There are 1600 U.S. listed stocks in a bear market, out of a total of 3664 listed stocks…
That’s 44% of the publicly traded companies in the U.S.
Yet, there are many above-average quality stocks that are grossly undervalued while many are value traps with deteriorating fundamentals and poor growth expectations.
The stocks that follow are offering fast growth, high-yields, and exceptional returns in the next few years and will benefit from the rise in long-term interest rates as anticipated by most economists.
Unum Group (NYSE: UNM) is a provider of group and individual income protection insurance in the U.S. and U.K. It’s the largest domestic disability insurer where the majority of premiums are employer generated. Unum also offers a stable of other insurance products including, long-term health and life insurance.
Unum’s bear market at this time is a result of concerns over its legacy long-term care policies from years ago and the pandemic’s economic impact.
The long-term growth consensus is 9% CAGR, and its yield is 6.8%.
Lincoln National (NYSE: LNC) offers individual and group insurance, retirement, and investment products in the United States and the United Kingdom. It also owns and operates 15 radio stations.
Most insurance companies are experiencing modest to severe negative growth, yet LNC is anticipating strong growth in all its fundamentals, including growing dividends which reach back to 2009.
It is important to note that although this is a good long-term investment today, stronger than Unum, there is significant exposure to energy loans, and the stock has a history of volatility.
Lincoln National offers a 5% yield and a long-term growth consensus of 9.8% CAGR.
Bank of the Ozarks (NASDAQ: OZK) is a bank holding company that operates in the Southeastern U.S, Texas, New York, and California.
“The bank holding company also owns a number of finance subsidiary business trusts formed in connection with the issuance of debt and preferred securities. Bank of the Ozarks provides a wide range of retail and commercial banking services, but principally concentrates its activities in real estate loans, which account for the great majority of the bank’s loans and leases.” Morningstar
This ultra-conservative lender, along with its underwriter has only experienced 4 major loan losses in the past 17 years. And it’s well-capitalized sitting in the nation’s highest tier 1 ratio of America’s 100 largest banks.
The bank’s 13-year median return on equity sits at 15.4% compared to an industry average of 7.8 to 10%.
Ozark has struggled as of late due to hotel loans accounting for 40% of its commercial real estate portfolio. The average downpayment though, is 31%, in the event of default the bank will not absorb a total loss.
Ozark Bank has grown it’s dividends for 22 consecutive years and is one of the best capitalized and safest U.S. banks.
Its yield stands at 5.1% and its long-term growth consensus stands at 12% CAGR.
Bottom Line: Regardless of the growth expectations of these three stocks there are significant risks in this market right now. Each one of these stocks faces hurdles brought on by the pandemic. Your risk tolerance should be considered carefully when making any investment decisions. A well-balanced portfolio may have room for such investments, as a rule of thumb no more than 5% would be a prudent precedence to set.
The BLI Staff