While a full-on down cycle might not materialize, a tactical correction may be on the horizon, thus necessitating a deeper look at the best undervalued stocks. That’s roughly the perspective of Morgan Stanley’s Mike Wilson, who has not been a fan of bidding up what could be a potentially overheated market.
Instead, Wilson believes that for those that wish to stay in the equities sector, investors should focus on securities with defensive characteristics, operational efficiency, and earnings stability. For this list of bargain stocks in a hot market, that’s exactly what I’m offering with the below ideas.
Specifically, I filtered out publicly traded companies for their Piotroski F-Score, which considers profitability, leverage (liquidity), and operating efficiency. Generally speaking, a score between 7 through 9 indicates good value. On that note, below are the top-value stocks in a bull market.
Cigna (CI)
A global health service company, Cigna (NYSE:CI) ranks among the best undervalued stocks to buy thanks to its secular relevancy. Historically, the healthcare segment offers several ideas for defensive play since the demand for it remains reasonably stable irrespective of market cycles. However, the market doesn’t see it that way, with CI stock losing over 17% of its equity value. For astute investors, though, this fallout could be an upside opportunity.
According to data from investment resource Gurufocus, the market prices Cigna shares at a forward multiple of 10.81. As a discount to projected earnings, Cigna ranks better than 66.67% of sector rivals. Moreover, CI trades at a trailing multiple of 12.12. In contrast, the sector median value stands at 21.71 times. As well, CI ranks among the bargain stocks in the hot market thanks to its Piotroski F-Score of 8. This stat suggests high operating efficiency, an implication confirmed by Cigna’s return on equity (ROE) of 14.91% (above 68.42% of competitors).
Archer Daniels Midland (ADM)
At the most basic level, Archer Daniels Midland (NYSE:ADM) makes a great case for the best undervalued stocks to buy under present conditions thanks to overriding relevance. As a multinational food processing and commodities trading firm, Archer Daniels essentially enjoys a permanently relevant profile. However, the market has other ideas, sending ADM lower by slightly over 19% on a year-to-date basis.
Such red ink might be overdoing it. Either way, ADM on paper represents one of the value stocks in a bull market. Specifically, the market prices ADM at a forward multiple of 10.44. As a discount to projected earnings, Archer Daniels ranks better than 81.25% of companies listed in the consumer packaged goods industry. Also, ADM features a price-earnings-growth (PEG) ratio of 0.56, far lower than the sector median of 1.7 times.
According to Gurufocus, Archer Daniels features a Piotroski F-Score of 7, which is a solid rating. Helping to confirm Archer’s efficiency is the company’s ROE, which comes in at 18.37%. This stat ranks better than 85% of its peers, making ADM one of the undervalued stocks to buy.
ICL Group (ICL)
A company thrust into cynical relevance due to geopolitical flashpoints, ICL Group (NYSE:ICL) is a multinational manufacturing company. Primarily, the entity develops produces, and markets fertilizers, metals, and other special-purpose chemical products, per its public profile. With global food crises becoming a prominent risk factor, ICL is one of the unignorable entities among the best undervalued stocks.
As with the other enterprises on this list, the market doesn’t see it that way (for now). Since the Jan. opener, shares plunged slightly over 24%. Nevertheless, recent trades suggest a turnaround might be in order. Either way, because of the fallout, ICL trades at a trailing multiple of 3.95, according to Fintel. That matches up with info from Gurufocus, making ICL significantly undervalued.
In addition, ICL also prints a three-year revenue growth rate of 23.6% (on a per-share basis), beating out 69.3% of its peers. Also, its EBITDA growth rate during the same period impresses at 50.5%. Overall, ICL’s Piotroski F-Score lands at 9 out of 9. You really can’t get better than that.
Murphy USA (MUSA)
As an operator of a chain of discount retail gasoline stations, Murphy USA (NYSE:MUSA) ranks among the best undervalued stocks because of its everyday utility. True, economic conditions might impact fuel demand. However, people still need to get around. Additionally, with companies beginning to recall their workers back to the office in earnest, MUSA might become a cynical beneficiary.
Plus, on paper, Murphy USA ranks as one of the high potential undervalued stocks. Mainly, the company’s three-year revenue growth rate clocks in at 30.5%, beating out 88.87% of its peers. Also, its EBITDA growth rate during the same period impresses at a sterling 56.9%. Despite this outperformance, MUSA trades at a trailing sales multiple of 0.28. As a discount to revenue, the company ranks better than 75.84% of the competition.
Notably, the company’s Piotroski F-Score lands at 7 out of 9, which is a decent score. Just as well, Murphy’s ROE pings at 85.22%, outflanking 97% of its peers. Thus, it’s a great idea for bargain stocks in a hot market.
Integra Lifesciences (IART)
Headquartered in Princeton, New Jersey, Integra Lifesciences (NASDAQ:IART) is a global leader in regenerative tissue technologies and neurosurgical solutions dedicated to limiting uncertainty for clinicians. As an advanced medical technology firm, Integra enjoys relevance in any market cycle. However, IART is one of the riskiest ideas on this list of value stocks in a bull market, shedding 27% YTD.
Still, for those that don’t mind ramping up their risk-reward profile, IART could be intriguing. First, Gurufocus labels Integra as significantly undervalued. Most noticeably, the market prices IART at a forward multiple of 12.79. As a discount to projected earnings, Integra ranks better than 96.94% of companies listed in the medical devices sector.
Second, the company’s Piotroski F-Score stands at 9 out of 9, indicating superior operational efficiency. In addition, Integra’s ROE comes in at 10.13%, ranked better than 73.26% of its peers. As such, it’s one of the best undervalued stocks for speculators.
Photronics (PLAB)
As a technology firm, Photronics (NASDAQ:PLAB) might not seem an ideal play among the best undervalued stocks. Moreover, tech plays usually tend to be cyclical, which wouldn’t be ideal as a defensive proposition. However, Photronics’ semiconductor photomask provider business offers myriad applications and broad utility. As a result, shares skyrocketed over 36% since the beginning of this year.
Despite the strong performance in the charts, PLAB makes a compelling case for value stocks in a bull market. For instance, the company’s three-year revenue growth rate pings at 19.2%, above 68.43% of its peers. Also, its EBITDA growth rate during the same frame clocks in at 38.7%, above 72.27%. Nevertheless, PLAB still trades at a trailing sales multiple of 1.61, below the sector median of 2.72 times.
Lastly, Photronics benefits from a Piotroski F-Score of 8 out of 9. Combined with an ROE of 14% (ranked above 70.32% of sector players), PLAB makes for an intriguing case for undervalued stocks to buy.
TD Synnex (SNX)
Another tech enterprise, TD Synnex (NYSE:SNX) is a Fortune 200 company, according to its public profile. It’s a leading provider of a comprehensive range of distribution, systems design, and integration services for the technology industry to a wide range of enterprises. Thanks to its broad footprint, SNX makes for an enticing case for the best undervalued stocks. Since the January opener, shares slipped nearly 4%.
Nevertheless, the red ink might offer an attractive entry point for astute contrarians. Currently, the market prices SNX at a forward multiple of 8.01. As a discount to projected earnings, TD Synnex ranks better than 91.53% of sector rivals. Operationally, the company posts a three-year revenue growth rate of 20.4%, beating out 86.9% of its peers. Despite this outperformance, SNX trades at only 0.14 times trailing sales, well below the sector median of 1.36 times. On a final note, TD Synnex’s Piotroski F-Score clocks in at 7 out of 9. At the same time, its ROE pings at 8.59%, beating out 60.57% of other competitors.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.