An Exciting New Feature for Value Authority Members

The dynamics of the stock market are always changing, and to remain successful investors, we also need to stay flexible and willing to jump on new opportunities. So, with this in mind, we’re adding a new feature to the Value Authority service today.

I’m very excited to introduce the Value Trader Portfolio.

The Value Trader Portfolio will consist of stocks that not only meet my typical value criteria (undervalued stocks with strong fundamentals—cash, earnings and valuation), but also have strong technical analysis underpinnings, or have a catalyst that will help produce a quick winning trade.

It’s important to note that I still like the traditional value methodology, and this new feature will not impact our current Buy List. However, certain market dynamics, including the popularity of indexing that gives a big advantage to mega-cap names and aggressive speculation in technology stocks despite the Federal Reserve’s tightening in recent years, has made us wait longer for many of our names to work well than I would ideally like.

Now, I still think that there are inherent risks in indexing, and the speculation in tech stocks will cool over time. But as long as these phenomena continue to dominate the markets, we should look to profit from them, too. So, I want to give you the option to secure quick wins in names that have the potential for strong near-term performance and quicker profits. Please note that we will not hesitate to sell these positions quicker if the trade is not working.

To give you a better idea of how this will work, let’s discuss our new Value Trader recommendation…

Our First Value Trader Recommendation

To build our Value Trader Portfolio, we will start with one stock and then add others over time. Our first recommendation is likely a familiar name: HP Inc. (HPQ). We have had success with the giant computer and printer manufacturer in the past, and I like how the trade is set up again.

From a technical perspective, the stock is very oversold, with a Relative Strength Index (RSI) of 24.58. Typically, any RSI reading below 30 is a signal that the stock may be due for a bounce. In addition, the stock has found a lot of support in recent years between $26 and $27. I look for this support to hold here, giving the shares limited downside.

Looking at the fundamentals, HPQ is down approximately 17% from its July high of $33.90, even though forward earnings estimates have not moved downward in a meaningful way since then. The company is expected to earn approximately $3.30 a share in the October 2023 fiscal year, down from the pandemic inflated $4.08 a share last year. However, the company has controlled its operating margins well, and free cash flow remains strong,

So, I think the company’s EPS guidance for the new fiscal year in November could be a catalyst for the stock. Current earnings estimates of $3.44 a share are realistic and could turn out to be conservative if the company steps up its share repurchase program. HPQ has retired nearly half of its shares in repurchases over the past six years.

HPQ may not have a lot of growth, but it remains a dominant player in the PC and Printing industry, and the company is not going away any time soon. At around 8X current EPS estimates, the stock is a compelling buy on both a technical and fundamental basis. HPQ is a buy under $28. My initial target is $31.