to find out because we're going to take a look at a couple of them. Some of them have had big runs already, quietly in the background, while everybody's focused on the mag sevens and those software stocks and they're kind of obsessed with technology. There have been some smart investors that have been in some of these stocks over the last year, 52 weeks. And so they've been, you know, getting some big winners like we have in my value portfolio, where some of the AI infrastructure stocks we entered into in 2020, even so we've just been able to ride those much higher, and we got in at the lower valuation. But I don't feel like a lot of these are stretched because they do have the growth component now. But let's take a closer look at a couple of them. One, I have just recently added to the value portfolio. The Zack's Investor. Value investor. But I like this area and it's one we've talked about on this podcast in the past. So there's a lot of auto stocks that are showing up on various screens. I'm only going to talk about this one today because it's kind of a dual auto and AI play now and that's what's getting at some of the buzz. But it has pulled back off the highs because of the war issues. And so this could be a buying opportunity in it. And that's why we got in it in the value investor portfolio. But the stock is Borg Warner Ticker B boy W as in Wayne, as in Adam. It's a number three right now. But it did beat on its last quarter and it has a very good earnings surprise track record. Just two misses in the last five years. And that you could understand would be the case because this is in automotive, but it's on the the propulsion side, precision propulsion and it's a little more on the technical side. So they did announce recently that they entered into an agreement with TurboCell to build turbines that are going to power data centers. So obviously when you hear that that's going to push the stock higher, they're not actually going to be booking those. They have got the orders in, but those aren't going to be showing up in the balance sheet until 2027. But that doesn't mean we can't get excited now. So it is an A on the style scores for value and A for growth. It has an F for momentum because it has pulled back off those highs. But it has an A overall score. And their actual summary on sacks.com says they're a global leader in clean and efficient technology solutions for combustion, hybrid and electric vehic. So they do do a lot of automatic transmission and timing chain systems. It says propulsion as I mentioned, but their customers are the auto companies across the board. They're not focused on just one. They're like basically every big auto company in the world. But now they're doing this data center type business. So I'm liking it that they're back branching out and using their great technology in other areas and especially these hot areas. So this stock is actually a true value here on like pes and pegs and other things like price to sales ratios. So this is one of the ones that I'm talking about today that is actually in the value category. So Forward p is just 10.7 right now with a PEG of 1.1. Earnings are expected to be up just 5.1% this year. But they were up 13.7 last year. And then they're going to be booking in some of this data center business next year when earnings are expected to rise 11.6. Now this is the type of company where you're not expecting 20 or 30% on the earnings growth or the sales side growth. They're a stable middle digit, mid single digit sales growth and in double digit, but low double digit on the earnings growth. So you do want to get it on the cheaper side, which it is right here with that PE low and that PEG ratio low. It also has a low price to sales ratio as I mentioned, of just 0.79. Remember, any price to sales ratio at 1 or under means we're getting, getting those sales at a discount. Basically we're getting the sales on sales. So this is 0.79. So we're paying 79 cents for every dollar worth of the sales. That's a bargain. That's what we want to see. Price to book is just two. So that's also in the classic value area that I look at. I look at three and under. So there's a lot of cheapness going on here. The shares have spiked off their 2025 lows where they really got beaten up into the liberation sell off. And then they've been on a real hot streak but they have pulled back off those highs. So this is a buying opportunity. In a stock like this you do, like I said, want to get it as cheap as you can. Analysts are raising those earnings estimates for this year. They have popped in the last 30 days since their earnings report to 516 versus 509 in that period. And then next year they're looking for 576 versus 565 in the last 30 days. So the estimates have been increased for 2027 as well. So I'm looking forward to the rebound in the auto sector. To be honest. Sales have remained pretty flat. So that means sales for Borg Warner have remained pretty flat as well. But the auto industry goes through these cycles and it's not going to stay flat for forever. The consumers will need new autos and they will buy again. But now we also have this data center side that could be a little bit removed from the cycle of the autos and that might give them an extra little boost there. So I'm liking all these, the auto side plus what is going to go on with data centers and the turbines. So BorgWarner BWA is my first old economy stock that I'm liking a lot right now. And again, I do own it in the value investor portfolio here at Saks. Okay. The second one, I've kind of seen this stock being mentioned during the war and it's because when certain of the power plants or energy is being possibly hit in the infrastructure over in the Middle east, this company is being mentioned and it's Siemens Energy. And this is an adr. So it has five ticker, five letters in the ticker