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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 I feel like we need a dose of Warren Buffett. Yes, he is retired as CEO. So Greg Abel is now doing all the stock trading at Berkshire Hathaway, basically with maybe some Buffett input because he still remains on the board. But we as value investors are still following in the strategies of Warren Buffett, and we're seeing more need for that as the stock market continues to rise. Valuations look a bit stretched, especially on some stocks like SpaceX, which just went IPO. And so we're needing some value reinforcement, let's say. So for this week, I decided to run a Buffett screen. It's not on Zacks.com screens. It is a more advanced screen that's on Zach's ZRS system on the Research wizard. And you can see it if you get the Research Wizard. But that is for more professional type investors. But I like to consider ourselves to be on the pro side. Right. And so we have a screen on there under the guru screen, where we have screens that are supposed to mimic, say, Peter Lynch's investment style and as well as Buffett's. So over the years, I've run this screen for this podcast, but it's been a while since I took a look at it, and usually in the past, I've only gotten one or two stocks on the Buffett screen. So it's always been kind of a downer. And I've had to run some of the other guru screens just to get more stocks. Although this time I did run the Peter Lynch. We have two Peter lynch guru screens on there. And for those who don't know, like who is Peter Lynch? He. He was the manager of Fidelity's Magellan mutual fund in the 19, late 1980s into the late 1970s into the 80s, and then he retired in the early 1990s. It is considered to be one of the greatest runs by a money manager of all time in the Magellan Fund. And he really took advantage of that big bull market when valuations were still low in the 1980s. And he wrote a couple bestselling books before he headed off to his retirement, where he still remains. Peter lynch is still with us now, but he's basically out of the stock investing game. But we still like to look at some of his strategies as well. So I ran the value strategy we have in the guru screens. We have also have a growth one. But Peter lynch was al. Always had this kind of value edge to him. He wasn't specifically a value investor, but he liked to buy companies when they were smaller before they broke out. So he had a lot of Success in the 80s buying retail stocks because a lot of the big retailers we know today were very much in their infancy in the 70s and 80s. Stocks like Walmart and Home Depot, they had only been in a few states even. And Peter Lynch's view on the retailers back then, this was before online shopping was that for a new hot retailer like Home Depot was originally in the 70s, it can take decades to actually build out all of your stores across the country. And, and then as we headed into this century, a lot of the retailers started going international as well with the, the brick and mortar stores internationally. And now we've added on another layer with online. But his whole point was it takes a long time to build out either a restaurant chain nationally or globally or a retail chain. So you have a long Runway with a lot of growth going on for a number of years. And if you can get that growth cheap, you can see some outsized gains. And he was able to do that on a lot of his retail stocks. But a lot of stocks in the 1980s really were just in their infancy. So I looked at his screen too, and there was zero stocks on the value side that showed up. So I was like, that's not going to help. So I returned to the buffet and a little dubious that we would get enough stocks in that one. But running that screen, it did return eight stocks. And what is in that screen, it is very narrow and it does have a lot of components. So some of them are things like return on equity. You have to have double digits return on equity to make it into this one. Return on investment, it has to be double digits for that as well. Debt over equity, cash flow over equity, and then EPS growth over the price. And then it does look for some standard value fundamentals, but it uses price to book for that in the screen. It does not include the Zach's rank on, on the screen. So we're not necessarily going to find, you know, top number one ranked stocks with rising earnings estimates. We are, however, going to find cheap stocks on all these other metrics. And so this is more, you know, again, more narrow than even like the classic value stock I run off of Zachs.com screens. But Buffett does look especially at return on equity. He's always looked a lot at that. And the debt side, he loves companies that have great free cash flow and moats. That would be kind of the moat component. And then adding on to that growth there too. So what was in this? Well, we shouldn't really be surprised because even Berkshire Hathaway itself has been going down this direction the last couple of years. But a lot of foreign companies were in