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Value stocks are once again in favor following the Federal Reserve’s announcement to possibly taper later in the year.
We have identified four value stocks that may perform well during a taper:
- Berkshire Hathaway (BRK.B)
- Procter & Gamble (PG)
- CVS Health (CVS)
- Exxon Mobil (XOM)
Let’s explore each of these value stocks in greater detail.
Best Value Stocks to Buy
#1. Berkshire Hathaway (BRK.B)
- 1-Year Trailing Performance: +37%
- Market Cap: $712 billion
- Dividend Yield: 0.00%
Berkshire Hathaway is a holding company that invests in real businesses across various sectors.
It is governed by Warren Buffet and Charlie Munger, who are known for their long-term approach to investing in undervalued companies.
Here are several companies that Berkshire Hathaway wholly owns:
- GEICO
- Duracell
- Dairy Queen
- Fruit of the Loom
- Pampered Chef
And other companies that Berkshire Hathaway has a significant minority stake in:
- Kraft Heinz (KHC)
- American Express (AMEX)
- The Coca-Cola Company (KO)
- Bank of America (BAC)
- Apple (AAPL)
Buffett, Munger, and Berkshire Hathaway are all synonymous with value investing.
BRK.B effectively serves as an index fund of blue-chip private and public companies.
#2. Procter & Gamble (PG)
- 1-Year Trailing Performance: +18%
- Market Cap: $393 billion
- Dividend Yield: 2.14%
Procter & Gamble is a consumer goods conglomerate specializing in a wide range of personal care and hygiene products.
P&G owns various brands that millions of people use every day, such as Tide, Bounty, Pampers, Gillette, Febreze, Crest, Tampax, Pepto-Bismol, and countless others.
These are iconic brands that face little-to-zero chance of being replaced.
Society has relied on these products for over +100 years, and we don’t expect that to stop anytime soon.
Let’s take a look at Procter & Gambles recent FY22 Q1 earnings report:
- Net sales: $20.3 billion, up 5% year-over-year
- Earnings per share: $1.61, down 1%
- Operating cash flow was $4.6 billion for the quarter
- Returned ~$5 billion of cash to shareholders via dividend payments and buybacks
P&G stock is certainly one to consider for investors seeking value.
#3. CVS Health (CVS)
- 1-Year Trailing Performance: +37%
- Market Cap: $138 billion
- Dividend Yield: 2.11%
CVS Health is a pharmacy health care provider with nearly 10,000 locations spread across 49 of the 50 United States.
While CVS Pharmacy serves 4.5 million customers each day, the company has several other business segments that it has acquired or scaled over the years.
For example, it operates 1,100 MinuteClinic locations that provide stop-in care for common family illnesses. The MinuteClinic has received over 50M patient visits.
CVS Health acquired Aetna, a health insurance provider, for $69 billion in 2017 to further integrate its services.
More recently, the company has administered millions of Covid tests and shots in response to the pandemic.
Here’s a snapshot of CVS Health’s latest earnings report:
- Earnings per share: $1.97 adjusted vs. $1.78 expected
- Revenue: $73.79 billion vs. $70.49 billion expected, up 10% year-over-year
In sum, CVS Health is a full-stack healthcare services company with promising growth and a reliable dividend.
#4. Exxon Mobil (XOM)
- 1-Year Trailing Performance: +47%
- Market Cap: $291 billion
- Dividend Yield: 5.11%
Exxon Mobil is an American oil and gas corporation and the largest direct descendant of John D. Rockefeller’s Standard Oil Company.
It is an industry leader in pretty much every aspect of the energy and chemical manufacturing business, with operations in most of the world’s countries.
Here are the highlights of Exonn Mobil’s latest quarterly report:
- Earnings per share: $1.58 (biggest adjusted quarterly profit since 2014)
- Quarterly earnings increased by $7.4 billion versus 2020
- Announced share repurchasing program of up to $10 billion over the next 12-24 months
- Announced first dividend hike in +2 years
As worldwide demand for oil and natural gas recovers following the pandemic, Exxon Mobil will likely post some mind-boggling year-over-year increases in earnings.
Additionally, the company offers an attractive dividend yield of 5.11%, which is well above any other stock mentioned in this article.
Other Value Stocks to Consider
There are obviously many more value stocks to consider than Berkshire Hathaway, Procter & Gamble, CVS Health, and Exxon Mobil.
Here are some other value stocks that come to mind:
- JPMorgan Chase & Co. (JPM)
- Pepsi Co. (PEP)
- Johnson & Johnson (JNJ)
- UnitedHealth Group (UNH)
- Enterprise Products Partners (EPD)
- Abbott Laboratories (ABT)
- Altria Group (MO)
- Merck & Co. (MRK)
- Bristol-Myers Squibb Co. (BMY)
- Lowes (LOW)
- FedEx (FDX)
Consider the Vanguard Value ETF (VTV) if you’d rather have diversified exposure to large-cap value stocks.
It invests in approximately 350 stocks across all sectors of the economy.
Value Stocks: Frequently Asked Questions
What are undervalued stocks to buy?
The market is turning to undervalued stocks during these uncertain times. Here are undervalued stocks to buy:
- Lowes (LOW)
- FedEx (FDX)
- Bank of America (BAC)
- General Motors (GM)
- Comcast (CMCSA)
- McDonald’s Corp. (MCD)
- JPMorgan Chase & Co. (JPM)
- Pepsi Co. (PEP)
What is a value stock?
A value stock is a security trading below its fair market value. Value stocks typically have a high dividend yield, a low price-to-earnings ratio (PE ratio), and a low price-to-book ratio (P/B ratio).
Bottom Line: Best Value Stocks
Who knows how long the shift from growth to value will last, but fighting the market’s momentum has historically been a futile effort.
Keep Reading:
This article is for informational purposes only. It is not intended to be investment advice. Read our editorial guidelines and public equity research framework to learn more about how we accurately evaluated the Best Value Stocks.
