WellPoint, Inc. (WLP), National-Oilwell Varco, Inc. (NOV), Genworth Financial Inc (GNW): Buy the Dips, the Rally Isn’t Over Yet

Page 1 of 2

It may seem absurd for me to make this prediction but I believe that despite current volatility, the market actually has further left to run.

There are currently many different analysts all stating why they believe the market is overvalued and due for a pullback, however, a quick evaluation of the market by one of the simplest methods around quickly shows that the market could actually be undervalued.

WellPoint, Inc. (NYSE:WLP)

According to data compiled by ValueWalk, the S&P 500 has traded at an average forward P/E of 15.10 for the last 27 years; currently, the index is trading at a forward P/E of 14.24, 6% below its 27-year average. Moreover, according to the same set of data, the index is trading 17% below its average price-to-book ratio average for the same 27 year period.

While the S&P 500 as a whole is undervalued, according to ValueWalk the majority of the index is being pushed higher by several overvalued sectors. In particular, the consumer discretionary sector is trading 10% above its 27-year average P/E ratio and 40% above its average P/B ratio. In fact, it would appear that the consumer discretionary sector is the most overvalued sector in the index, as the sector is also trading at a 27% premium to its price to operating cash flow ratio.

Alongside the consumer discretionary sector, the utilities sector is also overvalued compared to its 27-year average. On a forward P/E basis the sector is trading at a 19% premium to its historic average and a 6% premium to its historic P/B ratio.

But hang on, some sectors are still undervalued

Yes, even in this supposedly overbought and tired market, there are still some sectors that are undervalued relative to their historic averages. Surprisingly, one of the most undervalued sectors is the relatively defensive healthcare sector, which is trading at a 28% discount to its 27-year average price-to-operating-cash-flow figure, a 36% discount to its historic P/B ratio and an 8% discount to its historic forward (which sounds like it is a contradiction in terms) P/E ratio.

Aside from healthcare, the energy sector also appears undervalued and currently trades at a 16% discount to its historic P/B ratio, 12% discount to its historic price to free cash flow ratio and 17% discount to its 27-year average forward P/E ratio.

Unsurprisingly, the financial sector is still undervalued relative to its 27-year average P/B ratio and is currently trading at a 26% discount. However, the sector is trading at a 16% premium to its 27-year average forward P/E ratio.

All this is helpful, but are there any individual opportunities?

Using the above data to identify picks in this uncertain market has led me straight to healthcare plan provider¬†WellPoint, Inc. (NYSE:WLP). WellPoint, Inc. (NYSE:WLP) is currently trading at a P/E of 9.2 and a forward P/E of 9.45, both significantly below the healthcare sector average P/E of 30.5 and the company’s sub-sector, healthcare plans, which is trading at an average P/E of 13.8. The healthcare plan sub-sector trades at an average price to free cash flow ratio of 78.1; meanwhile WellPoint, Inc. (NYSE:WLP) has a P/FCF ratio of 15. Moreover, WellPoint, Inc. (NYSE:WLP) trades at a P/B ratio of around 1, 40% below the healthcare sector average of 1.8.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!