If you’re bullish on growth names, it looks like luck is on your side. Of course, we’re still contending with the novel coronavirus pandemic. And I’m not the only one who thought that the contentious Georgia runoff elections, plus last week’s breach of the U.S. Capitol could negatively impact benchmark indices. But so far, that hasn’t been the case, making value stocks to buy a rather pedestrian proposition.
Naturally, it’s easy to get caught up in the emotions. Look, even cryptocurrencies — which I thought could see some real-time volatility over last week’s chaos — are surging higher. And these are incredibly speculative assets, digital “funny money” to the critics.
Such a pleasant market environment can easily catalyze FOMO, the fear of missing out. And frankly, people just don’t get FOMO when it comes to value stocks.
Although definitions may vary, value stocks typically are well-established blue chips with stable (but hardly exciting) growth trajectories. Further, they tend to be under the radar compared to their growth counterparts. While they may not get all the attention, this attribute is one of the reasons to consider their holistic proposition.
Under a market correction, growth firms are vulnerable to volatility. This is partly because such companies often don’t pay dividends. Therefore, the benefit lies in their speculative upside potential, leaving no point in holding shares into the red. That isn’t to say that value stocks won’t get hurt in a correction. But business stability and commonplace dividend payouts provide some measure of protection.
And the stock market doesn’t just keep moving higher indefinitely. Eventually, a corrective phase happens. And newcomers to the investing arena may not realize this, setting up what could be a severe downside event. Therefore, at least some consideration for these value stocks to buy would be prudent.
Here are 8 value stocks that could perform surprisingly well in 2021:
- AstraZeneca (NASDAQ:AZN)
- Johnson & Johnson (NYSE:JNJ)
- Duke Energy (NYSE:DUK)
- Altria (NYSE:MO)
- IBM (NYSE:IBM)
- Lockheed Martin (NYSE:LMT)
- Molson Coors Beverage (NYSE:TAP)
- Intel (NASDAQ:INTC)
As a final word before we get into the details, investors should be prepared for anything. So it’s best you don’t go all-in on any one sector or philosophy. Rather, keep the powder keg dry for any possible discounts.
In the days following the 2020 election, pharmaceutical giant AstraZeneca enjoyed significant bullishness. The implication of an incoming Biden administration boded well for AZN stock, considering the contentious, controversial leadership of President Trump. However, the rise of Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) conspired to make AstraZeneca one of many overshadowed value stocks.
Of course, the former two companies received emergency use authorization for their coronavirus vaccines, which are both messenger-RNA based. A key advantage of the RNA approach is that it facilitates rapid manufacturing, As a Harvard University blog noted, “RNA-based vaccines could be manufactured in less than two months at a lower production cost, making it possible to respond to epidemics even as they develop.”
Well, it turns out that these RNA vaccines are being produced at a slower rate than hoped, per the Washington Post. That potentially opens the door for AstraZeneca and its Covid-19 vaccine candidate, which recently received emergency authorization from the U.K. I’d keep a close eye on AZN stock, which could be a come-from-behind value play on the coronavirus battle.
Johnson & Johnson (JNJ)
Commonly cited as a value stock to buy, Johnson & Johnson had a ho-hum year following its sharp recovery rally in March-April of 2020. But recently JNJ stock has been moving higher, presumably as investors recognize the holistic coverage that shares offer regarding our new normal.
On the near-term front, JNJ stock is suddenly a viable coronavirus play. Like AstraZeneca, Johnson & Johnson’s Covid-19 vaccine candidate utilizes a viral-vector approach. Though it doesn’t have the rapid-manufacturing capability of RNA vaccines — which could be a “false” advantage, as mentioned above — viral-vector vaccines have been clinically demonstrated to be effective and don’t require onerous storage requirements.
Amidst a frenzied rush to purchase ultracold vaccine freezers, the infrastructural challenges for administering RNA vaccines may affect Pfizer and Moderna while providing an opportunity for Johnson & Johnson. That’s going to be critical in terms of feeding international demand, where healthcare infrastructures may not be adequate.
Second, JNJ offers myriad over-the-counter medication revenue channels, which could be an important factor in the new normal as consumers eschew expensive medical visits for self-care.
Duke Energy (DUK)
Under any circumstances, utility firms like Duke Energy make sense as a viable value play. As I’ve stated many times before, when people flip the switch, they expect the lights to turn on. That simple need for consistency is the fundamental argument behind DUK stock and its peers.
Because the other side of that narrative isn’t so pleasant. For instance, a 1977 blackout in New York City plunged the metropolis into a crime rampage, according to CNN. While that’s a particularly harsh example, logically, there’s every incentive to keep our energy infrastructure intact, which broadly benefits DUK stock.
While the incoming Biden administration has its eyes set on a net-zero emissions society, that’s going to take a long time. Further, last year’s California blackouts reveal that without adequate battery storage systems, intermittent energy sources such as wind and solar are unable to accommodate spike demands. This adds more to the bullish argument for Duke Energy.
