4 Stocks That Look Like Dirt Cheap Picks to Add for 2018

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With the markets continuing the Santa Claus rally melt-up, those who are taking profits are stuck with what most consider a good problem. Where to put the capital? And is it the least bit safe to even put that capital back in now? While the markets have been on a record run, there are still stock ideas to add that fall into the value category.

As we have written before, value stocks are shares of a company with solid fundamentals that are priced below those of its peers, based on analysis of price-to-earnings ratio (P/E), yield and other factors.

The analysts at Jefferies regularly have a group of value stock ideas that are rated Buy, and in a recent research report highlighted four that look like solid ideas for 2018.

Air Products

This company has seen some solid insider buying over the past couple of years. Air Products Inc. (NYSE: APD) produces atmospheric gases, including oxygen, nitrogen, argon and rare gases; process gases, such as hydrogen, helium, carbon dioxide, carbon monoxide, syngas; and specialty gases.

The company also provides equipment for the production or processing of gases, comprising air separation units and non-cryogenic generators for customers in various industries, including metals, glass, chemical processing, electronics, energy production and refining, food processing, metallurgical, medical and general manufacturing. It also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction and liquid helium.

The Jefferies team recently upgraded the shares to Buy and said this in the report:

We’re more convinced that better industrial demand and capex will occur and be a catalyst for a better relative valuation multiple. If we assume on-site and cylinder rental cash flows get a BAA yield, that implies the growth stub trades at just 8.5x 2018 estimated EBITDA. We also assume the industrial gas companies can grow dividends at an 8.6% compounded annual growth rate through 2020 and still return (or deploy on mergers and acquisitions) almost $37 billion.

Shareholders are paid a decent 2.34% dividend. The Jefferies price target for the shares is $185, while the Wall Street consensus target is $174.11. The shares closed trading on Monday at $162.14.

Ingersoll-Rand

This is one of the many top companies that have restructured and are now based in Ireland. Ingersoll-Rand PLC (NYSE: IR) is another top industrial stock to buy and, with the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well.

Many on Wall Street also see the stock as a good play on the replacement, upgrade and, ultimately, growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction and are thus earlier in the cycle.

Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.

The company has reported solid earnings this year, and the analysts are positive on future growth and said this:

We were out with a note looking at the impact that tax reform could have on the machinery space, particularly in terms of divestitures. Lower rates could reduce the “barrier to exit” for companies with non-core businesses that have a low tax basis. Divesting businesses that act as a drag on growth could boost company valuations. The company’s non-core golf cart and fluid power business generate $800 million in revenue and a divestiture could boost growth.

Ingersoll-Rand investors receive a 2.08%% dividend. Jefferies has a $105 price objective, and consensus price target is $98.25. Shares closed on Monday at $86.64.