HollyFrontier Corporation (HFC) has seen strong revenue growth over the past five and 10 years, with solid returns on equity, making it a value play in the small- and mid-cap sector, says Steve Lewis, Portfolio Manager at Verity Asset Management. “[HFC] trades at a very low price-to-earnings ratio when compared to other refiners and also to the industry at large,” he says.
Lewis says the small and mid-cap space offers several value investment options and depending on broad market performance it may yield positive returns on an absolute basis.
“We’re not doing any kind of market timing. However, when you look at the small/midcap value space, there are over 2,000 companies within our market capitalization range of between $300 million and $10 billion,” he said. “That’s a big universe to search within to find underpriced candidates for the portfolio.”
Lewis also likes Joy Global (JOY), a manufacturer and servicer of mining equipment. “That’s another strong area that we like for the portfolio, and the screening metrics are all looking good. Recently, the stock was actually down about 40% from its February 2012 high. We think that looks like a very attractive value right here,” Lewis said
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