Buy these 25 stocks that have the rare combo of highly reliable profits and cheap valuations, UBS says

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High-quality stocks and high-value stocks don't often go hand-in-hand.

After all, if a company falls into value-stock territory there's a good chance something has been going wrong and its quality has diminished. Value stocks are inherently stocks that investors have undervalued or dismissed as they search for higher-growth opportunities on the market. With growth stocks enjoying massive success over the past year and decade, value stocks have gone mostly overlooked. 

But that's not to say there's no value in value stocks. The recent sell-off among high-growth tech stocks has led investors to take a closer look at value stocks as they try to take advantage of the market's rotation. To aid investors in their search for value picks, a team of UBS equity strategists led by Stuart Kaiser has compiled a list of high-quality, high-value stocks that investors should consider. 

UBS' quantitative analysts define a high-value stock using two criteria: book value and the present value of expected future cash flows.

The firm's method of determining what constitutes a value stock, unlike traditional value metrics like P/E ratios, measures both a firm's assets and the earning power of those assets, thereby offering investors a fuller picture.    

Meanwhile, UBS defines a high-quality stock using a whopping 20 different factors encompassing "profitability, financial health, efficiency, management signalling and risk." High-quality companies outperform UBS' benchmark while maintaining low levels of volatility, and "tend to have growing earnings with low levels of dispersion in earnings outcomes." 

There isn't a lot of crossover on the Venn diagram of high-quality and high-value stocks: among the 1,000 companies on the Russell 1000, UBS has found only 25 that meet their criteria for both high quality and high value. 

As you can see below, these 25 companies land above the 75th percentile in both quality and value. UBS has also included each stock's 12-month momentum to give investors a sense of how each company has been performing.

Ticker: VZ

12-Month Momentum: 0.6%

Quality Score: 0.74

Quality Percentile: 77.3

Value Score: 1.65

Value Percentile: 85

Source: UBS 

Ticker: INTC

12-Month Momentum: -4.1%

Quality Score: 1.26

Quality Percentile: 94

Value Score: 1.71

Value Percentile: 86.7

Source: UBS

Ticker: AFL

12-Month Momentum: 44.3%

Quality Score: 0.80

Quality Percentile: 80.9

Value Score: 2.58

Value Percentile: 98.5

Source: UBS 

Ticker: BBY

12-Month Momentum: 51.5%

Quality Score: 1.07

Quality Percentile: 90.3

Value Score: 1.41

Value Percentile: 75.6

Source: UBS 

Ticker: KR

12-Month Momentum: 15.6%

Quality Score: 0.81

Quality Percentile: 81.3

Value Score: 1.79

Value Percentile: 88.9

Source: UBS

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