The chatter about the 2021 change on Wall Street is getting louder, and we saw it last week as it was clear that the rotation trade is in full swing as the move to cyclical stocks, value and small caps continued. The bottom line is that the large-cap indexing that worked so well for the past few years is not working as well now. Before Monday’s big move, the S&P 500 was up only 1.4% in 2021, and that compares with a whopping 11.5% gain for the Russell 2000.
The question for many investors wanting to stay with larger-cap companies is what to do now, and the answer may very well be a shift to value.
Value stocks tend to trade at a lower price relative to their fundamentals, such as dividends, earnings and sales, making them appealing to investors with longer time horizons. We screened the BofA Securities Value 10 List looking for companies rated Buy that pay solid and dependable dividends, and that had the lowest 12-month price-to-earnings (P/E) ratios. We found four that look like outstanding ideas now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Insurance companies tend to do well regardless of the economy, and this sector giant may be an outstanding pick for investors. It was one of the analyst’s top picks for 2021. Allstate Corp. (NYSE: ALL) is the largest publicly traded personal lines insurance company, with about 12% of the personal lines market (one in eight households).
Allstate is primarily a direct writer. Besides a full array of personal lines P/C products (preferred, standard and nonstandard auto insurance, and homeowners’ insurance), the company also offers life insurance and annuity products.
The analysts noted this in February after the company posted earnings:
Allstate shares underperformed following a material earnings per share beat for the fourth quarter of 2020 results likely due to policy count decline. Ironically, Allstate’s periods of greatest share outperformance were simultaneous with periods of policy count decline. ALL shares currently appear trading at a P/E discount to commercial property and casualty peers unseen since the 2008-2009 global financial crisis.
Shareholders receive a 2.95% dividend. The BofA Securities price objective for the shares is a whopping $141. The Wall Street consensus target price is $125.14, and Allstate stock closed Monday’s trading at $109.72 a share, up almost 3% on the day.
Positions in health care should continue to act well, and market leader is a good idea for more conservative investors looking for health care positioning. HCA Healthcare Inc. (NYSE: HCA) offers health care services. It provides diagnosis, treatments, consultancy, nursing, surgeries and other services, as well as medical education, physician resource center and training programs. It serves patients in the United States, operating from its network of approximately 185 hospitals and 2,000 sites of care.