Stocks: Nine Low-Risk Value Plays

S&P's latest list finds attractively valued names with top rankings from its equity analysts

by Beth Piskora From Standard & Poor's Equity Research

Well-known value investors such as Warren Buffett and Bill Nygren say they are finding great opportunities in the stock market these days. We put together this week's screen to help individual investors emulate these and other value-oriented masters.

We started by consulting S&P Stock Reports, which categorizes the companies in S&P's coverage universe as growth or value stocks. (Growth stocks typically have a higher price-to-cash flow ratio that represents the premium that is being paid for the expected higher growth. Value stocks typically have higher dividends and more moderate price-to-earnings ratios.) Obviously, we wanted the value names.

Some Stocks Discounted for a Reason

Next, we screened for those issues with S&P investment rankings of 4 STARS (buy) or 5 STARS (strong buy), which would suggest our equity analysts believe they will outperform the broader market in the next 12 months.

However, some value stocks sell at discounted valuations for a reason: They are distressed, they have recently emerged from bankruptcy, or the businesses are otherwise undergoing restructuring. So we also added a risk element to our screen, using another proprietary S&P measure. S&P's Qualitative Risk Assessment represents the S&P equity analyst's view of a given company's operational risk, or the risk of a firm's ability to continue as an ongoing concern. We included only those stocks that have obtained a low qualitative risk assessment from S&P Equity Research.

Many real estate investment trusts turned up on our screen, but we omitted those from the final list, since they were the subject of a screen we ran last month.

Nine stocks made the final cut:

Piskora is managing editor of U.S. Editorial Operations for Standard & Poor's .