5 Stocks To Buy From Value Investing Quadrant - Jan 2026

Value Investing Quadrant Update – January 2026

Key Concepts: Value Investing, Risk/Reward Quadrant, Free Cash Flow Yield, P/E Ratio, Break-Even Oil Price, Dividend Yield, Cyclical Stocks, Margin Analysis, Capital Expenditure (Capex), Market Capitalization.

I. Introduction & Quadrant Overview

The presentation focuses on a value investing quadrant used to categorize stocks based on risk and reward. The X-axis represents reward (low to high), while the Y-axis represents risk (low to high). The goal is to identify stocks with low risk and high reward potential, and conversely, to sell stocks with high risk and low reward. The update reviews the current status of stocks within this quadrant as of January 2026, considering recent market changes. The template used is based on an assessment from December 6th, 2025. Detailed deep dives for each stock discussed are available via links in the video description.

II. Individual Stock Analyses

A. Ferf (Formerly High Growth, Now Challenged)

• Situation: Ferf’s stock has significantly declined due to changing growth rates, a CEO transition (with the previous CEO receiving substantial compensation), and three consecutive negative quarters.
• Financials: Despite recent performance, the company still generates substantial cash flow – approximately 2.88 billion year-to-date, projected to reach 4 billion for Q3. This translates to a free cash flow yield exceeding 10-12% based on a market capitalization of 36 billion.
• Valuation: Currently trading at a P/E ratio of 8, considered exceptionally low in the current market.
• Outlook: Analysts project a return to growth in 2027. The key factor is the next earnings report. If the new CEO stabilizes the company, the stock could potentially reach 100, offering a likely return of 10-12% with moderate recession risk.

B. Oil Stocks – Var Energy & Petrobras

• Var Energy: Highlighted for its 15% dividend yield, primarily for educational purposes. Break-even price is around $30/barrel.
• Petrobras (High Risk, High Potential): The stock price exhibits volatility. The company’s break-even price is $60/barrel, meaning it’s currently unprofitable. However, profitability surges significantly when oil prices rise.
• Investment & Cash Flow: Petrobras continues to invest heavily in production, despite current losses. Over the next five years, it plans to allocate $50 billion (a $10 billion annual return) based on current market capitalization of $74 billion.
• Oil Price Sensitivity: A lower oil price environment reduces the dividend yield to around 7%. Increasing production in an oversupplied market puts downward pressure on prices.
• Assumptions & Risks: Initial capital markets assumptions were optimistic, but current reality is lower. Significant debt exists, partially transferred to leases. Break-even for new projects is around $25/barrel, potentially leading to long-term oil prices around $50.
• Scenario Analysis: If oil reaches $60, Petrobras could face financial difficulties. Var Energy, with a $35 break-even, could cut dividends to survive. If oil reaches $100, Petrobras’ profits and stock price would increase substantially. Petrobras offers higher volatility – potentially reaching $40 with $100 oil.

C. US Play – Occidental Petroleum (Buffett Owned)

• Initial Analysis: When Warren Buffett initially invested at $75 oil, Occidental generated $5 billion in free cash flow on a $50 billion market cap (10% yield).
• Current Situation: Oil prices are now around $60, reducing free cash flow to $1 billion.
• Sensitivity: A $1 change in oil price impacts free cash flow by $265 million.
• Outlook: Requires oil at $70 to perform well. New wells have break-even points of $70-95. Buffett’s long-term perspective and Berkshire Hathaway’s backing are positive factors, but the stock is considered riskier with a lower potential reward. An 8% return is anticipated.

D. Greggs (UK Retailer)

• Recent Performance: Stock initially rose, then dipped after a trading update. Sales are up 7% year-over-year.
• Financials: Like-for-like sales are growing at 2.4-4%. City AM reports mitigating cost inflation. P/E ratio is 10, with a 4.25% dividend.
• Outlook: A 10% return is possible, especially in UK pounds, with potential for takeovers.

E. Flower Foods & Nomad Foods

• Flower Foods: No new updates. A 9% dividend yield remains attractive from a value perspective.
• Nomad Foods: Q3 results were slightly lower than expected, but dividends and buybacks continue. A 7-8% return is anticipated.

F. CH (Formerly Cranswick)

• Recent Performance: Jumped 10% recently. A deeper analysis is planned after yearly earnings. Potential for a 50% stock price increase if the food cycle reverts and farmers reinvest.

G. HPQ (Hewlett-Packard)

• Changing Dynamics: The stock is becoming cheaper, despite Buffett’s initial investment and subsequent sale. The dividend yield has increased from 4.19% to 5.67%, with a P/E ratio of 8.
• Margin Analysis: Gross margins are improving, but net margins are at historical lows.
• Analyst Downgrades: Goldman Sachs downgraded the stock due to higher memory costs driven by AI demand and weak PC demand.
• Outlook: The position has been adjusted to reflect increased risk and potential reward (10-11%). The stock is still considered undervalued, even with stagnant growth.

H. Pabry Funds & Dow Chemical/LeondellBasell

• Pabry Funds: Monitoring positions for value opportunities.
• Dow Chemical/LeondellBasell: Still down, awaiting a cyclical recovery. A potential spin-off of Bas’ agricultural sector may already be priced in. Significant overcapacity exists in the industry.

I. Amazon

• Valuation: Market capitalization of $2.66 trillion, P/E ratio of 44.
• Growth: Expected to continue growing at 10%, justifying the P/E ratio.
• Outlook: A 7% return is anticipated, with moderate risk related to valuation and potential recessions.

III. Conclusion & General Risks

The portfolio includes a diverse range of businesses with low valuations and potential for dividend income and volatility gains. Key opportunities include a potential 15% dividend yield from Var Energy, a 10% return from Greggs, and the potential for significant gains from cyclical stocks like CH. HPQ presents an interesting situation with a low P/E ratio and increasing dividend yield, but faces headwinds from memory costs.

General risks include:

• Oil Price Volatility: A major factor impacting Petrobras and Occidental.
• Economic Slowdown: Could affect consumer spending and corporate earnings.
• Inflation: Pressuring margins and impacting consumer behavior.
• Geopolitical Risks: Potential disruptions to supply chains and energy markets.

The presenter encourages viewers to explore the linked resources for more detailed analysis and offers a research platform with a money-back guarantee for further context.