Zacks
4 PEG-Based Value Stocks to Buy Amid Tariff War and Market Bloodbath
Urmimala Biswas
5 min read

In This Article:

President Donald Trump’s “Liberation Day” has caused a wave of financial and geopolitical repercussions across global markets. The 10% baseline reciprocal tariff now imposed on virtually all U.S. trading partners and a 25% tariff on all foreign-made vehicles, as well as imports of steel and aluminum, triggered a historic stock market sell-off and international retaliation. It appears that the risk of recession has returned with a vengeance. The market has responded quite brutally, with the tech-heavy Nasdaq Composite plunging 6% yesterday and the “Magnificent Seven” collectively losing nearly $1 trillion in market capitalization.

With growing macroeconomic uncertainties, many investors are currently re-evaluating their portfolio strategies. Historically, it has been seen that in times of volatility, investors tend to choose value investing over other options like growth or momentum. As soon as other investors start selling their stocks at a cheaper rate in times of market uncertainty, value investors take this as an opportunity to pick good stocks at a discounted price.

Several stocks that have surged significantly in recent times have shown the overwhelming success of this pure-play investment strategy. Here, we discuss four such stocks Qifu Technology, Inc. QFIN, Suzano SUZ,Fresenius Medical Care FMS and JD.com JD.

This simple value investment technique, however, has some drawbacks, and not properly understanding the strategy may often lead to “value traps.” In such a situation, these value picks start to underperform over the long run when the temporary problems, which once drove the share price down, turn out to be persistent.

There are many value investment yardsticks, such as dividend yield, P/E or P/B, which are simple and can single out whether a stock is trading at a discount.

However, for investors looking to escape such value traps, it is also vital to determine where the stock will be headed in the next 12 to 24 months. Warren Buffett advises these investors to focus on the earnings growth potential of a stock. This is where the importance of a not-so-popular value investing metric, the PEG ratio, lies.

PEG Ratio at a Glance

The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate

A low PEG ratio is always better for value investors.

While P/E alone fails to identify a true value stock, PEG helps find the intrinsic value of a stock.

There are some drawbacks to using the PEG ratio. It does not consider the common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.

Terms and Privacy Policy
Your Privacy Choices
Utah Privacy Notice
More Info

Recommended Stories