Best Value Stocks

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Value stocks/companies consist of companies whose current valuation appears low relative to their fundamentals, such as free cash flows, revenue, dividends, and growth rate based on company and market trends. This can also be displayed by a low stock price compared to its intrinsic value, and investors expect the growth of these stocks to transcend market growth overall. This group of companies includes some of the world’s most well-known and largest companies, such as Procter & Gamble, Johnson & Johnson, and Berkshire Hathaway, which can make them a good investment.

Stocks in the value sector, which are holistically represented by the Vanguard Value ETF (VTV), have broadly outperformed the market as VTV has provided investors with a return of 32.19% over the past 12 months, above the S&P 500’s total returns of 31.27%. 

Here are the top value stocks across all sectors for the week of October 25, 2021 as inflation scares and supply chain bottlenecks have brought down valuations of companies across various sectors.

12 Best Value Stocks

Here are the top value stocks to invest in right now:

1. BioNTech SE (BNTX)

BioNTech is a Germany-based biotechnology company that focuses on developing cancer therapeutics, including individualized immunotherapy, as well as vaccines for infectious diseases, including COVID-19. The company's oncology pipeline contains several classes of drugs, including mRNA-based drugs to encode antigens, neoantigens, cytokines, and antibodies; cell therapies; bispecific antibodies; and small-molecule immunomodulators. With a forward P/E ratio of 5.79 and a PEG ratio of 0.05, BioNTech played a huge part in formulating the BioNTech-Pfizer vaccine - the most effective COVID-19 vaccine in the world. BioNTech will continue to see strong growth due to accelerated vaccine and booster rollout as the Delta variant lingers. 

2. Stellantis N.V. (STLA)

Stellantis NV was formed on Jan. 16, 2021, from the merger of Fiat Chrysler Automobiles and PSA Group. The combination of the two companies created the world's fourth- largest automaker, with 14 automobile brands. For 2020, we calculate that pro forma Stellantis would have had a sales volume of 5.9 million vehicles and EUR 132.8 billion in revenue, albeit substantially affected by COVID-19. With major markets all over the world, Stellantis has a forward P/E ratio of 5.152 and current P/E ratio of 4.706. Recently, Stellantis and Samsung SDI agreed to form a joint venture to produce battery cells and modules for North America as planned.

3. Capital One Financial (COF)

Capital One is a diversified financial services holding company headquartered in McLean, Virginia. Originally a spin-off of Signet Financial's credit card division in 1994, the company is now primarily involved in credit card lending, auto loans, and commercial lending. Boasting a P/E ratio of 6.751, Capital One has shown a jump in top-line and bottom-line growth that very few companies in this sector have experienced, resulting in a comparatively low valuation with a PEG ratio of 0.27. Moreover, as the Federal Reserve begins to taper and hike rates, this company may see further growth and an increasingly favorable valuation. 

4. Micron Technology (MU)

Micron historically focused on designing and manufacturing DRAM for PCs and servers. The firm then expanded into the NAND flash memory market. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). The firm's DRAM and NAND products are tailored to PCs, data centers, smartphones, game consoles, automotive, and other computing devices. With a forward P/E ratio of 7.283 and revenue growth of 29.25%, Micron recently announced its plans to invest $150 billion to increase chip output. 

5. Ameriprise Financial (NYSE: AMP)

Founded in 1894 and headquartered in Minneapolis, Minnesota, Ameriprise Financial, Inc. and its subsidiaries provide various financial products and services to individual and institutional clients in the United States and internationally, operating through four segments: Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other.

6. Western Digital (NASDAQ: WDC)

Founded in 1970 and headquartered in San Jose, California, Western Digital Corporation develops, manufactures and sells data storage devices and solutions in the United States, China, Hong Kong, Europe, the Middle East, Africa, rest of Asia and internationally, offering client devices, including hard disk drives (HDDs) and solid state drives (SSDs) for computing devices, such as desktop and notebook personal computers (PCs), smart video systems, gaming consoles, and set top boxes; flash-based embedded storage products for mobile phones, tablets, notebook PCs, and other portable and wearable devices, as well as automotive, Internet of Things, industrial/connected home applications and flash-based memory wafers. Products are sold under the Western Digital, SanDisk and WD brand names to original manufacturers, distributors, dealers, resellers and retailers.

7. CF Industries Holdings (NYSE: CF)

Founded in 1946 and headquartered in Deerfield, Illinois, CF Industries Holdings, Inc. manufactures and sells hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities worldwide, including anhydrous ammonia, granular urea, urea ammonium nitrate, ammonium nitrate products, diesel exhaust fluid, urea liquor, nitric acid, aqua ammonia products, compound fertilizer products with nitrogen, phosphorus and potassium. CF primarily sells to cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

8. Warner Bros. Discovery (NASDAQ: WBD)

Incorporated in 2008 and headquartered in New York City, Warner Bros. Discovery, Inc. operates a media and entertainment company worldwide in three segments: Studios, Network, and DTC. The Studios segment produces and releases feature films. The Network segment comprises domestic and international television markets, and the DTC segment offers premium pay-tv and streaming services. Brands held under WBD’s umbrella include Warner Bros. Pictures Group, Warner Bros. Television Group, DC, HBO, HBO Max, Discovery Channel, discovery+, CNN, HGTV, Food Network, TNT, TBS, TLC, OWN, Warner Bros. Games, Batman, Superman, Wonder Woman, Harry Potter, Looney Tunes, Hanna-Barbera, Game of Thrones and The Lord of the Rings brands.

