This is the Value Investor podcast with Tracy Rinek, all things value all the time. Welcome back value investors. So I'm sorry to be the bearer of bad news, but value is apparently out of favor again. We've seen the lagging in some of the key value sectors, obviously the banks have lagged and then some not even just lagged.
And energy energy I would say is a little bit more of the lagging category this year in 2023, but the financials are really key to the return of value stocks. They make up about 20% of the small cap index. That includes insurance companies and other financials as well, but the banks are a big component of it. And until they get out of this bear, value stocks I fear are going to lag.
But growth, especially tech has resurged here in 2023. And just because we're value investors doesn't mean we can't own tech. After all, Warren Buffett owns Apple and Amazon. So he's owned it and we can too, but we still want to get it as a value, right?
We don't want to buy the overpriced tech. So I did a screen on zacks.com looking for companies in the computer tech sector. That's the name of the computer technology. And then for value, I actually looked at the price to sales ratio and I did put it at under one.
Now remember the price to sales ratio, if it's under one, that means you are buying the sales at a discount. So if it's .7, you are buying a dollar's worth of the sales for 70 cents. So that's a good thing. That's getting them on sale.
The PE for tech, I don't feel is quite as reliable. So companies that are going to have the really low price to sales ratio usually have a fairly low PE as well. But I just feel it's not quite as reliable an indicator of cheapness because with technology, we really want to get the sales just cheap. And to achieve.
I don't care so much about the earnings. I care about the sales. So that's why I use the price to sales ratio in this screen. We're getting the sales as cheap as possible.
I also threw in the zacks rank of number one, the strong buys. I actually did debate this. Do I care about the rank with this screen? I feel like I do because I do still want earnings estimates to be on the rise.
If it's going to be this cheap on a price to sales ratio and for tech, especially under one is really cheap. I mean, there's some people who think under 10 is cheap in technology these days, but price to sales under one really cheap in the tech group. And so I wanted to make sure something else good was going on there that it wasn't just dirt cheap for some other reason, but the earnings actually were on the rise. So I plugged in the zacks number one ranked two because I do want the analysts to feel somewhat bullish about the company or at least seeing something good going on on the horizon, even though it's cheap.
So running just this basic screen with just these few parameters here, I got just five stocks. So I didn't have to do anything else. I did actually run it just out of curiosity with the zacks ranked number ones and number twos, which are the buys. And I got 22 stacks, but I decided to just stick with the number ones because they're number ones.
So they're strong buys. So I don't know what most of these are. So I did have to investigate. And also with the screen, I did not put any kind of market cap or volume parameters on it.
I didn't do price parameters. So we got kind of a mixture on this list of five, but that's okay because I did want to know what are the cheap tech stocks that are out there with the good sex rank. And these are the five that are. So let's dive right in and see what they are because they are kind of intriguing this week.
Okay, the first one is called Bell Hughes. The bigger is B is a boy, E is an Edward L as in Larry, F is in Frank, B is in boy. So it does have five letters B E L F B Bell Fuse. And this is a small cap, six hundred and four million market cap.
The price of sales is .88. It does have a low PE, even though we didn't screen for that at 11.8. Now what does Bell Fuse do? They this is from the website.
They design, manufacture and market a broad array of products that power, protect and connect electronic circuits. They have three different areas, magnetic solutions, power solutions and protection and connectivity solutions. In the first quarter, connectivity and power groups posted record sales. So I'm linking that they did in 2022 ramp up headcount and production in North American factories to meet expected demand from commercial aerospace and defense customers.
They are a global company with global facilities in the first quarter. Sales were up 26.1%, 272.3 million gross profit margin rose to 31.1% from 25% a year ago. So I'm liking all of that. So I can see why this, you know, the analysts are liking what is going on here.
Year to date, the shares are up 41.4% and two years they're up 180%. So this isn't a company that's kind of hidden, but yet it is because it's a small cap and nobody really talks about it. They are in New Jersey. So they are in the US and they do pay a dividend yielding .6%.
So that's a little unusual for small cap company to pay a dividend, but they are. So this is kind of an intriguing one, probably not what you would think about when you're thinking about computer technology companies, right? You're thinking Microsoft or someone like that, but Bell Fuse looks like it's basically doing the tough work behind the scenes in tech. And that can be just as profitable as these more glamour companies.