Plus, let’s not forget that no matter how advanced we become, the great irony is that we’re immensely dependent on a key commodity — electricity. Combined with Duke’s dividend yield, this is probably one of the safest value stocks to own.
Altria has been one of the more disappointing value stocks of the past few years. I would know, having bought some shares as a broader vice play and as an indirect exposure to the cannabis market via Cronos Group (NASDAQ:CRON). That didn’t quite work out for me.
But now the situation might be different. Generally speaking, I anticipate a rise in vice activities if we incur a downturn in the economy. Looking at the destruction of small businesses and the eviction crisis that has only been delayed, not fully addressed, I think economic downside is well within the realm of possibility. In addition, evidence indicates that fewer people quit smoking during recessions, which cynically augurs well for MO stock.
Further, the myriad restrictions on vaping could see a rise in traditional smoking platforms. Usually, many people looking to kick the cigarette-smoking habit turn to vaping — with its flavored e-juice options — as a satisfying cessation device. With this avenue falling increasingly under government control, users may end up moving back to “analog.” If that happens, MO stock could benefit.
Frankly, IBM seems like a perpetually overshadowed value stock. Several years ago, investors abandoned IBM stock due to the underlying company’s strong ties to legacy businesses that were becoming increasingly irrelevant in the face of innovations such as cloud computing. Stakeholders also questioned management’s various strategic decisions, leaving shares of Big Blue mired in mediocrity.
Could 2021 be different? I’d like to think so but let me be clear: I must concede that many proponents, including yours truly, have been saying this for a long time with nothing to show for it. So take the optimism with a grain of salt.
However, I think it’s also fair to point out that the beginning of 2020 appeared to be auspicious for IBM stock. With the potential of a trade deal between the U.S. and China on the horizon, the implied economic and geopolitical stability was a net positive for the technology icon. Then, the pandemic happened and everything fell apart.
Still, IBM has been using this otherwise-awful scenario as an opportunity to forward its artificial intelligence solutions. The company offers compelling enterprise-level cloud computing and cybersecurity solutions as well, both of which are enormously pertinent sectors.
Lockheed Martin (LMT)
Few presidents have demonstrated as much love for the military as Donald Trump has. And Lockheed Martin was on a tear in early 2020.
I get it. President Trump was an old school American leader, a Teddy Roosevelt type that spoke bluntly. And the big stick in the modern case is the military. Logically, this was a huge sentiment catalyst for LMT stock. With our adversaries getting restless, a second Trump term would need to project more power. Of course, Lockheed would be a willing partner.
But under a Biden White House? Investor sentiment around the president-elect is that he’s more levelheaded and less hawkish than his predecessor. Thus, LMT stock has become one of the underperforming value stocks.
However, Wall Street may be too pessimistic about Lockheed Martin. Biden must project confidence and he can’t do that by being a pushover in the global arena. Thus, LMT has the potential to surprise.
Molson Coors Beverage (TAP)
Molson Coors Beverage has already shot way up since late October. However, this remains one of the few value stocks that could add to its rally throughout 2021. I say this because of the underlying business. With the economic outlook — as well as the outlook for the pandemic — very much questionable, people will turn to various forms of stress relief. Like it or not, alcohol happens to be a common one.
Moreover, it’s unclear when small businesses in the bar and restaurant industry can return to some semblance of normal. For instance, California is under stay-at-home orders, with particularly onerous restrictions placed on some of its biggest cities like Los Angeles and San Francisco. If this continues, alcoholic beverage sales will shift to grocery stores, which in the longer run may benefit TAP stock.
That’s because Molson Coors specializes in lower-cost beverages that will appeal to consumers under a recessionary environment. Furthermore, the company is getting involved with the cannabis business through its partnership with Hexo (NYSE:HEXO). Since most Americans support legalization, this could foster another compelling catalyst for TAP stock.
Many years ago, Intel was one of the unquestionable leaders of the semiconductor industry. However, missteps and a lack of appreciation from the growing competitiveness of Advanced Micro Devices (NASDAQ:AMD) saw INTC stock lose substantial ground. Then, a series of perplexing embarrassments doomed Intel to ignominy.
But will it stay there? According to InvestorPlace contributor Will Ashworth, INTC stock was one of his worst ideas for 2020. At the time, he viewed shares as one of the better value stocks on a relative basis to the competition. However, as Ashworth stated, “Investors viewed growth plays such as AMD as better bets in the current economic environment.”
However, there is a case to be made that Intel is still a force to be reckoned with. In other words, INTC could have its own AMD moment over the years ahead.
Honestly, I’m not sure how I feel about this because losing steps in the technology arms race is like losing multiple lifetimes. Still, if you want to speculate on your value stocks, Intel might be the ticket.
On the date of publication, Josh Enomoto held a long position in MO and HEXO.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.