Value stocks have affordable prices and are somewhat unappreciated by the broader investment community. When analyzing a value stock, investors may notice that its share price looks low compared to its sales, earnings or the dividend it pays out to shareholders.
This is often because the market has discounted or overlooked the fundamentals underpinning the stock, or failed to see the long-term potential of a company and its stock, choosing instead to focus on short-term gains from more aggressive growth and momentum stocks.
Value stocks are for investors who have patience and are playing the long game when it comes to their portfolio. Value stocks may not represent the latest cutting-edge technology company or the hot new trend on Wall Street, but they tend to reward investors who take a buy and hold approach as they appreciate over time.
In this article, we examine four rock-solid value stocks that will reward investors for their patience.
- CVS Health (NYSE:CVS)
- NextEra Energy (NYSE:NEE)
- General Electric (NYSE:GE)
- Berkshire Hathaway (NYSE:BRK.B)
Value Stocks That Will Reward Your Patience: CVS Health (CVS)
It’s not flashy or exciting, but pharmaceutical retailer CVS Health is a stable, well-run company that can offer peace of mind to patient investors.
The company is much more than the chain of retail pharmacies that people are familiar with in their neighborhoods. CVS Health also owns Aetna, one of the largest health insurance providers in the U.S., as well as pharmacy benefits manager CVS Caremark.
Together these divisions make CVS Health one of the top five companies on the Fortune 500 list with annual revenues of $195 billion.
As we come out of the global pandemic, CVS stock has been performing well, gaining 33% in the past six months to around $75 a share. Analysts and investors see continued upside for the stock as the vaccine distributions continue at a brisk pace throughout the U.S.
The company is expanding a new HealthHUB concept that provides vaccinations, as well as treatments for common ailments such as ear infections and strep throat. CVS is pushing hard into telehealth services, which are gaining in popularity with consumers and becoming standard across the healthcare system.
NextEra Energy (NEE)
It may take some time to get there, but NextEra Energy is the future of energy generation.
As the biggest renewable-energy company in the U.S., NextEra Energy is ideally positioned to capitalize on the move away from fossil fuels.
Currently a hybrid of gas and oil as well as renewable energy sources, NextEra Energy already produces more energy from wind and solar power than any other company worldwide. Moving forward, the company plans to ramp up its renewable energy power generation as it scales back fossil fuels.
With the U.S. again leading on climate change, NextEra Energy looks to be the right company at the right time. Going forward, NextEra Energy should steadily build on the gains it has achieved over the past 15 years.
Since 2006, NextEra Energy has grown its earnings per share (EPS) at a compound annual growth rate (CAGR) of nearly 9%. During the same period, the company’s annual dividend payment to shareholders grew at a CAGR of almost 10%.
NEE stock has also performed strongly, rising 690% since mid-2006. In the last year, the stock has climbed 44% and is now around $79, and that’s after a four-for-one stock split last October.
General Electric (GE)
General Electric is a value stock that is finally turning around after being depressed for several years.
Following struggle and stagnation, the Boston-based conglomerate has finally succeeded in reorganizing its business into the main areas of aviation, healthcare, renewable energy and finance. This renewed focus has helped GE again capture the interest of investors.
Year-to-date, GE stock has risen 28% yet remains affordable at nearly $13.50 a share. This time last year, General Electric’s share price was hovering at $5.50.
General Electric recently got a boost after UBS bank raised its price target on the stock to $17 a share and reaffirmed its “buy” rating. UBS analyst Markus Mittermaier praised GE for its streamlined business model and improved cash flow.
UBS and other analysts have also applauded the sale this year of General Electric’s aircraft leasing business to AerCap Holdings for $30 billion, noting that the transaction gives GE a 46% ownership stake in the newly combined company that will boast 2,600 commercial aircraft from carriers all over the world.
Berkshire Hathaway (BRK.B)
Among value stocks, Berkshire Hathaway remains king. The holding company run by Warren Buffett continues to be the ideal stock for investors with long time horizons and plenty of patience.
Buffett himself refers to himself as a value-oriented investor and continues to espouse a buy-and-hold investment philosophy even at age 90. Investors get to own a company that is well-diversified and has a track record of providing strong returns. With the economy now reopening, Berkshire Hathaway stock has done well year-to-date, providing an 18% return to shareholders.
Over the past decade, BRK.B stock has provided a 275% return. The holding company today owns everything from railroads to furniture stores, clothing companies to dry goods purveyors.
Of course, Berkshire Hathaway remains best known for its extensive portfolio of stock holdings. The company is one of the largest shareholders of major American companies such as Apple (NASDAQ:APPL), Coca-Cola (NYSE:KO) and Bank of America (NYSE:BAC), to name only a very few.
Berkshire Hathaway is the type of reliable value stock that investors can hold onto forever. You could buy the class A stock (NYSE:BRK.A) that has never split and currently costs around $403,000 for a single share. But the Class B stock is much more affordable for most retail investors.
On the date of publication, Joel Baglole held long positions in BRK.B and APPL.