this screen. They're just cheaper than the US companies right now. They're being ignored. They are more of a value for that reason. And even Berkshire Hathaway is buying those big Japanese conglomerates, you know, the ones that are in basically everything. They bought some of those a couple of years ago and those have been big proposals, performers for Berkshire Hathaway since they bought those because Japan, Japan was cheap. They, they still are cheap. But some of these stocks on this list are also just, you know, too cheap to ignore. On international and I do recommend looking at international companies, especially these big cap international companies that have been around for a while. I know a lot of people in the Great Recession kind of got away from international companies because we did see a lot of big blow ups, especially on the bank side, on the international stocks and they really took a beating. But. And then even with the pandemic, we saw the same thing again. But a lot of them are back and they're back with good growth and still cheap. But I picked out three out of the list. One of them is not an international stock. And so I thought we'd go with that one to start off with because let's start with the American company. So this is on the tech side, but it's in IT services. So it's Cognizant Technology Solutions, Ticker C as in Charles, T as in Tom, S as in Sam, H as in Harry, CTS H and they're in computers IT services as I said. And their tagline is we are an AI builder and they're building the bridge to AI impact. So they're on the more boring side. But I've covered some of these in the past and that's why they're on the value. But they still, this company has AI exposure because they're on the services side, like the back end side. And they also talk about how they can help you reimagine your business if you are looking to really deploy AI in your business. This is like who you call now. The Shares did hit four five year lows recently here in 2026. They're off the lows a little bit, but they look like they might try to test it again even though earnings look fantastic, up and to the right on the earnings side and with very solid earnings growth for a value company. So 2025 they grew earnings 11.2%. 2026 they're expected to grow at 8% and 2027 8.9%. So these are very solid especially if it's cheap. And it is. It has a forward PE of just 8.9 with a PEG ratio of 1.07. I had to look those up separately because those weren't in the screen. Its row, its return on equity is 17.5%. Price to book is at 1.6. So you can see on and then it met the requirement for cheapness on all of these other things. The debt, the EPS growth over the price, the cash flow to equity and a few other metrics. So it's definitely cheap. Shares have plunged down. Those earnings are on the rise. But it remains out of favor obviously with the street. If we get it cheap enough we don't care if it's out of favor especially when we see earnings growth doing what this is doing. This is not an earnings trap here with this one. And so it also pays a dividend for your troubles to stick it out. And it's yielding 2.6% which isn't shabby by any means. 2.6 while I'm waiting for a rebound here. So like I said it has fallen off of its recent try at a bounce back. It's trying to get a little bit out of the the dungeon here but on a bigger market pullback a stock like this might see more weakness. So um, I might put it on my watch list here but it is dirt cheap. So if you just want to dive in and you're a long term investor you are still getting those earnings pretty cheap here. We can't always time the bottom right? We don't always know when it's when it's finally going to bottom but this one appeared to in early May but it is off of its recent highs here. Let's see one month chart, let's get that in there. Let's just see. So one month chart we are getting. It's still up in the month, up 4.6%. The S&P 500 is up 1.1% in that period over the last five days it's showing a little bit of weakness, just 1% though. This is what I mean. It's coming off of that recent rally and the S p is actually up 3% on the three month stack is where you really see the sell off though. That's down 18% now on the three month and that's where it hit the the five year low in May and Now has seen a little pop, but it's given up some of those gains. So this kind of stock isn't going to have the, you know, momentum traders in it for very long because the momentum's to the downside here. So I would maybe hold off on looking to buy here. But again, depending on your, your longer term outlook, you can never really time the bottom and we are getting it very cheap here. That's cognizant Technology Solutions Ticker ctsh. Okay, Stock number two is a Chinese stock. I know, I know, but it keeps showing up on the screen so I did want to talk about it. Some of you are more eager to be in Chinese stocks than I am, so I don't want to leave it off the table. And it is really, really cheap. The stock is PDD Holdings Ticker P as in Paul, D as in David, D as in David. Pdd, also really known