Buy low, sell high. This is the basic formula for success in the stock market. Simply put, this is also the definition of value stocks. Learn more with these examples of value stocks, the rough diamonds of the stock market.
What are value stocks?
A value stock is a stock whose price does not necessarily reflect its fundamental value. Basically, value stock investors are looking for bargains.
By investing in a value stock, you are assuming a possible rise in its price. Sooner or later, the market finds out its true value and the stock price goes up. When the market corrects in price, value stocks have the potential to generate income.
Value stocks versus growth stocks
Value stocks differ from growth stocks in that the latter are companies with a significantly higher growth rate. While value stocks are actually undervalued, growth stocks move faster than the average stock, generating profits faster.
Overall, value stocks are safer than growth stocks. There are more risks inherent in investing in growth stocks. Growth stocks are generally less established companies that are considered promising because of their innovative products or services. Value stocks are usually large, well-established companies. The stock price may have taken a hit due to a bad earnings season, negative publicity or some other factor, but should rebound over time. Value stocks are better suited to long-term investors than short-term investors.
Characteristics of value stocks
Patience is a virtue. This is something value investors need to have because value investing is designed for the long term. Here’s what to look for when it comes to value stocks. The following are examples of characteristics of value stocks:
Value stocks generally pay dividends. This is not the case with growth stocks.
Examples of value stocks
You will no doubt recognize the names of these companies behind examples of value stocks. They are some of the biggest names in their industry, but they can be undervalued.
#4 meta platform (NYSE: FB), formerly known as Facebook
Meta Platforms, Inc, the company formerly known as Facebook, is the parent company of Facebook, WhatsApp, Instagram and other subsidiaries. These days, it’s also a value stock, as it trades at less than 15 times estimated earnings. This makes it cheaper than around 2/3 of stocks in the S&P 500 index.
On April 27, 2022, Meta released its first quarter results. Total revenue increased by 7% over the previous year, but total costs and expenses increased by 31%. Operating profit fell by 25%. Year-over-year, Facebook’s daily active users increased by 4% and monthly active users increased by 3%. First quarter revenue growth was impacted by the war in Ukraine.
Meta does not pay a dividend. The stock closed at $212.03 on May 3, 2022. Its 52-week high was $384.33 and its low was $169.
No. 3 Pfizer (NYSE: PFE)
Pfizer was a surprising loser in 2020. The pharmaceutical giant is now a prime example of value stocks. It currently provides the world with Comirnaty, the most widely used mRNA vaccine to prevent serious illness, hospitalizations and deaths from COVID-19. As of May 1, 2022, the cumulative share of doses administered by Pfizer worldwide has increased to 62%. Paxlovid, its antiviral drug used to treat COVID-19, has received regulatory approval or temporary authorization in more than 60 countries.
Pfizer’s results for the first quarter of 2022 show revenue of $2.7 billion. This reflects operational growth of 82% compared to the first quarter of 2021. Revenue grew by 2% operationally, excluding contributions from Comirnaty and Paxlovid. The report reaffirmed 2022 revenue forecasts for both drugs. Comirnaty’s revenue forecast is expected to be around $32 billion. And this, despite an unfavorable exchange rate effect of 1 billion. Paxlovid’s revenue forecast is approximately $22 billion, with an unfavorable foreign exchange impact of $0.5 billion.
However, Pfizer reduced expected earnings per share from its earlier estimate of $6.35 to $6.55. He now estimates EPS of $6.25 to $6.45. Overall, the company forecasts sales of $98 billion to $102 billion for the year.
Pfizer’s closing price on May 3 was $49.29. The 52-week range is $37.96-$61.71. The annual dividend is $1.60 with a yield of 3.31%.
Keep reading for more examples of value stocks.
Procter & Gamble No. 2 (NYSE: PG)
When it comes to consumer staples, Procter & Gamble is a giant. P&G products run the gamut from Bounty, Charmin, Crest, Dawn, Pampers, Pepto-Bismol, Tampax and dozens of other brands that most people have in their homes. However, inflation and supply chain issues have plagued the multinational and its recent performance has been less than stellar.
On April 20, 2022, Procter & Gamble announced its third quarter of fiscal 2022 with a 7% increase in net sales of $19.4 billion over the prior year. Diluted net earnings per share were $1.33. This is a 6% increase over the previous year. The main drivers of sales are its healthcare and homecare divisions, with beauty and grooming lagging behind. The company has raised its sales growth outlook for fiscal 2022 from a 3-4% range to a 4-5% range from the prior year, making it a great addition to this list. of the best examples of value stocks.
Procter & Gamble’s current dividend yield is 2.31%. Its 52-week range was $165.35-$131.94. Its stock price as of May 3, 2022 was $156.21.
No. 1 US Steel (NYSE: X)
US Steel literally built the infrastructure of this country. From buildings to bridges to motor vehicles, US Steel provided the products that fueled America’s growth throughout the 20th century. By the end of the century, however, the rise of cheaper imported steel spelled the death knell for many American steel producers. US Steel was able to purchase the assets of National Steel after that company went bankrupt in 2002. Overall, it was a difficult time for the industry. Another difficult period occurred more recently, as COVID-19 lockdowns halted construction projects, causing steel prices to plummet. The end of the pandemic has the opposite effect.
US Steel announced that it was “transforming” its business model into “a sustainable, customer-centric steel producer with an unmatched value proposition.” Steel prices were high in 2021 and this is expected to continue into 2022. The war in Ukraine is causing disruption while the reopening of the economy means strong demand. Keep in mind that steel prices are always cyclical. They rise and fall in conjunction with the overall economy.
The 52-week range for US Steel is $39.25-$17.98. As of May 3, 2022, the stock closed at $29.47. US Steel currently pays a dividend of $0.05 per share.
Value Stock Considerations
These examples of value stocks show that even the most well-known companies are trading at a price below their intrinsic value, which makes them good bargains. While volatility is always a possibility in the stock market, value stocks present less risk. Think of value investing as an opportunity to buy good stocks at lower prices.
Jane Meggitt specializes in writing about personal finance. In addition to investing and planning for retirement, she writes about insurance, real estate, credit cards, estate planning and more. His work has appeared in dozens of publications, including Financial Advisor, Zack’s, SF Gate and Investor Junkie. A graduate of New York University, Jane lives on a small farm in New Jersey’s horse country.