Investing

4 Jefferies Value Stocks to Buy as Market Volatility Jumps in 2016

Lee Jackson

Published: January 13, 2016 8:25 am

Last Updated: January 13, 2020 3:06 pm

After years of relatively benign volatility, investors are getting a taste of something they are not very accustomed to. The Volatility Index (VIX) has been elevated since the start of the trading year, and with China, oil and other issues still stirring the pot, this could be the norm for the near future. One good idea is for investors to consider adding value stock to their portfolios.

Each week we cover the new value calls from the analysts at Jefferies, and increasingly some of the calls may look surprising, as some solid big blue chips companies are becoming so cheap on a multiple basis they are ending up in the value arena. This is the best of both worlds for investors, when large cap growth companies become inexpensive enough to have a value call.

Here are four of this week’s value stocks to buy from Jefferies. All are rated Buy.

Ally Financial

This is the old financing arm of GM that was known before the great recession as GMAC. Ally Financial Inc. (NYSE: ALLY) has been rebuilt into a stronger and more solvent Internet-focused bank with no brick-and-mortar locations. Its customers do their banking solely through the bank’s website, its mobile application and automatic teller machines.

Jefferies feels that in comparison to peers, though few are actually structured like Ally, the stock is very cheap. Trading at a low 7.05 times estimated 2016 earnings, and at a less than one times book value, the analysts think that there is room to run. Most on Wall Street feel that the stock should trade more like 1.25 times book value. And they feel that the bank is moving away from a dependence on GM and into a more balanced operating structure, which is good for long-term strategy.

With the capital structure optimized and management having diversified the origination’s platform ahead of expectations, the stock has tremendous value at current levels.

The Jefferies price target for the stock is $28. The Thomson/First Call consensus price target $26.94. Shares closed on Tuesday at $16.28.

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