Mid cap Property & Casualty Insurance operator Hastings Group has come up on our value screens.
Stacks of academic research covering different time frames and regions of the world all come to the same conclusion: over time and on average, cheap stocks outperform expensive stocks.
But cheap shares are often cheap for a reason. They can look unappetising. And, while the evidence shows that maintaining a value strategy through boom and bust will be rewarded, sticking with it is actually extraordinarily hard. Yet the evidence is so compelling that value is one of Stockopedia's three main factors in investment returns.
One of the masters of value (and factor) investing is Jim O'Shaughnessy, the founder of O’Shaughnessy Asset Management (OSAM). In the 4th edition of his groundbreaking investment research tome What Works on Wall St, O’Shaughnessy showed that composite value factors based on a mix of metrics dramatically beat the market over a multi-decade period.
It was from this robust insight that Stockopedia’s Value Rank was born, its synergy coming from the following simple valuation ratios:
- Price to Book Value
- Price to Earnings
- Price to Free Cash Flow
- Dividend Yield %
- Price to Sales
- Earnings Yield %
How does Hastings Group stack up?
The Value Rank: how does Hastings Group stack up?
We can see by using Hastings Group’s StockReport that the group has a:
- Rolling price to book value of 1.93,
- Rolling price to earnings ratio of 9.63
- Trailing twelve-month price to free cash flow of 9.60
- Rolling dividend yield of 7.18%
- Trailing twelve-month price to sales ratio of 1.66
When we add all of these together, we find that Hastings Group (LON:HSTG) has a Value Rank of 79. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.
Hastings Group’s Value Rank of 79 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.