9. Nuveen CA Select Tax-Free Income Portal (NYSE: NXC)

Formed in 1992 and domiciled in the United States, the Nuveen California Select Tax-Free Income Portfolio is a closed-ended fixed income mutual fund launched by Nuveen Investments Inc that is co-managed by Nuveen Fund Advisors LLC and Nuveen Asset Management, LLC. and invests in the fixed income markets of California.

10. NVR (NYSE: NVR)

Formerly known solely as Ryan Homes, founded in 1980 and headquartered in Reston, virginia, NVR, Inc. operates as a homebuilder in the United States, operating through the Homebuilding and Mortgage Banking segments and primarily serving Maryland, Virginia, West Virginia, Delaware, New Jersey, Eastern Pennsylvania, New York, Ohio, Western Pennsylvania, Indiana, Illinois, North Carolina, South Carolina, Florida, Tennessee and Washington, D.C. NVR, Inc. was founded in 1980 and is headquartered in Reston, Virginia.

11. T-Mobile (NASDAQ: TMUS)

Founded in 1994 and headquartered in Bellevue, Washington, T-Mobile US, Inc. and its subsidiaries provide mobile communications services in the United States, Puerto Rico and the U.S. Virgin Islands, offering voice, messaging and data services to customers in the postpaid, prepaid and wholesale and other services along with selling wireless devices, including smartphones, wearables, tablets, home broadband routers and other mobile communication devices and their accessories. TMUS also offers financing through equipment installment plans, leasing through JUMP! On Demand and High Speed Internet services.

12. Nucor (NYSE: NUE)

Founded in 1905 and headquartered in Charlotte, North Carolina, Nucor Corporation engages in manufacture and sale of steel and steel products. NUE’s steel mills segment produces hot-rolled, cold-rolled and galvanized sheet steel products; plate steel products; wide-flange beams, beam blanks, and H-piling and sheet piling products; and bar steel products, such as blooms, billets, concrete reinforcing and merchant bars and engineered special bar quality products. Rebar distribution is also available, and all segments sell to entities in North America. The steel products segment manufactures hollow structural section steel tubing products, electrical conduits, steel racking, steel joists and joist girders, steel decks, fabricated concrete reinforcing steel products, cold finished steel products, steel fasteners, metal building systems, insulated metal panels, steel grating/expanded metal products and wire/wire mesh products primarily for use in nonresidential construction applications. Piling distribution is also available. This segment also engages in the piling distribution business. NUE’s raw materials division produces direct reduced iron (DRI); brokers ferrous and nonferrous metals, pig iron, hot briquetted iron, and DRI; supplies ferro-alloys; along with processes ferrous and nonferrous scrap metal, selling primarily to electric arc furnace steel mills, foundries for manufacturing process, nonferrous scrap metal to aluminum can producers, secondary aluminum smelters, steel mills and other processors.

Features to Look for in Value Stocks

These are some of the top attributes to keep in mind while looking for value stocks:

1. Relatively Low Price-to-Earnings Ratio

The price-to-earnings (P/E) ratio is one of the most common metrics for stock valuation. The P/E ratio tells us how expensive the stock is compared to its earnings. It is calculated by dividing the stock price by earnings per share.

Value investors look for low P/E ratios that are 15 or lower. You should compare ratios not only against the market but against the underlying industry as well. As of June 15, 2021, the S&P 500 average P/E ratio was 45.11.

2. Reasonable Price-to-Book Ratio

The price-to-book ratio (P/B) is a ratio that compares the market value of a company to its book value. Book value consists of total assets (tangible or intangible) deduced by the total liabilities.

P/B ratios under 1 are considered good, as they point that market value is below the book value. Yet, P/B ratios are not perfect and are often used along with return on equity (ROE). As a rule of thumb, ROE near or above 15% is acceptable.

3. Little or No Debt

Even the best business can fail if it gets overwhelmed in debt. Taking on too much debt, especially when the times are good and financing is cheap, has brought down even the titans of industries.

Debt-to-equity (D/E) ratio shows the financial leverage of a company. As a value investor, you should look for a value below 2.0 and preferably unleveraged (below 1).

4. Well-Covered Dividends

A value investor is usually not buying stock to speculate but rather a long-term share in the business. A dividend is nothing more than your share of profits generated.

Yet, this has to be sustainable. During the last market downturn, many companies slashed or straight-out suspended their dividends. Most of them cultivated unrealistic expectations, refusing to adjust them and potentially spooked the investors.

A good rule of thumb is to look for a dividend payout ratio below 50%, and for defensive sectors like consumer staples or utilities, this can be as high as 75%.

Best Online Brokers for Value Stocks

Whether you’re a seasoned investor or a total beginner, the easiest way to invest is through a quality broker. Nowadays, this is conveniently available through web platforms and phone apps. Check out our broker comparison in the table below.

Biggest Value Stock Movers of the Day

Value stocks are usually low-volatility, but one can always find a few outliers. In the table below, you can see the biggest movers of the day.

Buying Undervalued is the Way to Success

Value investing created some of the largest fortunes in the world. While you might passionately track what famous value investors like Warren Buffett, Charlie Munger or Michael Burry currently have in their portfolios — take notice of your current situation!

Investing to become financially independent is different from investing to remain financially independent. However, you may not become financially independent. You could, however, plan for the future, keep a nest egg and remain secure, if nothing else.

Whatever your goal is, stick with the business models you understand and look for competitive advantages, capable leadership and the right price. Be prepared to wait for good opportunities as value investing requires patience, discipline and rationality.

As Munger said himself: “A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables.”

Frequently Asked Questions