Through nearly four months of 2012, the SPDR S&P 500 ETF (ARCA:SPY) is up 10.5% and within striking distance of a new multi-year high. During the same timeframe, the Vanguard Value ETF (ARCA:VTV) is up 7.5%, lagging its more diversified peer.
The value portion of the large-cap asset class has lagged growth in 2012 as investors look for "riskier" stocks and ETFs during the current bull cycle. It is not at all surprising for the value stocks to lag the overall market when investors are seeking risk. What may be a surprise is that there are individual stocks in the market that are considered value plays and are poised to outperform even if the risk-on trade remains.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Value ETF
The composition of VTV include over 400 large-cap value stocks based in the U.S. with a heavy concentration on the financials. The top three holdings are non-financials, and are names most investors recognize: Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), and General Electric (NYSE:GE). The ETF charges an expense ratio of 0.10% and has a current SEC yield of 2.7%.

The one main difference between VTV and the next four stocks is that the ETF is extremely diverse and focuses many of the mega-cap stocks that tend to move closely with the market. The stocks will be considered riskier due to the lack of concentration, however they have the ability to move with or without the market. Before you invest, make sure you understand the differences between "small cap" and "big cap" stocks.

Stocks
Chicago Bridge & Iron Company
(NYSE:CBI) is an engineering, procurement and construction firm that focuses on the energy and natural resources industries. The stock trades with a PEG ratio of 0.88 and pays a dividend of 0.4%. The company recently reported quarterly earnings that saw revenue increase by 26% and net income rise by 18%. The stock is a value play that has a bullish chart, as well as ties to two booming niche energy sectors: oil sands and LNG.

AMERCO (Nasdaq:UHAL) is better known as its subsidiary, U-Haul International, which provides moving and storage services. The stock trades with a PEG ratio of 0.83 and price-to-sales of 0.80. The stock has pulled back dramatically from an all-time high set in February and is now consolidating on support near the $100 area. UHAL could be a big winner if the housing market begins to pick up steam in the coming year, as more people demand their services.

SEE: Why Housing Market Bubbles Pop

Flotek Industries (NYSE:FTK) supplies drilling and production related supplies to the energy and mining industries around the globe. The company has a PEG ratio of 0.79 and is not far from a new multi-year high. The stock has been consolidating between $11.50 and $13 for the last six weeks and it appears it could be poised for a breakout in the near future. The ties the stock has to the energy sector and drilling, should continue to boost the valuation of share prices as more and more companies explore around the globe for natural resources.

The Bottom Line
As mentioned above, the overall large-cap value segment has been lagging the overall stock market. That being said, there are still plenty of opportunities in the segment for investors willing to invest in individual stocks. The three highlighted in this article are undervalued per their PEG ratio and they have solid charts and stories to back up higher prices in the future. The trifecta typically will lead to outperforming the market as long as a risk management strategy is put into place after purchasing. Understanding your risk tolerance is also very important. For more, read What Is Your Risk Tolerance?.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!


At the time of writing, Matthew McCall did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  3. Mutual Funds & ETFs

    ETF Analysis: BioShares Biotechnology Products

    Learn more about the BioShares Biotechnology Products fund, an exchange-traded fund that is focused on producers of FDA-approved drugs.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraShort Nasdaq Biotech

    Learn more about an innovative inverse-leveraged sector exchange-traded fund, or ETF, the ProShares UltraShort Nasdaq Biotechnology fund.
  6. Chart Advisor

    Value Stocks Offer Stability in a Volatile Market

    With volatility on the rise, investors are turning to segments of strength such as value stocks. We'll take a look at several ETFs that could be worth a closer look.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Market Vectors EM High Yield Bd

    Learn more about the Market Vectors Emerging Markets High Yield Bond ETF, a fund dedicated to subinvestment grade foreign debt issues.
  10. Mutual Funds & ETFs

    ETF Analysis: First Trust Tactical High Yield

    Find out more about the First Trust Tactical High Yield fund, a debt security-focused ETF designed to produce high income.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!