as Pinduoduo, but that is one of the companies they own. They also own teemu. Everybody's familiar with teemo, the discounted consumer online goods marketplace. Pinduoduo is also one of the largest online marketplaces in China. So you have a lot of exposure just to online shopping here. They're also moving heavily into logistics, fulfillment sourcing. That is a big driver of the company going forward. And they even said in the first quarter that this quarter marks the start of deep transformations in our business. Supply chain investments will be our core, core strategic priority. They did have cash and cash equivalents at the end of that quarter of $63 billion. So that's pretty impressive. They don't pay a dividend. I'm not sure what they're doing with all that cash except building out their supply chain investments. So if that is what you're interested in, maybe the transformation away from online to this supply chain and logistics sides of things, then this should be one for your watch list. Now what about the cheapness? So return on Equity is at 24.3%. Very high. Price to book is at 1.9, so that's really low. PE is just at 7.9. It's very cheap. But these Chinese stocks have been cheap. Market cap is 118 billion and they've been listed on the US side since 2018. So they have been around a while. Shares are trading near their 52 week low. We didn't search for the rank, but it's a number three on this one. And earnings expected to be up but only 2.4% in 2026 because of this transition. It sounds like more to the supply chain side and then 2027, maybe it pays off with earnings growth of 16.1%. And this is double digit revenue growth expected for this year and next. And you are getting all of this fairly cheap. But China is a complicated country to do business in with its government and otherwise just with its size really. And they've been struggling over there. The consumer's been struggling a bit and retail sales down a. So we have had some earnings estimates, cuts on PDD. And so we're now looking for 1061 this year down from $11.74 just 30 days ago. And then next year a little bit of a decline there to $12.39 down from 1332. Now this looks a little more like a value trap to some extent. And that is the problem with a lot of foreign companies. There's not as much coming out. You do have geopolitical issues. Even if you're outside of China, if you're in India or Mexico, wherever you're at United States, you are going to have geopolitical issues. New regulations, new taxes, possible tariffs, trade wars, wars in general going on. All of these things going to impact every company. But internationally you are dealing with governments in those countries. And so that's another added thing you have to keep on top of. They have missed on estimates 2/4 in a row now. So that's why you've got the stock trading near the 52 week lows. But the consensus chart, the, the on the earnings side you can see where those estimate cuts are in. So it's on the downside now. And that's not really what I want to see. But the screen wasn't looking for that, it was looking for cheapness. And so this company met all those criterias. And we shouldn't just rule out Chinese stocks just because they're Chinese stocks. Right. I do like to look at them every once in a while to kind of see what's going on. But these shares are not at the five year low, which was in 2022. They are near the one year low. And so I might need a bigger breakdown to really think like, yeah, I might get some upside in this if I buy it here. So that's PDD holdings ticker P as in Paul dd And then the third stock is a bank. We just can't escape the banks on the cheapness side. And a lot of people, you know, don't like the banks ever since the Great Recession. I get it, I'm with you. But US banks have rebounded and so have international Banks and the business looks good, loan growth looks good. You know, very strong years in profits. The, the biggest banks globally also have the investment arm, wealth management. And even if they're outside of the United States, that aspect of their business is doing much better as well. So a lot of drivers here. And this bank that was on this list this time is Banco Bilbao Vizcaya, Argentina. It was founded in 1857 in Bilbao, Spain, but it's now basically headquartered in Madrid. It is Spain's second largest bank after Santander there, which we've covered on another podcast. So a lot of these Spanish banking giants are cheap. And this one, market cap of 139 billion. 