Value stocks

5 Value Stocks That Can Make You Richer in 2022

For over a decade, growth stocks have been the talk of Wall Street. Historically low lending rates have rolled out the red carpet for fast-moving businesses and allowed them to borrow more cheaply to hire, acquire and innovate.

But what you may not realize is that value stocks have actually outperformed growth stocks over the very long term. Since value stocks are profitable and time-tested, they are the perfect place for patient investors to grow their money.

Below are five value stocks that could make you richer in 2022.

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General Motors

The days of General Motors (GM -3.77% ) being just another stagnant car stock, they disappeared. The electrification of automobiles has placed a decades-long growth opportunity on the company’s doorstep, and it will undoubtedly work with it.

In June, General Motors announced plans to increase investment in electric vehicles (EVs), autonomous vehicles and batteries to $35 billion by 2025. The ultimate goal is to deploy 30 new EVs in the world by the middle of the decade. In addition, the company plans to have two factories dedicated to the production of batteries for electric vehicles in operation by 2023.

The great thing about electric vehicles is that they’re a global trend with incredible momentum. Not only does GM have excellent brand power in the United States, but it has a good chance of gobbling up significant market share in China, the world’s biggest auto market. General Motors likely delivered about 3 million vehicles to China last year, which should provide it with the brand power and infrastructure to rapidly increase sales of electric vehicles in the No. 1 auto market.

Best of all, General Motors is inexpensive. Stocks can be bought for less than nine times earnings for the coming year and a price-to-earnings growth (PEG) ratio of less than one – a PEG ratio of less than one is considered undervalued.

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AGNC Investment Corp.

Mortgage Real Estate Investment Trust (REIT) AGNC Investment Corp. ( AGCN -2.53% ) is another valuable stock that could make you richer in the new year.

The mortgage REIT industry may seem complicated, but it is quite simple. AGNC aims to borrow money at low short-term rates and use that capital to buy higher-yielding long-term assets, such as mortgage-backed securities (MBS). The difference between the average yield of MBS and its average borrowing rate is called net interest margin.

What’s interesting about mortgage REITs is that they often perform best during an economic recovery, which is where we are now. Recoveries are typically characterized by a steepening of the yield curve, which is when the spread between short-term and long-term Treasury bond yields widens. When long-term yields jump, it tends to increase the average MBS yield and widen the company’s net interest margin.

In addition, AGNC Investment buys almost exclusively agency securities. An agency asset is guaranteed by the federal government in the event of default. This added protection allows the company to use leverage to its advantage.

With AGNC trading below book value and looking at a 9.6% dividend yield, it looks ripe for the pick of value investors.

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Another deep-discounted value stock that could make investors rich in 2022 is the telecommunications giant AT&T ( T -0.50% ). Although AT&T’s golden age of growth is long past, the company relies on two key catalysts for value creation in the future.

For starters, the company’s wireless segment is expected to benefit from the ongoing rollout of 5G wireless infrastructure. Consumers and businesses have gone an entire decade without any significant upgrades in wireless download speeds. The rollout of 5G is prompting device upgrades over the next couple of years. Given that AT&T generates its juiciest margins from data consumption, investments in 5G should pay off.

The other big catalyst is AT&T’s pending spinoff of the WarnerMedia content arm, which will be merged with Discovery to create a new media entity. This new entity will have approximately 85 million pro forma subscribers and broader appeal through its library of original content, and is expected to generate more than $3 billion in annual cost synergies. The WarnerMedia split will also allow AT&T to cut its dividend to around 5% and focus on debt reduction.

A forward P/E ratio below 8 is simply too cheap for this proven money maker.

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Keep in mind that even growth stocks can qualify as value stocks under the right circumstances. Biotech Action Exelixis (EXEL 0.20% ) is a prime example of a company with sustainable double-digit growth potential and a PEG ratio well below one.

Exelixis’ claim to fame is the company’s anticancer drug Cabometyx, which is approved to treat first- and second-line renal cell carcinoma, as well as advanced hepatocellular carcinoma (HCC). These indications alone are enough to push Cabometyx over $1 billion in sustained annual sales.

Last year, Exelixis was beaten after announcing that a late-stage trial in first-line HCC was unlikely to demonstrate a statistically significant improvement in overall survival. While disappointing, this modest setback overlooks Cabometyx’s other victories. It also negates the roughly six dozen ongoing studies of the drug as both monotherapy and combination therapy. Even a handful of label expansions could turn Cabometyx into a therapy capable of $2 billion or more in annual sales.

The exceptionally high margins associated with cancer drugs also allowed Exelixis to relaunch its internal growth engine. While the company is expected to end 2021 with $1.8 billion in cash and investments, Exelixis has a war chest to either buy new drug candidates or significantly expand its research department. Either way, he looks set for a great year.

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Did I mention that growth stocks can also be value stocks? A fifth value stock that could make you richer in 2022 is Metaplatforms (FB -1.98% )the parent company of social media platform Facebook.

One of the easiest ways to make money on Wall Street is to buy the best companies. Facebook is the undisputed best of breed in the social media space. During the third quarter, Facebook attracted 2.91 billion monthly active users (MAUs), and another 670 million unique visitors went to Instagram or WhatsApp, which Meta also owns. Those 3.58 billion UAMs represent more than half of the world’s adult population and are a major reason the company has such incredible advertising pricing power.

As I noted before, Meta Platforms hasn’t even fully monetized all of its core assets yet. The company most likely passed $100 billion in advertising revenue in 2021, almost all of which came from Facebook and Instagram. If and when Meta monetizes WhatsApp and Facebook Messenger, it will likely see a further surge in sales and profit growth.

But as its new name suggests, Meta is more than just advertising these days. The company’s Oculus virtual reality devices have put it well on its way to becoming a major player in the metaverse. The Metaverse is the next iteration of the Internet and will allow users to interact in 3D virtual environments. Meta invested $10 billion in Metaverse-related projects last year and plans to spend successively more in the coming years.

With a PEG ratio below one, Meta Platforms is a stock that investors can buy with confidence in 2022.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.