One of the several items that I find disconcerting about the current market is the lack of bargains I am finding within it at the moment. One would think after a near 30% decline in the Nasdaq in 2022 and with the S&P 500 down some 15% for the year, a bevy of good value stocks would be quite apparent.
However, I am not finding that to be the case at the moment. The S&P 500 is currently trading near 18 times forward earnings. Hardly compelling value given likely meager earnings growth in FY2023, the risk free 10-Year Treasury yield near 3.7% and the Federal Reserve not done hiking rates. This is especially true given a likely recession on the horizon in the coming year.
Still, if one looks hard enough there are still some reasonable values to be had. We will kick off the new trading week highlighting a couple of names I either just put in my portfolio or recently increased my holdings within.
Let's start with NCR Corp (NCR) which I just acquired an initial stake in last week. NCR is a well-known provider of automated teller machines, as well as services and software to the banking, retail, and restaurant verticals that include payment processing, self-checkout, and point-of-sale (POS) terminals.
The stock is down by more than 40% here in 2022. The main cause of the pullback is the company decided to split itself into two companies instead of selling itself outright after a strategic review. Many investors were holping for a full-blown sale and the shares have sold off as a result.
The two companies that NCR will split into will consist of a leading digital commerce business for retail, hospitality, and digital banking. The other business will be a leading ATM-as-a-service provider and retain its ATM network business. The stock is seeing some recent insider buying and the shares are priced at just over seven times forward earning and less than 40% of annual sales.
I have also added a few shares this month to my existing holdings of Plains GP Holdings, L.P. (PAGP) . This investment grade master limited partnership owns and operates midstream energy infrastructure in the United States and Canada that consists of approximately 18,000 miles of various pipelines, nearly 40 million barrels of above ground storage, and various other energy infrastructure assets.
The company recently settled long standing litigation around an oil spill that occurred off the California coast in 2015. Stifel Nicolaus upgraded the shares in August due its improving balance sheet. In addition, Plains should be well positioned to capture incremental volumes over the next several years given it is one of the largest transporters of crude and natural gas liquids from the Permian Basin.
The company boosted forward guidance when it reported third quarter results earlier this month and the shares also provide a healthy 6.7% yield as well. The company's falling leverage should also result in significant distribution growth in the quarters and years to come.