and it's S as in Sam, M as in Mary, E as in Energy, R as in Robert, Y S, M E, R, Y. We do have analyst coverage on it. It's a Zax number two. It's got a D for value, so we'll have to see. I did not look at this one ahead of time to see how cheap it was, but it's got that A for growth, a C for momentum. So a B overall score. And this one says on Zacks.com, it focuses on design, development, manufacture and supply of products, installation and technology, advanced services in the renewable energy sector with a focus on wind power plants. It's based in Germany. So I've seen this company mentioned, like I said, in some news reports and things as just being mentioned. So I wanted to take a closer look. Let's look at what is going on with those earnings. So we have a couple estimates on it. Like I said, it is a Zachs number two, which is a buy stock right now. Looks like we've got two earnings estimates for the full year on the earnings. Only have one for the sales. It's kind of hit or miss on the quarterly. Looks like we've got some quarterly coming in for first quarter now, but it's mostly the full year as is normal with the foreign stock. But we have two estimates higher in the last 60 days. And so now we're looking for 510 versus 45660 days ago. So that's pretty big jump up there. And that is a lot bigger than what we saw last year, which was $1.77. So earnings expected to be up 188%. And then next year looks like they're on the fiscal year here. So we're almost into we're in the middle of the year for 2026 it looks like. And then next year, fiscal 2027, another 34% increase in earnings up to 685 from. And two estimates are higher in the last 60 days there as well. So the PE not as cheap as on Borg Warner. It's trading at 34 times. So that is a little pricier. It's more on the growthy side. And so maybe the D for value is warranted. Let's see what else. Price to sales is 3.3. That's not outrageous, but it's not cheap. Price to book is 11, so that's not super cheap either. So this is one where maybe we want to keep it on like some kind of watch list and kind of see what happens with it. If it can, if we can get it cheaper then, you know, maybe we dive in then as value investors. But maybe I'm not the only one that has been seeing it mentioned on various articles and news. It is on the pink sheets. It's trading on the pink sheets in the US which is common for a lot of these adrs. So that doesn't. That's fine. Does pay a dividend yielding 0.46%. But let's see what it's been doing. So year to date it is up 29%. Year to date it's off its recent highs during the war. Its recent high was around 200 a share and then it came all the way down to around 160 and now it's at 182 on March 25th when I'm recording this. So that's something to keep in mind. Over the last five years the stock is actually up 425%. So everybody's in, in on finding alternative energy sources. And so keep this on your watch list though. This area is, you know, on the various old economy type of stocks. Anything in like the utilities, the energy side that everybody thought was kind of boring and not oil and gas, but any kind of these turbines or any kind of power that is, you know, needed out there to run these data centers is in the news right now. So keep that in mind as you're looking at some of these stocks. So I wanted to include one of those types of stocks on this podcast because we haven't really talked about many of these because they are a little pricey here after this big run up. But we've had a little bit of a pullback here. If we can get a big bigger pullback. If I can get that PE under 30, I might be more interested in Siemens. So keep it on the list. S M E R Y is the ticker. Okay, the next stock, and this is the final one today I'm only going to do three stocks is on transportation side and I've been waiting for this one to pull back. It's pulled back just A little bit during the Iran war. I wish I could get it cheaper but maybe I won't be able to, I'm not sure. And it's Wabtech ticker Wab and it's in the industry, transportation, equipment and leasing. But this is the locomotive side so not the trucking but locomotive. So they do equipment systems, they did the braking, they do. The locomotives I believe in for trains. They are global so they're everywhere and trains aren't going anywhere. So I really like this area. And WebTech is old, old economy. It was like Westinghouse break back in the day. They have a market cap of 41 billion. They are a Zach's number three which is the hold. So they do have a D for value, a B for growth, a D for moment. Got a C. Overall forward P isn't as pricey as Siemens but they are trading a little bit higher. So forward PE now is at 23.8. They were a little pricier before this recent little pullback here. So we're getting a little bit cheaper. Peg ratio of 1.87 so that's not super stretched because we are having the earnings going in the right direction. Price to sales, pretty pricey on the price to sales size 3.75 and then price to book 375 for price to book 2 that's not so bad for price to book because again I look for three and under so that's not too bad there. But it's a little out of the normal valuations we look for, which is why I'm annoyed because I really would like to get in. It was happy to see this recent little pullback here but we're still paying pretty good price to get in it. Earnings expected to be up 14.9% this year and that's pretty juicy for an old economy type stock that's in railroads. And Then next year 12.2% on the earnings side. So I like to get it as cheap as I can and so I'm hoping, you know, I can get it maybe even a little cheaper here. That's why it's just on my watch list. But over the last 60 days two estimates are higher. One is lower for this year, two are higher for next year. We're looking for 1031. That's up from 1013, 60 days ago, but up from 