All three major U.S. indexes tumbled on Thursday, helping spoil a recent run that lifted the S&P 500 and Nasdaq to new records, while the Dow climbed above 29,000 for the first time since February on Wednesday. The pullback was driven by selling in coronavirus stars like Tesla TSLA, Apple, and Zoom ZM.
Stocks have faced declines even during the historic run off the market’s bottom in late March. And Thursday’s selloff seemed due and even healthy. Recent economic data has been solid, although a little disappointing ahead of Friday’s big releases on jobs and unemployment. Meanwhile, Wall Street is starting to get anxious about when the next round of stimulus will be passed, as millions of Americans remain out of work due to no fault of their own.
That said, the third quarter earnings outlook has improved and there should be enough political pressure on both sides to get something done on the stimulus front. This might mean that even with the uncertainties surrounding the upcoming election, stocks could continue their run higher as the Fed keeps interest rates pinned near zero.
With this in mind, we screened for “cheap” stocks with solid fundamentals that are trading for under $10 per share. We also added the requirement of a dividend to help boost returns, especially ahead of what could be more downward pressure on the market.
Sirius XM Holdings Inc. SIRI
Prior Close: $5.93 USD
Sirius XM is a subscription satellite radio giant that expanded its reach through its early 2019 acquisition of Pandora. This helped boost its audio and music streaming presence as it competes against the likes of Spotify SPOT, Apple AAPL Music, and others. The firm now reaches over 100 million people every month. SIRI matched our Q2 earnings estimate at the end of July, even though its ad business has taken a coronavirus-based hit as advertisers pull back on spending everywhere. Sirius also added more users than projected.
Shares of SIRI are up 30% off the market’s lows, yet they remain 20% below their pre-COVID highs. This could give it some runway as many other tech-focused stocks have surged to new highs. Overall, Sirius is up 55% in the last five years to outpace its media market industry’s 45%. SIRI also currently trades at a solid discount compared to its own 12-month median in terms of forward sales. Meanwhile, its 0.91% dividend yield easily top the 10-year U.S. Treasury note’s 0.63%. Plus, the board in mid-July announced the approval of an additional $2 billion in buybacks.
Zacks estimates currently call for SIRI’s fiscal 2020 sales to slip marginally, with FY21 projected to jump 5% higher to $8.17 billion. Meanwhile, its adjusted earnings are projected to climb 20% and 15% over this same stretch. SIRI earns a Zacks Rank #3 (Hold) at the moment, alongside a “B” grade for Growth in our Style Scores system. Investors should also note that Sirius announced in July that it is set to storm into the booming podcasting market with its purchase of Stitcher from E.W. Scripps Co. SSP.
Yamana Gold Inc. AUY
Prior Close: $6.19 USD
Yamana is a gold and silver miner with operations in Canada, Brazil, Chile, and Argentina. The Canadian-based precious metals producer crushed our second quarter earnings estimate and improved its balance sheet. The company’s earnings trends have moved in the right direction since its Q2 report in July, with its fiscal 2020 estimate up 53% and its FY21 consensus figure 21% higher. AUY’s adjusted earnings are projected to soar 77% and 48%, respectively over the next two years.
Yamana’s positive bottom-line trends help its land a Zacks Rank #2 (Buy) at the moment. The firm also earns a “B” grade for Value and rests within the highly ranked Mining – Gold industry, with gold and silver prices still up big over the last year.
Shares of AUY have surged 55% in 2020 to top its industry and 130% in the past two years. This climbed helps make its 1.15% dividend yield all the more impressive. The firm announced in late July that it boosted its dividend by 12%, as part of a continued raise to its payout. And the stock has cooled off a bit, which leaves it about 14% off its highs.
Amcor plc AMCR
Prior Close: $11.43 USD
Amcor comes in just above the $10 a share threshold we set, but it’s still within the low-priced range that we are looking for and its other fundamentals help make up for the slightly higher price. The firm completed its purchase of Bemis in June 2019 to create a massive global packaging powerhouse that services a variety of industries, from food and beverage to pharmaceuticals and personal care. Amcor’s offerings include flexible and rigid packaging, specialty cartons, and more. Amcor has also started to focus on making what it calls “increasingly light-weighted, recyclable and reusable” products that are made “using a rising amount of recycled content.”
Amcor’s push toward greater sustainability could prove key amid growing backlash to plastic and waste. On top of that, plastic and paper packaging of all types remain vital around the globe and likely will for years to come. The company on August 18 matched our Q4 bottom line estimate, with its adjusted fiscal 2020 earnings figure up 13% and its fiscal 2020 revenue up over 31%.
Amcor stock has climbed 66% since March 23 and is up 33% over the past three years to blow away its industry’s 27% decline. This means that its dividend yield is not artificially inflated. AMCR’s dividend yield rests at 4.18% right now, which blows away its industry’s 2.16% and the S&P’s 1.65% average. AMCR is currently a Zacks Rank #3 (Hold) that earns an “A” grade for Growth and a “B” for Momentum in our Styles Scores system. And Amcor’s bottom-line is expected to continue to climb.
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