4 large-caps led by women

Female CEOs have a history of strong returns and skilled management, and they're at the helm of these undervalued companies

Vikram Barhat 11 March, 2020 | 2:20AM
Facebook Twitter LinkedIn

Women walking on sand into distance

This article is part of our Women in Investing special report.

Few would argue against the fact that gender stereotypes exist in all walks of life. However, stereotypical assumptions about women are particularly exaggerated when it comes to the world of business and finance, including investing. The negative perception persists despite various research findings clearly showing women are as skilled as men, if not more when it comes to the stock market game. Studies also show that women consistently earn higher returns than men.

The same goes for the women heading up S&P 500 companies. Female CEOs make up only 5% of CEOs in the S&P 500, even though history shows they’ve been able to generate greater returns for investors than male peers, according to an S&P Global Market Intelligence study.

Thankfully, regardless of the sector and size, some of the biggest companies boast highly skilled and impactful women in leadership roles. The following large-cap names are helmed by women who most likely fought great odds to rise to the top in industries and management teams heavily dominated by men. That stocks of these companies are currently trading at a sizeable discount to their fair value places the proverbial cherry on top.

 

Synchrony Financial  
Ticker: SYF
Current yield: 2.90%
Forward P/E:   7.41
Price:  US $28.87
Fair value:  US $40
Value:  28% Discount
Moat:  None
Moat trend:  Negative
Star rating:  ****
Data as of Mar 3, 2020  

The largest provider of private-label credit cards in the U.S., Synchrony Financial (SYF) offers a variety of credit products through three sales platforms: retail card (private-label credit cards), payment solutions (consumer financing for major purchases), and CareCredit (financing for elective healthcare procedures). Synchrony’s partnerships include such retail heavyweights as Amazon, Sam’s Club, Gap, and J.C. Penney.

The consumer financial services company, formerly GE Capital’s retail finance business, is headed by CEO Margaret Keane, who was ranked number 3 on the list of the Most Powerful Women in Finance for 2019.

The company provides the store-branded credit cards of many of the country's largest retailers and profits from these long-term mutually beneficial relationships.

While it recently lost partnership with Walmart, taking a significant blow, “the company will still be able to maintain returns in excess of its cost of capital while repurchasing large quantities of its own shares,” says a Morningstar equity report. 

Synchrony has routinely generated returns on equity exceeding 15% and is forecast to “sustain returns on equity in the midteens while returning a substantial amount of cash to shareholders,” in the coming years, assures Morningstar equity analyst, Colin Plunkett, who puts the stock’s fair value at US$40, while pointing out “the average length of [its] relationships is still more than 18 years, suggesting to us that switching costs are still relevant despite Walmart’s exodus.”

 

Ventas Inc.  
Ticker: VTR
Current yield: 6.05%
Forward P/E:   36.36
Price:  US $52.15
Fair value:  US $64
Value:  18% Discount
Moat:  None
Moat trend:  Stable
Star rating:  ****
Data as of March 03, 2020  

A real estate investment trust, Ventas Inc (VTR) owns seniors housing communities, skilled nursing facilities and hospitals in the U.S. and Canada. The company’s diversified healthcare portfolio of over 1,100 in-place properties includes more than 40 properties in Canada and the U.K. as the company looks for additional investment opportunities in countries with mature healthcare systems. The firm also owns mortgages and other loans, which account for about 3% of net operating income (NOI).

Ventas CEO Debra Cafaro has been named one of Harvard Business Review’s Top 100 Best Performing CEOs in the World for six consecutive years, including 2019 where she was ranked number 29, her highest placement on the list.

Morningstar assigns Cafaro-led Ventas an Exemplary stewardship rating, stressing her team “has demonstrated great foresight in the industry and has made smart investment and capital allocation decisions that have benefited shareholders.”

The firm will be dominating senior housing, medical office, life science and hospital industries over the next decade, says Morningstar equity analyst, Kevin Brown, who pegs the stock’s fair value at US$64.

Not only does Ventas stand to disproportionately benefit from the Affordable Care Act, but also from baby boomer generation entering its senior years. “Ventas will benefit from these industry tailwinds due to its portfolio of high-quality assets connected to top operators,” says Brown, adding the ability to work with top partners is a sign of Ventas’ exemplary stewardship.

 

General Motors Co  
Ticker: GM
Current yield: 4.84%
Forward P/E:   5.18
Price:  US $30.52
Fair value:  US $48
Value:  36% Discount
Moat:  None 
Moat trend:  Negative
Star rating:  ****
Data as of Mar 03, 2020  

Automotive major General Motors (GM) designs, makes and sells cars, trucks and auto parts. The company has a 17% U.S. market share, where it now has four brands instead of eight. It also has a captive financial arm GM Financial.

When appointed as the CEO in 2013, Mary Barra became the first woman to head a major auto firm. Barra is widely credited with boosting company profits while operating in an industry that largely remains a boys’ club in the higher management ranks.

“GM makes products that consumers are willing to pay more for than in the past,” says a Morningstar equity report, adding that the automaker “no longer has to overproduce in an attempt to cover high labour costs and then dump cars into rental fleets.”

Since the company operates in a demand-pull model, it would do no worse than break even at the bottom of an economic cycle. Having a high degree of operating leverage, the report adds, would result in “higher profits despite lower U.S. share.”

The legacy automaker is embracing the burgeoning ride-sharing and ride-hailing industry. “Actions such as a US$500 million investment in Lyft, buying Cruise Automation, and unifying GM’s legacy car-sharing activities under the Maven brand, position GM well for this new era,” says Morningstar sector strategist, David Whiston, who appraises the stock to be worth US$48.

 

Anthem Inc  
Ticker: ANTM
Current yield: 1.40%
Forward P/E:   12.06
Price:  US $256.38
Fair value:  US $348
Value:  22% Discount
Moat:  Narrow
Moat trend:  Stable
Star rating:  ****
Data as of Mar 03, 2020  

One of the largest private health insurers in the U.S., Anthem (ANTM) provides medical benefits to roughly 40 million medical members. As the exclusive licensee of the Blue Cross Blue Shield (BCBS) brand in 14 states, the company enjoys a unique position as the largest single provider of Blue Cross Blue Shield branded coverage. BCBS is the most recognizable and trusted franchise in the U.S. health insurance industry.

President and CEO Gail Boudreaux ranked number 5 on the Fortune’s Most Powerful Women in Business list in 2019 and 2018, and number 11 on the Forbes 100 Most Powerful Women in 2019. Since assuming the CEO role in 2017, “Boudreaux has already made a significant impact on the firm's operating earnings growth trajectory,” says a Morningstar equity report.

The health insurer’s second position in the U.S. by medical membership is “particularly impressive given Anthem's limited geographic reach compared with [rival] UnitedHealth's national network,” notes Morningstar senior analyst, Julie Utterback.

With its substantial local and national market share, Anthem aims to deepen its influence on both the provider and client front. Moreover, with strategic initiatives like the launch of its IngenioRx pharmacy benefit management platform, “Anthem seeks to accelerate its growth in the long run,” says Utterback, who recently raised the stock’s fair value from US$306 to US$348, prompted by strong free cash generation.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Anthem Inc448.29 USD0.04Rating
General Motors Co56.24 USD-4.34Rating
Synchrony Financial45.64 USD-3.39Rating
Ventas Inc50.77 USD-2.94Rating

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

© Copyright 2022 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy