How You Can Find Some Value In An Overvalued Market
If you pay any attention to the stock market or the overall economy you may know that the market is at historical over valuations and that some investors are waiting for market corrections while other investors think the market can go higher. In this situation is where you turn to value stocks. A value stock is a stock that is undervalued or an investment priced below what you think it should be. You can look for value based on dividend growth year over year or a change in management for the better. For example McDonald’s has just appointed a new CEO who has a great plan to return to the company to growth.
McDonald’s (MCD) Hurt by strong competition, changing consumer tastes and, more recently, a strong dollar, McDonald’s earnings have been under pressure the past few years, and the stock is 4% below where it traded in early 2012. But hamburgers haven’t gone out of style, says Joseph Zock, of Tocqueville Asset Management, and McDonald’s remains a dominant player run by a new CEO with a comeback plan. Plus, the stock yields 3.5%.
This stock market is having a lot of Merger and Acquisition (M&A) activity where bigger companies are buying smaller ones or competitors to help increase their growth rates. This is a great way to grow a company’s shareholder value and increase the price of a stock. The apparel gian VF Corp (VFC) has grown by buying The North Face and Timberland two brands you might be familiar with. This has resulted in the last ten years growing their dividend by an annual rate of 17%. That is a great increase!
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.