This is the Value Investor podcast with Tracy Runick, all things value all the time. Welcome back value investors. It's time to find some value stacks. Value has had this big run in 2021.
Yes, we're finally on top of the world. But are there any classic Ben Graham type value stacks still out there? I thought I'd take a look and try to run at least one of the screens that I knew might give us, those exact Ben Graham type value stacks. So, Zach has a product called the Zach's Research Wizard, and it's a more advanced stock screener than what you find on Zach's.com.
And it has all these preset screens that are not on Zach's.com, the more advanced screens and more complex that the Zach's.com screening tool cannot do because it doesn't have as many components as research wizard does. So, I'm giving you a free look basically at one of these screens because there's one that is actually called the Benjamin Graham screen on there. And so, I decided I'm going to run this one and see what it brings up because I haven't run it in at least a year, if not longer. And so, what's in the screen?
It uses return on assets, ROA. And one of the big components is EBIT, E-B-I-T over ABS, which is market value plus long-term debt, plus preferred equity minus the cash. And EBIT is earnings before interest in taxes. So, the market cap could be anything.
There were some big caps and some small caps on here. It could be any sector industry. What's missing is interesting. So, there's no value, classic value fundamentals in the screen.
There's no PE, PEG, press the sales, press the book. None of that is in here. And there's no ZACS rank. So, it could be any rank, but it's only going to screen for Benjamin Graham's key areas, which is ROA and EBIT over ABS.
So, this screen returned 25 stocks. So, there are some Ben Graham stocks still out there. Now, I decided just to pick five out of the list as I normally do, and I tried to get stocks in different categories, although, mistakenly, two of them turned out to be in the same category, but they're not listed in the same industry on ZACS.com. So, I did not know that they were going to be in the same category, because one of the companies, I don't know.
So, two of them turned out to be in the same category. Also, interestingly, almost all of these were some were pandemic type winners, and now the market thinks they're going to be pandemic recovery losers. So, a lot of them have fallen year to date, the shares, and even though all the underlying fundamentals still look good, the street thinks these trades are done now. So, maybe that's why they're also showing up at Ben Graham's list, because fundamentally, they're still pretty solid, although I'm going to talk a little bit about that, because I did look at the earnings with these companies, even though that was not in the screen.
And so, there are some surprises in this list of the five that I chose. So, let's just dive right in, so you can see what I'm talking about. So, the first one is Hibbit Sports. We've talked about this one in the past, so I wasn't surprised to see it show up on this type of screen.
Tigger HIBB, any of these sporting goods retailers have been red hot, because everybody's rushing out and buying outdoor goods, right? But this is one of the ones that the street feels like, oh, you know, this might be done now, and we're going to just cash in and walk away. So, it's still a ZAC number one rank, because those earnings still look amazing. It has a PE of 9.2 and a peg of 1.08, so the peg is almost in their in the value category now.
The ROA is 22.9. Year to date, these shares are still up 59.8%, but at one point earlier this year, they were up 90%. And they now fall in 10% in just the last month. This is as everybody's jumping out of this trade.
It is, as I said, as X number one, strong buy, because those earnings are still looking good. So, Hibbit, still cheap, and Ben Graham would like it, but shares may come down further as investors who are kind of playing the trend think the trend is over and are jumping out. So, you might be able to get this one even cheaper. Okay, the next stock is co-diagnostics.
CODX is the ticker. This is a small cap, 247 million market cap. This is one I did not know is Utah based molecular diagnostics company using DNA or RNA, and they had record results in 2020. Why?
Because COVID testing. So, revenue was mostly coming in just even this last quarter from their Logic Smart COVID-19 test. So, this was a big winner, but now year to date, these shares are down 8.5% have really come down. Now, the ROA on co-diagnostics here is 79.9%.
P is just 9.6, and it's a X number three hold right here. But this is, again, another one where the street is like, meh, we're over the COVID testing. A lot of that revenue is going to go away. What have you done for us lately?
And, you know, we're not interested. That's why it's a value. The third company also, what is the one that is in the similar area, which I knew was, but I wasn't thinking about co-diagnostics, even though diagnostics is in its name, right? So, Quidl is the other one, Quidl.
QDEL is the ticker. Everybody knows this one. They do the at-home COVID test through like Walgreens. They have a $4.7 billion market cap.
ROA is 63.9. P is dirt cheap, 6.8, and it has a peg of 0.27. Year to date, these shares are way down down 37.6% now, because again, how many of us are buying the at-home COVID tests, not as many now that the vaccine is rolled out, right? So, a lot of people thinking this trade is done.
It is a ZACS number five strong sell here, and that's because those earnings are being adjusted lower here. So, it has fallen to the number five. So, that's something to keep in mind, even though the screen did not screen for the ZACS rank. The ZACS strong sells are kind of exclusive group, the same way that strong buys are.
There's only a little over 200 of those. So, you want to dig a little deeper, if you have a stock, that's a number five, and ask why are all those analysts cutting those estimates? Well, we kind of know why with the diagnostics, but they're not cutting as much in co-diagnostics, but non-smen analysts follow that company because it's so much smaller than CODEL with that bigger market cap. So, keep that in mind.
Okay, then switching away from diagnostics, there was one in the transportation area. So, I decided, yeah, I'm interested in what's going on with transportation right now, and it's DHT holdings, DHT is the ticker, and it turns out they're a Bermuda-based independent crude oil tanker company. And they are ZACS-4 sell, that's the sell, but this one is interesting because the estimates are going in the wrong way here in 2021, earning expect to be down 95.9%, but then really rebound in 2022. So, I had to take a look to kind of see what's going on here, that 2021 is going to be such a big reversal from last year, and then another reversal in 2022, but those estimates are also work cut in the last couple months here.
