September and October have historically been considered two of the worst months for the market, and this year has been no different. Investors are dealing with an assortment of concerns ranging from the debt crisis to supply chain issues. In times of volatility, one strategy I like to employ is investing in “cash cow” stocks. These companies continuously produce steady cash flow.

It is named cash cows due to the similarity of cows producing milk regularly. Companies that produce steady cash flow are more equipped to navigate rocky markets or economic conditions than companies with low cash flow. This is because they have excess money to use as they see fit. A great place to find cash cow stocks is to look at the A-rated Pacer U.S. Cash Cows 100 ETF (COWZ).

The ETF screens the Russell 1000 for the top 100 companies based on free cash flow yield. Plus, since the beginning of September, the ETF has outperformed the S&P 500. So I imported the ETF's holdings into a screen to find the stocks with a Buy rating or higher in our POWR Ratings system. Some of the top stocks included LKQ Corporation (LKQ), Boyd Gaming Corporation (BYD), and United States Steel Corporation (X), which is why I am highlighting them below.

LKQ Corporation (LKQ)

LKQ is a leading global distributor of non-OEM automotive parts. Initially formed in 1998 as a consolidator of auto salvage operations in the United States, it has since greatly expanded its scope to include distributing new mechanical and collision parts, specialty auto equipment, and remanufactured and recycled parts in both Europe and North America.

The company has benefited through strategic buyouts. For instance, the acquisition of Elite Electronics buyout is helping to drive sales and profit for the company. In the first quarter of this year, LKQ acquired Nebraska-based automotive mobile diagnostic services business Greenlight. This is expected to be integrated into its Elitek brand by the end of the year.

In addition, LKQ sees a recovery in demand in its North American and European segments and strength in its Specialty segment. This trend is likely to continue due to robust demand for recreational vehicles and RV parts. Based on this trend, management has upgraded its 2021 outlook. The firm has also initiated a series of cost-cutting initiatives such as closing underperforming locations, consolidating delivery routes, and reducing headcount.

This has helped shore up its margins. Gross margin has also benefited favorable metals pricing. LKQ has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has a Quality Grade of B due to a solid balance sheet. The firm has $329 million in cash as of the most recent quarter, plus a free cash flow yield of 8.2%.

LKQ also has a Growth Grade of B as earnings per share are up 58.4% over the past year. Plus, analysts expect earnings to rise 44.3% this year. We also provide Value, Momentum, Stability, and Sentiment grades for LKQ, which you can find here.

LKQ is ranked #3 in the B-rated Auto Parts industry. For more top stocks in this highly rated industry, click here.

Click here to check out our Automotive Industry Report for 2021

Boyd Gaming Corporation (BYD) 

BYD is a multi-jurisdictional gaming company. The company operates wholly-owned gaming entertainment properties, including casino space, slot machines, table games, and hotel rooms in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. The company generates most of its revenue from its gaming operations.

The company has been expanding its portfolio by strengthening its current operations and growing through capital investment as it depends on acquisitions to expand its brand presence. The firm has also been making progress with its expansion in Northern California. It is currently working on Wilton Rancheria resorts. The property is expected to open by the second half of 2022.

In addition, management has been expanding its online betting offerings due to the legalization of sports gambling. In 2018, the company partnered with MGM Resorts (MGM) to offer online and mobile gaming platforms such as sports betting, casino gaming, and poker in areas with physical casino resorts and online licenses.

In the fourth quarter of last year, BYD rolled out a cashless digital wallet called BoydPay in Indiana and Ohio. Management expects to go live in 21 properties by the end of this year, subject to regulatory approvals. The goal is to integrate the offering into its online products. BYD has an overall grade of A and a Strong Buy rating in our POWR Ratings system.

The company has a Quality Grade of A due to a rock-solid balance sheet. At the end of the most recent quarter, BYD had $335 million in cash compared with only $39 million in short-term debt. Plus, it has a free cash flow yield of 8.6%. BYD also has a Growth Grade of A as analysts forecast earnings to surge 3,153.30 for the year. For the rest of BYD's grades (Value, Momentum, Stability, and Sentiment), click here.

BYD is ranked #1 in the Entertainment – Casinos/Gambling industry. For more top-ranked stocks in this industry, click here.  

Note that BYD is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

United States Steel Corporation (X)

X operates primarily in the United States but also has steelmaking capacity in Slovakia. The company's operating segments include Flat-Rolled, USSE, and Tubular, with most revenue coming from the Flat-Rolled segment. The segment includes X's integrated steel plants and equity business entities in North America involved in producing slabs, strip mill plates, sheets, and tin mill products.

The company has been implementing an asset revitalization plan in its Flat-Rolled division. This is expected to improve its profitability and competitiveness. The firm has also undertaken cost-cutting initiatives such as the realignment of its operating footprint. The X is also expected to benefit from its acquisition of the remaining equity in Big River steel.

This investment should bolster the company's position in high-margin steel-end markets such as automotive, energy, and infrastructure and help expand margins this year. X has also benefited from a recovery in U.S. steel prices. This has been driven due to rising demand in the automotive and construction industries, supply shortages, and high raw material costs.

These higher prices should help drive its margins. X has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as sales are expected to rise 101.7% for the year, while earnings are forecasted to soar 386.7%. X also has a Value Grade of B, which makes sense with a trailing P/E of 6.20 and a forward P/E of 4.56.

The company has a high cash level of $1.3 billion, which is up substantially from last quarter's balance of $753 million. X's free cash flow yield is also very high at 19.1%. To gain access to all of X's grades, including Momentum, Stability, Sentiment, and Quality, click here.

X is ranked #26 in the A-rated Steel industry. For more top stocks in this top industry, click here.

Discover Today’s Best Value Stocks

This article was written by David Cohne, Chief Value Strategist for StockNews.com.  David has helped investors find the most profitable stocks for over 20 years.

If you would like to see more of his best value stock ideas, then click the link below.

See David Cohne's Favorite Value Stocks

LKQ shares were unchanged in after-hours trading Monday. Year-to-date, LKQ has gained 44.75%, versus a 15.77% rise in the benchmark S&P 500 index during the same period.

David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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