Buying the Best Value Stocks in 2025

Market Overview - The stock market is preparing for its first decisive move in 2025, with major banks like JPMorgan and tech companies like Taiwan Semiconductor set to release earnings reports [1] - Strong earnings guidance from big tech and key sectors is crucial to avoid a market recalibration [1] - The bullish outlook for 2025 remains intact despite near-term uncertainties [1] Investment Strategy - Investors are advised not to chase expensive stocks early in 2025, as there are numerous value stocks with strong earnings potential [2] - A screening method is introduced to identify stocks with a combination of value and improving earnings outlooks [2][3] - The screen focuses on Zacks Rank 1 (Strong Buy) or 2 (Buy) stocks with P/E and P/S ratios below industry medians [4][5] - The screen also considers quarterly earnings growth rates above industry medians and uses a blend of upgrades and estimate revisions to select top stocks [9] Booz Allen Hamilton (BAH) Analysis - Booz Allen Hamilton's stock has surged 360% over the past decade, outperforming its sector (45%) and the S&P 500 (205%) [6] - The company's sales grew at a compound annual growth rate of 7.4% between FY20 and FY24, supported by multi-year government contracts [10] - BAH is projected to grow revenue by 13% in FY25 and 7% in FY26, with adjusted EPS expected to increase by 14% and 11%, respectively [14] - The stock trades at 19.9X forward 12-month earnings, near its 10-year median, and offers 17% value compared to its sector [15] Industry and Company Positioning - Booz Allen Hamilton operates in consulting, serving federal government clients in defense, national security, and critical infrastructure, as well as commercial clients in aerospace, health, energy, and financial services [13] - The company benefits from steady revenue streams due to the sensitive nature of its government contracts, which are often renewed [10] - Despite a recent 28% drop from its October highs, BAH's strong earnings outlook and support at 52-week lows make it a compelling buy-and-hold value stock [6][15]