Summary
- ConocoPhillips
COP
Market indexes rose on Tuesday as, along with a new batch of earnings and economic data, investors weighed tensions between the U.S. and China as House Speaker Nancy Pelosi begins a visit to Taiwan.
The S&P 500 Index inched up 0.3% after being down 1% earlier in the session, while the Nasdaq Composite gained 0.75%. In contrast, the Dow Jones Industrial Average slid 0.21%, or 67.59 points.
Overview of index performance year to date.
Due to these developments, investors may be interested in companies that qualify for Benjamin Graham’s Lost Formula screen, a Premium GuruFocus feature.
Prior to his death in 1976, the renowned investor and author of “Security Analysis” and “The Intelligent Investor” developed a refined formula that screened for companies with a price-earnings ratio of less than 10 and an equity-to-asset ratio of at least 0.5. The formula got its name from that fact that he was unable to publish it before his passing; therefore, it was lost from public knowledge for a time.
A backtest of the strategy from 1926 to 1976 showed it would have outperformed the Dow benchmark by approximately twice as much.
The screener found new companies that met the criteria as of Aug. 2 were ConocoPhillips (COP, Financial), Heartland Express Inc. (HTLD, Financial) and Archer Aviation Inc. (ACHR, Financial).
ConocoPhillips
ConocoPhillips (COP, Financial) has a $121.82 billion market cap; its shares were trading around $94.90 on Tuesday with a price-earnings ratio of 9.70, a price-book ratio of 2.48, a price-sales ratio of 2.32 and an equity-to-asset ratio of 0.53.
The Houston-based energy company explores for, produces, transports and markets crude oil, bitumen, natural gas, natural gas liquids and liquefied natural gas around the world.
The GF Value Line
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The GF Value Line suggests the stock is fairly valued currently.
The GF Score of 83 out of 100 implies good outperformance potential, driven by high points for profitability, growth and financial strength as well as middling grades for momentum and GF Value.
The GF Score indicates the company has good outperformance potential.
ConocoPhillips’ financial strength and profitability were both rated 7 out of 10 by GuruFocus. In addition to sufficient interest coverage, the Altman Z-Score of 3.72 indicates the company is in good standing. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s margins and returns on equity, assets and capital are outperforming versus competitors. ConocoPhillips also has a high Piotroski F-Score of 7 out of 9, indicating operations are healthy, and a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in ConocoPhillips, Dodge & Cox has the largest stake with 1.63% of its outstanding shares. Diamond Hill Capital (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and the Smead Value Fund (Trades, Portfolio) also have significant positions in the stock.
Heartland Express
Heartland Express (HTLD, Financial) has a market cap of $1.23 billion; its shares were trading around $15.55 on Tuesday with a price-earnings ratio of 8.87, a price-book ratio of 1.49, a price-sales ratio of 1.91 and an equity-to-asset ratio of 0.74.
The transportation company, which is headquartered in North Liberty, Iowa, provides truckload shipping services across the U.S. and Canada.
According to the GF Value Line, the stock appears to be modestly undervalued currently.
The GF Value Line suggests the stock is modestly undervalued.
The GF Score of 78 suggests the company is likely to have average performance going forward. It received high points for financial strength, GF Value and profitability, a middling rank for growth and a low grade for momentum.
The GF Score indicates the company is likely to have average performance.
GuruFocus rated Heartland’s financial strength 10 out of 10, driven by a comfortable level of interest coverage and a robust Altman Z-Score of 6.31. The ROIC also eclipses the WACC, so value creation is occurring.
The company’s profitability scored an 8 out of 10 rating on the back of operating margin expansion and returns that are outperforming over half its industry peers. Heartland also has a high Piotroski F-Score of 7. Despite recording a slowdown in revenue per share growth, it still has a one-star predictability rank.
With 0.67% of its outstanding shares, Hotchkis & Wiley is Heartland Express’ largest guru shareholder. Other gurus who own the stock include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Keeley-Teton Advisors, LLC (Trades, Portfolio), Chuck Royce (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Archer Aviation
Archer Aviation (ACHR, Financial) has a $1.01 billion market cap; its shares were trading around $4.22 on Tuesday with a price-book ratio of 1.49 and an equity-to-asset ratio of 0.90.
The San Jose, California-based company develops and builds electric vertical takeoff and landing aircraft, or eVT
VT
Since its public debut via special purpose acquisition company in September 2021, the stock has tumbled over 50%.
The price chart shows the stock has fallen significantly since its IPO.
Based on the low GF Score of 21, Archer appears to have poor future performance potential. However, since it is still a fledgling company, there is not enough data to form an accurate picture of its prospects.
The GF Score suggests the company has poor performance potential.
Archer Aviation’s financial strength was rated 7 out of 10 on the back of strong debt-related ratios. The Sloan ratio, however, is indicative of poor earnings quality.
The company’s profitability did not fare as well, scoring a 1 out of 10 rating due to negative margins and returns that are underperforming a majority of competitors.
Catherine Wood (Trades, Portfolio) is Archer Aviation’s largest guru shareholder with a 4.30% stake. Simons’ firm also holds the stock.
Disclosures
I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.
