2 Stocks to buy right now: top value investor – CNBC

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It seems that volatility is here to stay.

The S&P 500 Index and Dow Jones Industrial Average have been seesawing between negative and positive levels for the entire year, with the Nasdaq slumping 5 percent since January.

Volatility and market swings can make even the most level-headed investors flee for safety. Yet turbulent market moves can also present buying opportunities for patient and focused investors, experts say. As the volatility continues, where should investors put their money to work? What factors should top their stock-evaluation list?

Top value investor Stephanie Link, a portfolio manager at TIAA Global Assetg Management, shared her 5 rules to invest by—as well as two stocks that fit the bill. TIAA has $861 billion in assets under management.

As a value investor, Link conducts research into a company’s fundamentals to determine its intrinsic value. She then compares her analysis with the asset’s market value to see if it’s overpriced or under-valued.

If the market is under-pricing a company it can present an attractive buying opportunity, since the potential upside is not yet reflected in the stock price.

Link has a formula when it comes to hunting for value. The five factors she focuses on are: 1) valuation relative to a company’s history and its peers; 2) a strong balance sheet; 3) free cash flow generation; 4) market leadership and management team; and 5) operating leverage.

Following these rules, Steph has two stocks she’s watching.

The California-based company is already up 6 percent year-to-date, and Link believes there’s further upside ahead.

“It’s an old-line tech company that’s transitioning to one of the fastest-growing areas in tech, which is the cloud,” she told CNBC. Oracle has already acquired two cloud companies this quarter—Opower Inc. and Textura—which Link believes will help its top and bottom-line growth.

She also believes it has a “very strong balance sheet,” and is cheap on a P/E basis relative to its peers.

Bank of America may be under pressure this year—it’s down 13 percent since January—but Link believes upcoming catalysts could reverse the stock’s downward trend.

First up are results from the company’s annual Comprehensive Capital Analysis and Review (CCAR) test, which will be published in June. Link noted that this could mean “they are going to get approval to buyback more stock or increase their dividend,” the results could lead to a positive upside.

Following Wednesday’s FOMC minutes, investors are pointing to the increased probability of a June rate hike. This, too, is potentially positive news for Bank of America since Link argues that “if the Fed does decide to tighten, [BofA] will be one of the biggest beneficiaries.”

Following her five investing criteria, Link also likes the North Carolina-based bank’s “strong management team” and “strong capital position.”

Constantly combing through a company’s financials means Link also knows the signs of a value trap. For her, the number one factor to consider is if a company’s earnings estimates are going down.

“A stock will look cheap, but in actuality those numbers that you are basing the evaluation off of aren’t right,” she told CNBC. Even if something looks cheap, Link believes you must be able to make the case that earnings are stabilizing.

Another thing to look out for is stocks under pressure. Recent sell-offs and double-digit drops may look attractive, but Link noted that “just because a stock price has fallen doesn’t mean it’s cheap.”

Stephanie Link owns Bank of America