ZACKS·2025-05-13 15:40Market Overview - Wall Street experienced a strong rally, with the S&P 500 rising 3.3% to 5,844.19, the Nasdaq Composite climbing 4.4% to 18,708.34, and the Dow Jones Industrial Average gaining 2.8% to 42,410.10, driven by optimism over U.S.-China trade relations [1][2]. Trade Relations - A 90-day agreement between the U.S. and China to reduce tariffs has been established, with the U.S. lowering duties on Chinese imports from 145% to 30%, and China cutting retaliatory tariffs on American goods from 125% to 10, indicating a shift towards cooperation [1]. Value Investing Strategy - The current market conditions may present an opportunity to focus on value stocks, particularly those with strong fundamentals that have been undervalued due to external factors [2][4]. - The Price to Cash Flow (P/CF) ratio is highlighted as an effective metric for evaluating value stocks, with lower ratios indicating better financial health [3][6]. Valuation Metrics - Various valuation metrics are essential for assessing a company's financial position, with P/CF being a key indicator due to its reliability in reflecting a company's cash generation capabilities [5][7]. - Positive cash flow is crucial for a company's liquidity, enabling it to manage debt, reinvest, and return value to shareholders, while negative cash flow can hinder these capabilities [8]. Stock Selection Criteria - To identify true-value stocks, parameters such as P/CF, price-to-book ratio, price-to-earnings ratio, and price-to-sales ratio should be considered, along with a favorable Zacks Rank and Value Score [9][10][11][12][13]. - Specific stocks that meet these criteria include StoneCo Ltd. (STNE), Centene Corporation (CNC), CVS Health Corporation (CVS), and Pfizer Inc. (PFE), each with varying growth estimates and performance metrics [14][15][16].