139 billion. So it is not small. It does pay a dividend, as many of these banks do. And that's also why I like these international banks because they're very loyal to the shareholders and these dividends are quite massive. And we're getting a $14 with BBVA, as they're called, BBVA, $14 yielding 4.7%. So that's a pretty good yield to get just out of the gate. Now. The shares really rallied last year when all the big banks did. They've kind of stalled out a bit here, but have pulled back a couple of Times here in 2026 because they it has gotten more expensive. So price to book is just 1.9. It has a P E of 10. But remember, with the banks with the price to book, price to book, the banking analysts always say buy at 1, sell at 2. Well, we're at 1.9. So that is the big rally we saw last year. So it's not as cheap as some other banks. I've seen where we are still getting one or even under one. This one is closer to two, but it's cheaper than like JP Morgan, which is well over two now. So it still might have some more upside here. And you are getting that big dividend. So on any bigger pullback, I would find this much more attractive. But on the earnings side, 18.4% earnings growth for this year, 12.6%, 6% for next year. And they did say in this last earnings quarter, another very strong quarter in profit and capital generation. Every region saw growth in the first quarter. Now it's not just a Spanish bank. A lot of people think BBVA is a Mexican bank because they are the largest bank in Mexico, but they're not. They're Spanish, but Mexico is a huge market for them. And even Mexico showed growth in the first quarter as well. They're also in Turkey and then they have some in the rest of South America. So it's kind of an interesting mix. Turkey was also up big, but Turkey's economy has been struggling the last couple of years. So it's going to bounce off of those lows eventually. And that's what we're finding right now. So again, this bank was founded in 1857. Very impressive. It's still around, still churning out the cash, still making loans. It has a wealth management side, so I'm liking that. Investment banking as well. And as the if the global economy is doing well, so is a bank like this one, bbva. So keep this one on your watch list as well. If you get a bigger pullback and the shares are trading at $25 right now, but 52 week lows at 4,1463. And that was last year in 2025. So it's had quite a move since 2025. But if we get a bigger pullback off of these highs, really because it's right near the highs, then I'm liking some of these banks. Also, if you are an income investor, again, these, these bank dividends are pretty consistent and you know, they are shareholder friendly and focus on the shareholder. So you pretty much can expect to get this dividend at least for this year. No dividends are ever guaranteed, but it's looking pretty good on this one. And again, that Yield is almost 5%, which is a pretty good yield for those income investors. So that's Banco Bilbao, Vizcaya, Argentina. Ticker B as in Boy, B as in Boy V as in Victor, A as in Adam, BB va. And that's basically what they call themselves, bbva, because no one wants to say four poor names. They don't. So it's an interesting mix of companies. There were some other foreign banks on this screen, a few other foreign companies just in general. But we are seeing some cheapness in the IT services side with the cognizant being on this list. And so there's still some American companies cheap enough to be on a Buffett type screen like this. But for us value investors looking around, you have to think outside the box a little bit more. If you want like these dirt cheap, classic value type stocks, you have to look, you know, deeper and go global to find these kinds of stocks. But we like to think that there are some cheap stocks still out there. And there are. So keep that in mind when you're getting, you know, depressed out there that everything is trading at, you know, 30 times price to sales ratios. They aren't. There are still some great companies that have been around for hundreds of years that are still cheap out there. So be sure to keep a watch list of all these stocks or, you know, just know what's going on out there with the cheap stocks. I still believe everybody should be in the AI trade. You can still find ways to be in the AI trade on a cheap basis with a company like Cognizant. It's not going to be Nvidia growing at, you know, 50% on the earnings side year over year, but the cheapness makes up for that and you are still getting AI exposure. So keep that in mind as we move forward. So all these stock tickers again, Cognizant Technology Solutions, ctsh, PDD Holdings, Pinduoduo and Teu P as in Paul, D as in Dave D as in Dave P D D and then we had bbva, which is just B as in Boy B as in Boy V as in Victor, A as in Adam and as always, I aim to find the cheapest stocks out there and I am doing it. So be sure to join us. I know many of you are subscribing on our YouTube channel. Get us on Zach's podcast channel. You also get the ETF Spotlight some of our other podcasts there so you get a a bunch of good places to get some stock and ETF ideas. Get us on YouTube. Just put in Zach's podcast there and subscribe so you don't miss a single episode. And click on those notification buttons as well so you're notified. 11 of our podcast drops. And as always, I'll be back next week for some more value stocks.
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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 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 expressed may not reflect those of Zack's investment research as a whole.