Even though the stock market has been very strong—the S&P 500 is up 35% in the last year—there are still quality stocks that are trading at attractive prices.
Alphabet (GOOGL), ExlService Holdings (EXLS), and WR Berkley (WRB) are all attractive choices for the buy-and-hold investor. Cory Mitchell, an analyst with Trading.biz, explains why and provides the following statistics.
Alphabet Inc. (GOOGL)
The parent company of Google has been a long-term excellent performer, and the following metrics indicate this could continue for years to come.
- “A” financial health rating from Morningstar
- 21.5% yearly average earnings per share (EPS) growth over the last five years (9.2% yearly median growth for S&P 500)
- 19.3% forecasted yearly EPS over the next five years (9.3% median growth expected yearly for S&P 500 stocks)
- 17.4% annualized stock return over the last decade (12.9% for S&P 500)
- Price/Earnings (P/E) of 25.7 and Forward P/E of 19
The S&P 500 index is trading at a P/E multiple of 28.36. GOOGL is trading at a lower valuation and offers higher expected growth. This means it could continue to outperform the S&P 500 in years to come.
ExlService Holdings, Inc. (EXLS)
EXLS is another company that offers strong growth at an attractive valuation. Strong long-term growth (earnings) is correlated with strong stock performance.
- “A” financial health rating from Morningstar
- 27.7% yearly average EPS growth over the last five years
- 14.7% forecasted yearly EPS growth over the next five years
- 18.2% annualized stock return over the last decade
- Price/Earnings (P/E) of 28.7 and Forward P/E of 17.1
EXLS has a current P/E near the S&P 500 average, yet offers higher growth potential and thus could continue outperforming the S&P 500 into the future.
W.R. Berkley Corporation (WRB)
WRB is an insurance company. Its stock has performed better than both EXLS and GOOGL over the last decade.
- “B” financial health rating from Morningstar
- 17.8% yearly average EPS growth over the last five years
- 9% forecasted yearly EPS growth over the next five years
- 19.4% annualized stock return over the last decade
- Price/Earnings (P/E) of 17.1 and Forward P/E of 13.2
WRB is trading at a relatively low P/E compared to the S&P 500 and the other stocks mentioned, although that is not uncommon for insurance companies. The company has shown it can grow steadily and has forward-looking growth prospects similar to the S&P 500 average. It’s been a great long-term performer and is still worth considering.
Having an exit plan
These stocks currently have attractive metrics, but that may not always be the case.
Buy-and-hold stocks are held for as long as the company maintains metrics similar to, or above, what it is producing now. These stocks have been performing well for the long term, and may continue to perform well for many years to come. Or the metrics discussed may begin to decline. That could indicate it is time to exit.
Have an exit plan for investments, and always consider personal risk tolerance before investing in case the stock prices don’t rise over the long term as expected.
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