Investors got a good taste earlier this week of what a market crash could feel like. It is safe to assume most would like to avoid the kind of financial punishment a major crash could bring if we get another budget battle in November and a possible government shutdown. The unrelenting backup on Treasury bond yields has pushed mortgage rates to their highest level since 2000. Due to that, along with credit card debt surging among consumers, things could get a lot worse before they improve.
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One outstanding idea for stock investors, especially those who have not seen all their gains in 2023 dissipate, is to move to low price-to-earnings (PE) value stocks. The BofA Securities Value 10 picks have outperformed the S&P 500 value stocks this year. We screened the list for the lowest PE stocks that also pay a dividend. We found five top companies that equity investors can feel very comfortable with as we move through what could be a very difficult stretch for the stock market.

While all are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Aflac

Known for the commercial with a howling duck and football legends Deion Sanders and Nick Saban, this is a solid insurance idea trading at just over 10 times earnings. Aflac Inc. (NYSE: AFL) provides supplemental health and life insurance products.

The company’s Aflac Japan segment offers cancer, medical, nursing care income support, GIFT, and whole and term life insurance products, as well as WAYS and child endowment plans under saving type insurance products in Japan.

The Aflac U.S. segment provides cancer, accident, short-term disability, critical illness, hospital indemnity, dental, vision, long-term care and disability and term and whole life insurance products in the United States. It sells its products through sales associates, brokers, independent corporate agencies, individual agencies and affiliated corporate agencies.

The company is also a Dividend Aristocrat and has raised its dividend every year for the past 25 years.

The current dividend yield is 2.23%. The BofA Securities target price Aflac stock is $86, which compares with a $76.00 consensus target and Thursday’s closing share price of $76.44.

Goldman Sachs

This industry leader is a premier stock in the sector for those looking to add financials at a very reasonable price, and it trades at a reasonable 13.7 price-to-earnings. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, and top investment banking and capital markets expertise, and it continues to be a dominant force around the world in the world of finance.
Its Investment Banking segment provides financial advisory services. These include strategic advisory assignments related to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs. The segment offers middle-market lending, relationship lending and acquisition financing, as well as transaction banking services.
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This segment also offers underwriting services, such as equity underwriting for common and preferred stock and convertible and exchangeable securities. And it offers debt underwriting for various types of debt instruments, including investment-grade and high-yield debt, bank and bridge loans and emerging- and growth-market debt.

The Global Markets segment is involved in client execution activities for cash and derivative instruments, credit products, mortgages, currencies, commodities, and equities, as well as provision of equity intermediation and equity financing services. It also offers clearing, settlement and custody services.

Goldman Sachs stock comes with a 3.59% dividend. The $388 BofA Securities target price is higher than the consensus target of $382.18. The stock closed on Thursday at $310.50.

Home Depot

With the potential for a 2024 recession, and skyrocketing interest rates and home prices, people will likely stay put, and this is one of the top retailers to own now. Home Depot Inc. (NYSE: HD), a home improvement retailer, sells various building materials, home improvement products, lawn and garden products and décor products, as well as facilities maintenance, repair and operations products.

The company also offers installation services for flooring, water heaters, baths, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows. In addition, it provides tool and equipment rental services. The company primarily serves homeowners. But it also serves professional renovators/remodelers, general contractors, maintenance professionals, property managers, building service contractors and specialty tradesmen, such as electricians, plumbers and painters.

Besides via Home Depot stores, the company also sells its products online. Its sites include Blinds.com, for custom window coverings, and The Company Store, for textiles and décor products.

Shareholders receive a 2.86% dividend. BofA Securities has set its target price at $363, while Home Depot stock has a consensus target of $344.52. Thursday’s close was at $291.70.

Nucor

While by far the cheapest from a price-to-earnings standpoint at 7.2, this also may be the best contrarian idea from the Value 10 list. Nucor Corp. (NYSE: NUE) engages in the manufacture and sale of steel and steel products.
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The company’s Steel Mills segment produces:

• Hot-rolled, cold-rolled and galvanized sheet steel products
• Plate steel products
• Wide-flange beams, beam blanks and H-piling and sheet piling products
• Bar steel products, such as blooms, billets, concrete reinforcing and merchant bars and engineered special bar quality products.

The company also engages in the steel trading and rebar distribution businesses. This segment sells its products to steel service centers, fabricators and manufacturers in the United States, Canada and Mexico.

Its Steel Products segment offers the following:

• Hollow structural section steel tubing products
• Electrical conduits
• Steel racking
• Steel joists and joist girders
• Steel decks
• Fabricated concrete reinforcing steel products
• Cold finished steel products
• Steel fasteners
• Metal building systems
• Insulated metal panels
• Steel grating and expanded metal products
• Wire and wire mesh products, primarily for use in nonresidential construction applications

This segment also engages in the piling distribution business.

The Raw Materials segment produces direct reduced iron (DRI); brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI. It supplies ferro-alloys and processes ferrous and nonferrous scrap metal. This segment sells its ferrous scrap to electric arc furnace steel mills and foundries for manufacturing process, as well as nonferrous scrap metal to aluminum can producers, secondary aluminum smelters, steel mills and other processors, and consumers of various nonferrous metals.

Investors receive a 1.31% dividend. BofA Securities has a price target of $185, and the consensus target is $160.50. Nucor stock closed at $156.43 on Thursday.

United Rentals

In a slowing economy, rental companies always tend to outperform, and at a cheap 13.5 PE, this is an outstanding idea now. United Rentals Inc. (NYSE: URI) operates as an equipment rental company though the following two segments.
The General Rentals segment rents the following:

• General construction and industrial equipment, including backhoes, skid-steer loaders, forklifts, earthmoving equipment and material handling equipment
• Aerial work platforms, such as boom and scissor lifts
• General tools and light equipment, comprising pressure washers, water pumps and power tools

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It rents to construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities.

The Specialty segment rents:

• Specialty construction products, including trench safety equipment (trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work)
• Power and heating, ventilating and air conditioning equipment (portable diesel generators, electrical distribution equipment, and temperature control equipment)
• Fluid solutions equipment for fluid containment, transfer and treatment
• Mobile storage equipment and modular office space

This segment serves construction companies involved in infrastructure projects, as well as municipalities and industrial companies. It also sells:

• Aerial lifts, reach forklifts, telehandlers, compressors and generators
• Construction consumables, tools, small equipment and safety supplies
• Parts for equipment its customers own.

It also provides repair and maintenance services. The company operates a network of 1,521 rental locations in North America, Europe, Australia and elsewhere.

United Rental stock investors receive a 1.39% dividend. The BofA Securities price target is $530. The consensus target is just $471.75, and Thursday’s close was at $420.93.

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These five outstanding value stocks should continue to do well as the strong rotation to value, cyclical and financial stocks continues for the rest of 2023 and into next year. All are offering solid entry points and could hold their ground much better than high PE growth stocks should we hit a turbulent stretch in the quarter.

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