So, basically, in the first quarter, the company said there was a weak freight market, and they're still being impacted by COVID. Remember, there were still outbreaks going on to start the year, that was the first quarter, and certainly globally, we're still seeing outbreaks happening, and certain restrictions being placed in Asia and other places. So, DHT is getting hit pretty hard by what's going on with COVID. The ROA and DHT is 12.2%.
It does have a Sky High PE, because those estimates are being cut at 87 and no peg. Year to date, these shares are actually still up, 24.7%. And it does pay a dividend yielding 2.5% for your troubles, but you're not having much trouble because the shares are up. Now, everybody believes this will turn around as the COVID situation improves.
That's probably why the street is not as negative on this one, like they are in some of the others. This is actually more of a reopen play than anything else, but it remains, again, a DAX number four sell here. That's DHT holding DHT. Then I'm going to wrap it up with one of the mortgage brokers, Rocket.
We all know this one, right? It basically has been a Reddit play in the past. Ticker RKT. So they are the largest mortgage broker in the country, but they also have Rocket Auto and Rocket Homes.
And in the first quarter, March was the highest ever purchase application volume that the company has ever seen for homes. And Rocket Auto increased the number of vehicles it sold by 65% in the first quarter. So it's ROA is 28.2%. It has the cheap PE at 9.5 and a peg of 0.95, which does give you value and growth.
But this one is also his X number five strong sell. And so I took a look, earnings expected to be down 47% here in 2021, and then down again, 24.2% in 2022. Same with revenue expected to be down 18% this year and down 20% next year. So what's going on?
Well, that March was the highest ever purchase application volume. And basically the street believes they will never see that purchase application volume ever again, or at least not for the next two years. So with mortgages similar to the home builders, there's nowhere or at least the street doesn't believe there's nowhere higher to go, especially if those mortgage rates don't fall back and go even lower, which most people are not expecting to have happen. So they expect the home market to cool off, and even the auto market to some extent to cool off.
So what does that mean for Rocket's earnings? It's not a good thing. So everybody's fleeing out of this one year to date down 0.7%. It did have a big Reddit spike in the shares, a huge one in March, but it's come back down.
And this is one that is a little more cyclical here and may get even cheaper as we go along and see what happens with the mortgage market here in the second half of the year. But basically all the good news is priced in on this one, similar to the other cool good plays, the diagnostics ones. And so investors have been fleeing. So what do these five stocks really tell us about Benjamin Graham's strategy?
Because this is trying to look for companies that he would like. Well, they all are mostly cheap except DHT with the higher PE of 87. But all the rest have pretty low pegs and PEs, which Graham has always liked. A couple have the earnings just going in the wrong direction, which I don't like because I do want to see the earnings growth.
So some of these look a little more like value traps to me, but still interesting what else was on this list. So there were a couple gold miners. I just chose not to pick one of those, but there were three of them on the list. So that's interesting.
There were no energy companies. So the energy is just not making the type of the ROA or the other things that this one is looking for. And very few with any financials, like rocket companies was one of the few financials. So there were not a bunch of banks or things like that on this list as well.
So yeah, this is a little interesting. And you can kind of see the pattern there that a lot of these are the companies that were the big pandemic winners and now are kind of being rejected by investors, which is the value mantra, right? Is that there's still something good going on underneath there, but investors are thinking it's not going to be lasting much longer. So they're fleeing out of there.
So these are maybe just some to keep on your list, especially Hibbit Sports, which has come down quite a bit off those highs and may come down some more. I'm not sure that the sporting goods trend is over just about yet, even with the reopening happening. I think people still got kind of used to being outside and doing outdoor activities and that that will continue, but how hot it will continue remains to be seen. So it's always going to run these screens and kind of see what you're getting when you're taking a little bit deeper view and we're looking at components that we normally don't screen for, which is the ROA for sure.
And so it's interesting to see kind of what's out there that Ben Graham, maybe himself, the father of value investing would be looking at if he were investing today. So let me recap those tickers again. So we had Hibbit Sports, HIBB, we had co-diagnostics, CODX, that's the small cap, diagnostics company, Quidel, Quidel. I'm not sure you pronounce it, QDEL is a ticker for that one.
That's the bigger COVID diagnostics, but that's other diagnostics too. DHT holding the crude oil tanker company, DHT, that is one of the few that's remaining elevated on the shares because the oil market is recovering along with the global economy, right? So there's going to be some demand for the oil to be moved around in those tankers. That's why we see the rebound in earnings there in 2022 and then we had rockets.
That's the mortgage broker, but they also do auto RKT is the ticker there. And as always, I'm going to be running some more of these screens over the summer here, so we can have kind of see what's going on with value. But we do kind of already know where the cheap stocks are. I'm sure by ran a classic value type screen, which you can on sax.com, we get a lot of those home builders back in there and the banks, home builders still remain with single digit P's because the street believes that story is now over as well.
But we saw that last year and it turned out not to be true. So we'll see. We'll see on any of these. What will happen to their earnings and revenue now that some of these trends from COVID are starting to cool off?
And that's something we'll be following here on the Valley Investor over the next couple of weeks. So you want to be sure to subscribe. You can get us on Amazon Music, we're on Spotify, we're on Apple Podcasts. But get us anywhere that podcasts are and I'll see again next week with some more value stocks.
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