We’ve dug beneath the surface of Citywire’s recently launched Global Elite Companies index, which tracks the very best ideas of the world’s best portfolio managers, to find constituents trading on bargain-basement ratings.
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Our hunt for deep-value stocks ranks all 78 constituents of the Global Elite Companies index on eight valuation metrics to find the 20 cheapest shares. It must be possible to rank each stock on at least five of our chosen criteria.
The valuation measures used are:
- Forecast price-earnings (PE) ratio.
- Forecast dividend yield.
- Historic shareholder yield – a yield based on dividend per share plus net buybacks per share.
- Enterprise value (EV)-to-forecast sales.
- EV-to-forecast earnings before interest and tax (Ebit).
- Forecast free cashflow yield.
- Forecast price-to-book value (P/BV).
- Forecast price-to-earnings-growth (PEG) ratio.
Forecasts based on next 12 months consensus estimates.
The 20 cheapest stocks from the index can be found in the table at the end of this article.
Many of the stocks come from the energy and banking sectors, which are mainstays for many value investors. However, there are also companies from several other industries. We’ve taken a closer look at one of these below, which despite experiencing persistent upgrades to forecast earnings over the last year and buying back large amounts of its own shares, is valued at just 4.2 times earnings.
Also, read our recent coverage on some of the other deep-value index stocks:
General Motors
21 Elite backers
When a company is throwing off cash and has limited investment opportunities and very cheap shares, the textbook way for management to boost shareholder value is with buybacks. This is exactly what car maker General Motors (US:GM) is doing.
‘If the company is correct in the sustainability of its cash flow, its multi-year decision to focus extensively on share repurchases rather than dividends will reward shareholders greatly,’ said Elite Investors Jon Bosse and Jujhar Sohi in their year-end letter to investors in their Nuveen Multi Cap Value fund.
Since the start of 2022, repurchases have reduced GM’s share count by more than one-third. And last month the company announced a new $6bn buyback facility, equivalent to 12.5% of its current $48bn market value.
For the 21 Elite Investors backing GM, the shares’ rock-bottom valuation means a lot of value could be created by returning cash this way.
Illustrating what a good return GM could make from investing in its own stock, the shares boast a 24% forecast free cashflow yield and an earnings yield in the same ballpark based on a forecast price-to-earnings ratio of just 4.2.
Brokers actually expect cashflows and earnings not just to be sustained but to grow over the coming years. The consensus forecast is for annualised earnings per share growth of 7% over the next two years. And momentum in the business is good, with forecasts consistently nudged higher during the last 12 months in response to strong sales, particularly of trucks and SUVs.
‘GM has managed inventories exceptionally well and its core highly profitable truck segment continues to drive profits and free cash flow,’ said Bosse and Sohi.
Forecasts have also benefited from GM’s decision to pull out of its robotaxi joint venture, Cruise, following years of losses. This should save about $500m a year and provide more firepower for buybacks. Work to restructure the group’s struggling Chinese operations should also help.
However, the uncertainties that explain why GM judges it wiser to return cash rather than invest in the business also explain why the shares look so cheap.
The perennial problem that faces the car industry is overcapacity, which means companies like GM struggle to make enough profit to justify their investments.
The Trump administration could make life harder.
A big worry rocking the US market over the last month is the possibility that the recent barrage of policy announcements could push the US into recession. That would be painful for the economically sensitive car industry.
Meanwhile, the prospect of 25% tariffs on Mexico and Canada threatens havoc for GM’s cross-border supply chain. It has plants in both countries and more than one-fifth of the vehicles it sells in the US arrive from Mexico. That said, GM’s management has been insistent about the company’s resilience.
GM’s electric vehicle business, meanwhile, has been improving its financial performance but faces the prospect of a withdrawal of consumer subsidies by the Trump administration. While this is a source of uncertainty, Bosse and Sohi reckon it should prove a positive for the company.
It is clear from GM’s valuation that the market is pessimistic about prospects. However, many of the world’s best portfolio managers are betting risks are already more than priced in. If they are right, GM’s big buybacks should create significant value.
| Key facts: General Motors Company | |||
|---|---|---|---|
| Market capitalisation | $48.1bn | Price | $48.34 |
| Net debt | $101bn | Net debt/Ebitda | 4.1x |
| 52-week high/low | $61.24 / $38.96 | Return on capital employed | 6.6% |
| F’cst price to earnings | 4.2 | F’cst dividend yield | 1.0% |
| F’cst EPS growth | 7.0% | 12-mth share price | 22.8% |
Source: FactSet, as of 17 March 2025. EPS = earnings per share. Ebitda = earnings before interest, tax, depreciation and amortisation. Forecasts based on next 12 months.
20 cheapest index plays
The table is ordered from the cheapest company based on combined valuation ranking.
Source: FactSet, as of 17 March 2025. Forecasts based on next 12 months.
