First Micron… Now Honda
I know I’ve pushed value stocks hard in 2019…
But it is for a very good reason.
These stocks represent the best buying opportunity in the market today.
In fact, value stocks are more attractively priced today than they have been in the last 20 years.
And now, yet ANOTHER big-name money manager just jumped on the value bandwagon with me…
Today, I want to take a look at what this great money manager has to say.
Then I’ll introduce you to another deeply discounted value stock that their firm’s been buying.
Value Opportunities Have Already Been Working for Us
At the beginning of June, I told you that shares of Micron Technology (MU) were crazy cheap.
This wasn’t rocket science on my part. At the time, Micron’s shares were trading at just 3 times earnings and only 1 times book value.
From that kind of discounted valuation, there wasn’t much downside risk, but there sure was plenty of upside.
(Which by the way, is exactly what value investing is about — minimizing risk while still generating significant returns.)
That trade has worked out very well — shares of Micron are up 35% in the four months since I wrote to you!
There are more value opportunities like Micron out there right now, and one of my all-time favorite investment firms is finding them.
For three full decades, Orbis Investment Management has been killing it while investing discreetly from the beautiful island base of Bermuda. I know these folks well, I worked across the street from them when I lived in Bermuda.
When I say killing it, I sincerely mean it.
Since inception in 1990, the Orbis Global Equity Fund has more than doubled the return of the broader market.1
Anyone who can outperform for that long clearly has a formula that works.
Today, Orbis is finding exceptional value in cyclical businesses.
These are companies that have profits more closely tied to the state of the overall economy, including manufacturers, retailers, and semiconductor manufacturers like Micron Technology, which we identified as being a no-brainer opportunity back in June.
The very best value opportunities that Orbis is finding today are amongst global stocks… like this one that currently has a place in the Orbis portfolio…
Honda Motors — A Global Value Opportunity
Shares of Honda Motors (HMC) are currently trading at a valuation that hasn’t been seen since the depths of the global financial crisis.
And in the two years following, Honda shares doubled in valuation.
I think the stock can do it again, and so does Orbis.
Orbis notes that currently, Honda’s shares trade at a paltry 0.7 times book value. That is half the valuation relative to book value that the stock has historically traded at.
That means that Honda shares need to double just to reach their average historical valuation.
Meanwhile, the company continues to generate significant earnings. Exactly as it has for the past 40 years through every kind of economic environment imaginable.
In addition, it’s important to note that Honda’s car business is doing well and its fast-growing motorcycle business has an absolutely dominant position in Asia.
Orbis believes that at the current share price, the market is basically valuing only the motorcycle business, and giving us the car business (with $100 billion in annual revenue) for free!
I love dirt cheap stocks like this one…
And with a 3.95% dividend yield, I’ll gladly get paid to wait for the market to start accurately pricing it.
Here’s to looking through the windshield,
Financial Analyst, The Daily Edge