When investment giants like Warren Buffett spot the rare opportunity to buy a value stock, they more than often pass on the chance. Because they manage such large amounts of capital, investing less than a few billion in companies isn’t big enough to bring them returns.

Because of this, these behemoths overlook plenty of worthy stocks. The retail investor has an advantage in stocks like Best Buy Co. NYSE: BBY, Crocs Inc. NASDAQ: CROX, and even Mueller Industries Inc. NYSE: MLI. These companies share some of the characteristics these value investors look for. Still, they are all under the $20 billion capitalization yardstick.

Each of these stocks has the sort of profitability around them that would otherwise earn them a place in Berkshire Hathaway Inc. NYSE: BRK.A. However, due to their size, they are companies that the significant funds would need to pass on. Some people on Wall Street don’t have that problem, particularly analysts.

Mueller Industries: Steel Profiting

The Federal Reserve (the Fed) is looking to cut interest rates this year. However, the magnitude and timing of these cuts is still uncertain. Investors can follow the FedWatch tool at the CME Group Inc. NASDAQ: CME, where traders have priced in these cuts as soon as May or June 2024.

Analysts at The Goldman Sachs Group Inc. NYSE: GS think that the U.S. manufacturing sector could see a breakout his year. Of course, that belief – laid out in their 2024 macro outlook report -is backed by the same potential for interest rate cuts to boost economic activity.

Regarding the ISM manufacturing PMI, the primary metals and fabricated metals industry saw their first expansion reading in February after contracting for two previous months. Goldman is right so far in this manufacturing expansion, but why Mueller?

The stock’s return on invested capital (ROIC) is something that Buffett stocks all have. Over the past five years, Mueller’s financials show an average ROIC rate of over 22%. This compares to another one of Buffett’s holdings, Visa Inc. NYSE: V, which also has an average ROIC of 23% over the past five years.

While the stock’s $6 billion market capitalization makes it hard for Buffett to buy, other institutions like PNC Financial Services Group Inc. NYSE: PNC and the Vanguard Group purchased the stock in the past quarter.

Crocs Is Still in Fashion

Gross margins can tell investors much about a business, such as Crocs’ 55% and above gross margins in its financials. When a company can achieve this high rate of profitability, it typically means the underlying product or service has pricing power attached to it.

Crocs has always had good brand penetration, which may be the source of these high gross margins and pricing power. More than that, the company generates an average ROIC of 20% when financials are looked at over the past five years.

Despite trading at 95% of its 52-week high price, Crocs is still trading at a 74% discount to the footwear industry. Investors can follow this discount in the stock’s 11x P/E valuation versus the industry’s average 43x valuation multiple.

Best Buy Alive and Kicking

Analysts at J.P. Morgan Chase & Co. NYSE: JPM think that Best Buy stock could go a share, as they assigned an ‘overweight’ rating in March 2024; their current valuations say the stock could rally by as much as 22% from today’s prices.

Some investors argue Best Buy has no added value compared to Amazon.com Inc. NASDAQ: AMZN. While Best Buy does not have Amazon’s intensive network and size, it does have niche expertise in consumer electronics.

Management’s efficiency in turning the ship around, in plans such as store redesign for distribution hubs, inventory management, and optimization in their mergers and acquisitions (M&A) departments, can be measured in ROIC. Over the past five years, Best Buy’s financials show an average ROIC of 17%, above Amazon’s 5% average.

A 22% gross margin suggests that Best Buy’s business model is still alive today, and trading at shows how investors are comfortable filling the name with momentum.

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