So ticker again is B-E-L-F-B. Okay, number two is on the left side. It's a big cap. It's Mitsubishi Electric.
This is also five letters. ticker, Amazon Mary, I, E, isn't Edward L, E, is in Frank. M-I-E-L-F. And they are Japanese.
So that's also different than Bell Fuse. But this looks more like a huge conglomerate to me. It reminds me of Sony, kind of when I look at Sony's earnings because they're in so many different areas and so is Mitsubishi Electric. So just scanning through their, one of the earnings reports, they're in public utility systems, energy systems, defense and space systems, factory automation systems, automotive equipment, building systems, air conditioning systems and home products, information systems and semiconductors.
So that's a lot. Full year, 2023, their revenue achieved record highs due to the impact of the weaker yen and increase in demand for the mass production businesses. For fiscal 2024, revenue and profit are expected to achieve yet another new set of record highs. Just so you know what areas they're selling in, Japan is 49% of the revenue.
With America 12%, China 12%, Asia X, China 13%, Europe is 12% and then others at 2%. So you know where there are. Price to sales, just 0.7. The PE is 14.7.
So that's still a value even on the PE basis. They do pay a dividend yielding 2%. What is the stock done? Over the last two years, it's down 14.9% year to date, however, up 30.7.
So people have discovered that maybe it was a little too oversold to start the year and it is up. But this one is not going to make any news really, but it's one of those steady, eddy, like I said, conglomerate type companies with its hands and many different things, 27 billion market cap and paying out profits to shareholders and still cheap. So Mitsubishi Electric, M-I-E-L is the ticker. Then we're going to stay on the foreign companies and we're going to talk about Hello Group and it's ticker M-O-M-O-M-O-M-O.
And this is a Chinese company. Now you know what I think about the Chinese companies, but it made the screen, so we're going to talk about it. So Hello Group is a fun and simple way to discover, meet and make friends with people nearby. So they have mobile apps.
They also have one that includes dating. So it's dating, meeting people, friends, all that kind of stuff. They are profitable on earnings. So that's good.
Price to sales is 0.89. PE is just 5.5. They are a smaller cap, but on the bigger side of the small caps at 1.6 billion market cap. They are under $10, price under 10.
So they're trading around 8.75 right now here in May 2023. In the fourth quarter, however, they haven't reported first quarter yet. It looks like it's coming in early June, but in fourth quarter, revenue was down 12.6% and for the full year 2022, revenue was down 12.8%. Now I don't know if that had to do with the zero COVID rules, still having lockdowns from COVID, it very well may have, and that could be improving here in 2023.
We're about to find out when they report. We do have two estimates on the company for the full year, looking for $1.55 versus $1.33 last year, so that is earnings growth of 16%. So I do like to see that. No dividend with this one.
And year to date, down 2.8%, and over the last two years, still down, but down 37% over the two years stack. The Chinese stocks, especially on the tech side, have had a very volatile history in the last year or two. So this kind of meets that, you know, what's been happening. So it's Hello Group, ticker, M-O-M-O.
And then we're going to switch back to kind of a more traditional tech kind of company over here in the US, ribbon communications, ticker, R-B-B-N. So R is in Roger, B is in Boy, B is in Boy, and is a Nancy. And what do they do? They deliver communications software, IP and optical networking solutions to service providers, enterprises, and critical infrastructure globally.
So yes, it's one of those where you're kind of like, what? Okay, whatever they say. But in the first quarter, revenue was up 7% to 186 million from 173 million last year. They are a small cap.
Again, market cap of 464 million. No dividend with this one. IP Optical, that second of the business, was led by robust demand in India and EMEA. So they are global.
They did reaffirm guidance for 2023. This is what we all want to see our companies doing. But these shares are under not just $10, under $5 at $2.73 here in May 24th, 2023. They have the shares done year to date.
They're down but just 1.8%. Two years, they're down 63% still. So they did get hammered in the tech sell off in 2022 and down a little bit here in 2023 again. But expected to make $0.27 here in 2023.
That's versus $0.11 last year on earnings. That's up 14.5%. Price to sales ratio is just 0.6 and PE is 10.6. So that's ribbon communications R-B-B-N.
And then we're going to wrap it up with the fifth stock. And this one is also a small cap. But this is the smallest one we've talked about. And it's Rumble on ticker R as in Roger and as in Mary, B as in boy, L as in Larry, R-M-B-L.