897 last year. So that's where the growth is. And I'm just really liking anything in this transportation area outside of the airlines and the shipping in the ships, not shipping in freight, but shipping in ships because of the price of the fuel right now and the chaos in the shipping industry with the Strait of Hormuz mostly shut. So looking at the rails and the railroads themselves are not cheap here either, though I do like them as well. But if I can get something like a Wabtech, which is more on the, you know, services side, like providing, providing the products to the railroads, then that's, you know, where I want to be. But WABTech is ticker WAB. W as in Wayne, as in Adam, B as in boy. And you might want to keep it on your watch list as well. It has, like I said, pulled back off of its recent highs, but it hasn't produced a true value stock yet. But I am liking that, you know, it's no longer at the all time highs here. So over the last month it's down 5% only right now and year to date we're still up 16.9 and over the last year we're up 31.6. So keep this one on your watch list as well. And it's key to keep these old economy stocks out there and keep an eye on them because I do really feel like the momentum has changed this year as we're seeing the software stocks are breaking down once again and Adobe just hit another new five year low and there just isn't the momentum in those stocks. The bulls are going in briefly and then getting out again and then they're making new lows. That's not what we want to see. We want to see what's happening with Wabtech where it's made new highs. Yes, it's pulled back but now it's starting to rally again and that it means it really does have the momentum now. So all of these old economy stock seem to have the momentum even with the Iran war throwing a loop in there with commodity prices. But if we can get a resolution on the Iran war soon, then hopefully, you know, these stocks could really be unleashed as we go through the year. So have some exposure in your portfolio. We definitely do in Zack's Value Investor because this is our time as value investors. If you know, the old economy was ignored for a long time, but looks like it's back in favor now in a big way. And we want to be in these changes in trends and the cycles and a lot of these are still cheap. So we had BorgWarner BWA is the ticker there. It's the cheapest. It's a true value stock with that, that PE of 10 and all the other valuations are in classic value mode. It's in the value investor portfolio here at Sachs Sachs Value Investors. So yeah don't skip out on the auto side because you never know what you might uncover when you go to investigate and find out. Oh they're making turbines now for data centers so keep that in mind as well. Do do a deeper dive then we had Siemens Energy S M E R Y on the energy side. Yes it's fairly pricey here but look to get in on any kind of significant pullback on any of these energy plays because this is the big story of this year as well. And then transportation it is slowly coming out of this recession or depression here and Wabtech is one of those that's going to be the big beneficiaries Ticker Wal B B as in boy. So as always I aim to bring you as many value stocks as I can and sometimes growth stocks that I'm hoping to be values but we should keep an eye on like this week's episode. But I have been running those screens to look for Zach's number one ranks and right now a lot of the number ones are stocks we've talked about in the last prior couple of weeks. So that can change daily though the Zach's rank can change every day. So we'll be talking some about the top ranked stocks as we go through the next couple of weeks and we're anticipating the upcoming earnings season. It's coming quickly and it's going to be let off by those banks. And the banks have, you know, pulled back once again. They're as cheap as ever. I'm still a believer in the banks, especially if you can get them at these prices. And I'm talking about the regionals and the community banks most have do not have exposure to the private equity issues that are floating around out there. But everybody's concerned about contagion. And now we have a housing market that is not looking very good here in 2026 and many of the smaller banks do a lot of mortgage business still and we were hoping to see a turnaround in mortgages that would boost the banks as well. But looks like that's going to wait till 2027. So. So I'm going to be covering all of this on the next couple of weeks. Be sure to subscribe. Get us on YouTube. We have a YouTube channel for all of our audio podcasts. It's just Zach's podcasts. You can subscribe there and get everything. Be sure to get it there. Leave me a message. You can leave comments on YouTube. Tell me what you want to hear. I'm open to ideas here on the Value Investor Podcast. I know some of you send it to me on Twitter, on Blue sky, any of the social media sites I'm on stock twits. I'm always open to hearing your ideas there as well. So send me what your concerns are on value stocks here in 2026, but it's still looking pretty good for our end of the game here. There are still great quality value stocks here in 2026, like a BorgWarner, but it might not be quite in the areas you're thinking it should be or hoping it will be. So take a look at these three stocks we talked about this week. Keep some on your watch list, look for weakness, and join us next week with some more value Stocks this material
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is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advantage advice or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice 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, companies, 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 expressed may not reflect those of Zack's investment research as a whole.