U.S. stocks had another record-breaking year with 2014 scoring the third year in a row of double-digit gains that added $9.4 trillion to equity values. That happened for the first time since the dot-com bubble of the late 1990s. Major benchmark indexes are wavering near their all-time highs after climbing for most of 2014 despite some worrisome news last year including oil crisis, Russia invading Ukraine, Ebola, ISIS, some Federal Reserve missteps and concerns about global growth. The S&P ended the year up 11.4%, the Dow added 7.5% and crossed the 18,000 milestone for the first time. The tech-heavy Nasdaq rallied 13.4% in 2014.
It was the best year for adding new jobs since 1999. Unemployment started the year just below 7% but now holds at 5.8%, the lowest it’s been since 2008.
The accelerating growth increased confidence in the U.S. economy, and inflation is not a concern.
Experts hope the New Year is going to be another positive one for stocks.
“Our research indicates we are in the midcycle phase of the business cycle,” says Chris Hyzy, Chief Investment Officer at U.S. Trust.
To help you find solid stock ideas for 2015 we picked five stocks that are currently trading at discount, presenting a valuable buying opportunity for anyone willing to put some money and reap benefits in near future. Apart from low valuations, these stocks also have other characteristics that make them more interesting to value investors. Here are stocks trading at attractive valuations that you might want to look at.
Kellogg (K), the world’s largest maker of breakfast cereals, seems to be gaining momentum, and with consumer confidence returned to pre-recession levels, the stock is likely to keep moving on track for strong gains. Kellogg looks attractive at first glance, with a P/E ratio of just 13.9, but things sound better when it comes to know that one of the company’s major rivals, General Mills (GIS), is currently trading with a P/E of 20.2. While General Mills is likely to see earnings growth of 7% next year, Kellogg’s will grow earnings slightly lower at 4%, but it still appears more attractively priced considering how much lower its current valuation remains. The company’s dividend yields at, and has a stellar track record of at least nine years of dividend growth.
Auto retailer Autonation (AN) added around 20 percent last year in the wake of a strong auto industry, which is expected to continue to be kind to investors in 2015. The automotive sector fell sharply during the last recession but six years later it is running on all cylinders, and analysts call for a record sales this year. J.D. Power and Associates said that sales of new cars and trucks at U.S. auto dealerships is expected to reach 13.83 million in 2015. That would put them slightly above the current record of 13.8 million set in 2004. The improving economy, particularly the job market, will give a boost to the industry at least through this year, and both new and used auto retailers should be strong in 2015. The stock looks like a better purchase, with a P/E of just 17.7, and with analysts predicting 14% forward EPS growth, the stock should keep trending higher. By comparison, CarMax (KMX) has a much higher P/E of 28.8.
Mega-retailer Wal-Mart (WMT) made strong gains during the final three months of the year, but the stock still has more room to grow as holds a favorable valuation. The stock looks to have favorable valuation with the P/E ratio at 17.7, compared to Costco (COST) and Target (TGT), for which P/E ratios is sitting at 29.7 and 31.7 respectively. Unemployment came under 6%, which has helped lift the consumer confidence to the highest level since before the recession began. The U.S. economic recovery is moving on growth track, and 2015 should be a solid year for retailers. Analysts see EPS growth of 6% this year, which will provide sufficient support for the stock to keep moving higher in the new year. WMT is of great interest, with a healthy dividend yield of 2.3%, and the economic situation seems positive for the stock looking ahead.
Telecom equipment maker Qualcomm (QCOM) had been on a roller coaster last year, with shares recording a 3.5% gain through the closing bell on December 31. The stock marked its worst in early November, but now is moving upward. With the recent gaining momentum, the valuation seems less attractive as compared to it was just a couple months ago, but with a P/E of just 16.1 the stock still appears a good investment, especially when compared to Broadcom (BRCM) which is currently trading with a P/E of 59. Qualcomm’s valuation looks even more attractive taking into account analysts are looking for earnings growth of 20.1% in 2015. Moreover, the stock offers a 2.2% dividend yield, and has a stellar track record of eleven years of dividend growth.
2014 was a good year for the athletic apparel and accessories sector fueled by a new fashion trend known as “athleisure”. Athletic retailers such as Foot Locker (FL) benefited from a fashion shift towards more athletic and casual wear. The stock soared 40% last year. Moving forward, analysts are looking for more strength for the company, with earnings projected to move higher by 10% this year. Even with the stock posting solid gains during the year, its valuation remains reasonable. Its P/E ratio is sitting at just 16.6. In addition to creating upside potential from a value perspective, a current dividend of 1.2% makes it a good income play. Foot Locker is currently trading near its record high, but with 10% expected earnings growth, and a P/E of just 16.6 the stock still has more room to grow.