Value stocks are a great way to invest in the market without putting your whole portfolio at risk. These types of investments often offer more stability than growth stocks. They can allow investors with less experience or knowledge about finance an opportunity for success by diversifying their portfolios effectively while still working towards long-term goals.
The key component here isn’t guessing when companies will perform well; rather, the focus is on studying valuation metrics like P/E ratios or relative price movements against competitor firms. As long as an investor understands these numbers, there’s no limit to how far their wealth can grow.
More importantly, the conditions are ripe for value investing. After all, the markets have not recovered from the shutdown drama we all saw last week. Thanks to President Joe Biden, who signed an emergency funding bill hours before its deadline, investor sentiment softened in the deadline’s run-up, leaving several exciting companies to trade at a steep discount. We have compiled seven such enterprises you should take a look at for your portfolio.
- Kroger (NYSE:KR)
- NortonLifeLock (NASDAQ:NLOK)
- Rent-A-Center (NASDAQ:RCII)
- Verizon Communications (NYSE:VZ)
- United Parcel Service (NYSE:UPS)
- Tyson Foods (NYSE:TSN)
- Huntington Ingalls Industries (NYSE:HII)
Value Stocks to Buy: Kroger (KR)
The Kroger Company is a family-owned grocery retailer that has been around since 1883. It is one of the largest food retailers in America and has over 2,750 retail locations across North America, including grocery stores and supermarkets, and fuel centers. With nearly 11 million customers daily, the company is truly an industry leader.
Due to its large scale, Kroger is often considered a recession-resistant stock.
The grocer grew its EPS by 60% and a 14% growth in sales due to the pandemic-related eat-at-home trend. Its second-quarter results put to rest any doubts regarding a slowdown in performance. Kroger’s sales and profits surpassed analyst expectations.
The only negative in the earnings report was the gross margin of 21.4%, down from 22.8% in the year-ago period. The narrower margin is because of supply chain disruptions. However, this should not deter you from investing in this retail stock.
NortonLifeLock has been a leading provider in online safety and identity theft prevention for over 25 years. They offer award-winning virus protection along with comprehensive cloud backup services that help you stay protected no matter what happens on or off their sites. Considering the widespread cybersecurity issues we are all facing, NLOK becomes a must-have stock to have in your portfolio.
The company has committed to three to five-year financial objectives, projecting double-digit revenue growth, EPS of $3 per share, and free cash flow of nearly $1 billion that they said will 100% go back to investors. The stockholders are expected to get all positive results yielded from these developments.
Consumers today are becoming increasingly aware of cyber threats and how important it is to protect themselves. This is a secular trend, and therefore NLOK and other companies in the space stand to do very well in this environment.
Value Stocks to Buy: Rent-a-Center (RCII)
Rent-a-Center is committed to helping customers save money on large ticket items by offering lease options. The company has over 1,000 stores in the U.S., Mexico and Puerto Rico, with more than 460 franchises across America. It recently dropped an outstanding earnings report, which greatly helped the stock price.
Second-quarter revenues came in at $1.2 billion, representing a jump of 74.6% year-over-year. Meanwhile, adjusted EPS was $1.63, a significant uptick from the year-ago figure of $0.80. Much of this positive performance is attributable to last year’s purchase of Acima Holdings for $1.65 billion in cash and stock.
Looking ahead, the company is hiking its full-year guidance and giving the green light for a new share repurchase program for up to $250 million in common stock. Rent-a-Center now expects revenue in the range of $4.55 to $4.67 billion and non-GAAP diluted earnings per share of $5.90 to $6.40.
Despite these healthy prospects, RCII stock is trading at 7.62 times forward price-to-earnings. That makes it one of the most desirable value stocks out there.
Verizon Communications (VZ)
Verizon is a leading telecommunications company that provides communications solutions for customers across America. Lately, it’s been making huge investments in the 5G rollout.
The company’s ultra-fast network makes it possible for customers to stream video with crystal clear sound, download entire albums of music within seconds, and more without suffering from slow internet connections that are now commonplace all over America. All of this will translate into a bonanza for VZ stockholders.
Verizon is looking to streamline its operations, spinning off media assets that include AOL and Yahoo for $5 billion, reducing its media assets substantially to concentrate fully on the 5G sphere. Part of that strategy also includes operating a proactive mergers and acquisitions (M&A) strategy.
Verizon has invested billions on the 5G spectrum, and it does not look like the momentum will stall. This is an intensely competitive space that is only going to heat up from here.
Value Stocks to Buy: United Parcel Service (UPS)
There are few companies as ubiquitous as United Parcel Service; one of the world’s largest shipping couriers. The chances are bright that you might have sent a package or two using their services.
As the whole world was stuck at home last year, revenues for the freight delivery and logistics giant skyrocketed, finishing at $84.6 billion for the year. In April, the company revealed it had also distributed about 196 million vaccine doses. That figure could only have grown in the last few months, contributing heavily to the bottom line while also underscoring the importance of companies like UPS in the whole process.
There is a fear that UPS will suffer from the economic reopening and the coronavirus pandemic becoming a thing of the past. However, judging by its quarterly results, there is no indication that this is happening. The latest financials paint a very rosy picture. For the second quarter of 2021, consolidated revenue was $23.4 billion, a 14.5% year-over-year jump. Diluted EPS came in at $3.05 for the quarter, a 50.2% increase over the year-ago period.
According to 28 analysts tracked by Refinitiv, the consensus is for earnings to increase 11.2% and 11.7% in fiscal 2021 and 2022, respectively.
Tyson Foods (TSN)
Tyson Foods is an international company that has been around since 1958. They are the second-largest producer of chickens behind only Pilgrim’s Pride Corporation (NASDAQ:PPC), with production facilities in more than 40 countries on six continents, including China and India, where they have partnerships to help them grow business there.
Tyson is also responsible for producing 20% of the beef, pork, and chicken eaten in America. It supplies meat to national restaurant chains and grocery stores for consumers who want fresh quality at a reasonable price point.
Despite a global recession and mediocre performance in some regions, Tyson Foods’ strong operating cash flow enabled them to grow their EPS 61% year-over-year in the first nine months of the fiscal year. With this growth, they are catching up with other companies who have seen an increase. This is largely due to rising protein consumption. In the third quarter, the company reported an adjusted EPS of $2.70, a 93% year-on-year increase.
With consumer discretionary incomes on the rise, expect sales figures to remain healthy in the foreseeable future.
Value Stocks to Buy: Huntington Ingalls Industries (HII)
Huntington has been in operation for over 80 years. Huntington Ingalls Industries produces products that are vital to the United States Navy and Coast Guard, including ships’ propellers and support equipment such as patrol boats.
Considering the nature of the company’s business operations, this is one of the most recession-resistant stocks out there. Huntington Ingalls Industries is the largest military shipbuilder in America, with over 70% of all warship fleets coming from their facilities. The company also produces nuclear submarines for the U.S Navy.
During the last five years, HII has grown EPS by 15.4%, and revenue jumped 5.9%. According to CNBC data, Huntington Ingalls Industries has beat analyst estimates in the past four quarters.
The company has signed very lucrative contracts in the last few months. For example, one of its divisions recently inked a $2.9 billion contract for the repair of the US Navy’s nuclear-powered aircraft carrier USS John C. Stennis (CVN 74). There are billions worth of contracts in the company’s backlog just like this. Despite all this, shares are trading at 13.12 times forward P/E.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.