9 Inexpensive Consumer Services Sector Stocks

As I stated in the introduction in Part 4 of this series, my primary objective is to provide the reader with a clear perspective of just how different individual stocks are and how different companies operating in different sectors are.  Consequently, I will be covering every sector that FactSet covers.  As this relates to the Consumer Services Sector, it is not a sector that I am especially enthused about. For example, one of my primary screening criteria was an S&P credit rating of BBB- or better. There were only 56 companies in this sector that met that quality threshold and only 9 of which that I considered fairly-valued and worthy of presenting.

To clarify further, there were only 5 restaurant subsector constituents, and none of them were attractively valued. However, 3 of those 5, Darden Restaurants Inc., McDonald’s Corp. and finally Starbucks Corp. are all excellent businesses. However, I do not consider any of them attractive enough to invest in currently.

Of the 9 companies that I am reviewing in this article, 8 of them pay dividends. However, Discovery Inc. may offer the highest annualized future total return potential even though it is the only one that does not pay a dividend. The opportunity here is available as a result of very low valuation and a very high expectation of growth for the fiscal year 2019. Consequently, it might be attractive to the aggressive investor seeking a high intermediate-term total rate of return. (Note: on January 30, 2019, eBay announced the initiation of their first dividend, however, it is not yet reflected on the FAST Graph even though its dividend yield is reported in the FAST FACTS).

A Sector By Sector Review

This is part 5 of a series where I have conducted a simple screening looking for value over the overall market based on industry classifications and subindustry classifications reported by FactSet Research Systems, Inc. In part 1 found here, I covered the consumer services sector. In part 2 found here, I covered the communication sector. In part 3 found here,  I covered the Consumer Durables sector and its many diverse subsectors. In part 4 found here,  I covered consumer nondurables. In part 5, I will be covering companies in the Consumer Services sector.

In each article in this series, I will be providing a listing of screened research candidates from each of the following industry sectors, the sector I’m covering in this article is marked in green:

(Click on image to enlarge)

A Simple Valuation and Quality Screening Process

With this series of articles, I will be presenting a screening of companies that have become attractively valued primarily as a result of the bearish market activities experienced in 2018 from each of the above sectors. I will be applying a rather simple valuation and quality-oriented screen across each of the sectors. First, I have screened for investment-grade S&P credit ratings of BBB- or above. Next, I have screened for low valuations based on P/E ratios between 2 and 17. Finally, I have screened for long-term debt to capital no greater than 70%.

By keeping my screen simple, and at the same time rather broad, I will be able to identify attractively valued research candidates that I might have overlooked through a more rigorous screening process. In other words, I’m looking for fresh ideas that I might have previously been overlooking. Furthermore, I want to be clear that I do not consider every candidate that I have discovered as suitable for every investor. However, I do consider them all to be attractively valued. Additionally, I also believe that every investor will be able to find companies to research that meet their own goals, objectives and risk tolerances as this series unfolds.

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Disclosure: No positions.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the ...

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