And took it a little while to figure out kind of what they do. So Rumble on, this is from their website says they are the nation's largest retailer and the first technology based omni-channel marketplace in power sports. Now I guess it was the power sports that threw me because I'm not into the power sports. But those are like motorbikes, ATVs, autos that are used for like racing.
That kind of thing is in the power sports. And if you go to Rumble on their website, it's kind of like an Etsy or an Amazon type of marketplace where you can buy and sell the power sports vehicles. They provide instant cash offers. They do the online transactions.
But recently they did buy right now, which has 50 over 50 locations. And they do new and use power sports vehicles, parts and accessories. So there is more than just online, there are these actual retail locations. So Rumble on is based in Texas and they did report first quarter.
Revenue was down 22% year over year. However, to 346 million versus 445 million gross profit was down 13%. But the margins were actually up 270 basis points to 26.3% versus 23.6% a year ago. But I'm not surprised that there's some slowdown in this type of business because that's consumer, right?
Like I don't need to go buy the ATV now. I already bought one or maybe I'm going to sell it and that might help them. That gives them a seller. But you can see the consumer is going to slow.
They're probably going to slow in this area as well in the power sports. They do have 61.8 million cash on hand as of March 31st, 2023. Total debt though is 376.8 million. Now how cheap is it?
Price to sales is just 0.1. So we're getting it super cheap on the sale side. PE is eight, no dividend. And as I said, this is the smallest company, just 171 million market cap.
Now we have one estimate on it. And for 2023, it is higher in the last 30 days. But they're looking for $1.30 this year versus $2.35 last year. So that is a decline of 44.7%.
I'm sure that's the slowing economy basically. They see a little bit of gains in again in 2024, just $1.38. But that estimate is also higher in the last 30 days. This stock is trading right around $10.
So it's not quite the under 10, but it's right around there. Year to date though, the shares have rallied up 54.4%. Because over the last two years, they're actually down 74%. So Rumbelan got really hammered last year as the Fed was tightening.
And then the sell-off was overdone. People have gone in this year. But stock is still cheap, as I said, with the price of sales of just 0.1 and a PE of eight. So this is Rumbelan ticker R-M-V-L.
And did they reiterate? They did for their full year outlook. 2023, they did reiterate it in the first quarter. So that's something we'd like to see.
We don't want to see them cutting it, obviously, or else the estimates would probably be cut too. But the reiteration is a good sign. So at least things are somewhat stable and they have some view on what is going on out there with the business. So again, that's Rumbelan R-M-V-L.
So all these tech companies, because the tech sector is a big sector, are kind of in their own areas, right? Like, you wouldn't think when you ran a screen for the cheapest tech companies on a price of sales basis that you would get these five. They're international companies, they're dating apps and meetup apps. They're the back end components.
They're marketplaces. They're doing the circuits. They're all over the place. And that's what makes it interesting to be an investor, right?
Because it's not always just the fangs, the fang man. It's not just Microsoft and that's tech. They are tech, but everything isn't just that. There's a lot of companies out there that are growing their niches and in interesting areas.
And these are five that just happen to be cheap. So as value investors, we can buy tech. These are all in our wheelhouse as value investors. But remember to make sure to check that you're not buying a value trap in some way.
I didn't check that on this. We just have the Zacks number one rank, which means that earnings estimates are on the rise, but doesn't necessarily mean they're not actually falling year over year like we did see with at least a couple of them. So keep that in mind. But these are some good ideas and it's good to run these X screens when value is out of favor because there are always some hidden gems and some deals out there, even when value is out of favor.
All value isn't down on its luck. The group overall is, but there's still areas that are cheap. The market is ignoring them and it's good for us to take a look and see if there's any real deals in there. So let me recap the stocks we talked about.
So there was Bellfuse that was ticker B-E-L-F-E. Then we had the big cap, kind of conglomerate in everything over in Japan, Mitsubishi Electric, M-I-E-L-F. I'm switching my pages here. Then we had China, the dating app and meetup apps, Hello Group, M-O-M-O, Momo, is the ticker there.
Then we had ribbon communications, R-B-B-N. And then finally the power sports marketplace and retailer Rumble on ticker R-M-B-L-R-M-B-L. And every week I'm going to be finding you the value stocks here on the value investors. So be sure to subscribe, get us somewhere.
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