Some of the terms investors and analysts do not want to hear at all are bear market, recession, rising interest rates, and high inflation. The stock market is a constant battle among buyers, sellers, bulls, and bears. We are undeniably in an era of rising interest rates, and this can be summarized in just one but the trivial result, lower valuations for equities.
The U.S. 10-year bond yield has reached 3.36% as of June 13, 2022, which is the highest level in the past five years. This means that value stocks not only are a clear choice in a volatile stock market, but a shift from stocks to bonds is very likely as a switch to safety and minimizing losses.
For long-term investors, these seven value stocks to buy now are a way to invest in undervalued stocks that have the potential to generate very attractive returns when the stock market makes rallies, even in a bear market. As a reference, the S&P 500 P/E Ratio as of June 13, 2022, was 19.04.
| HMLP | Höegh LNG Partners | $8.98 |
| RFP | Resolute Forest Products | $13.54 |
| BEDU | Bright Scholar Education Holdings | $0.7887 |
| E | Eni | $25.44 |
| DDI | DoubleDown Interactive | $10.10 |
| BCS | Barclays | $7.99 |
| ACT | Enact Holdings | $21.22 |
Value Stocks to Buy: Höegh LNG Partners (HMLP)
Höegh LNG Partners (NYSE:HMLP) is a company that owns, operates, and acquires floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters. The firm was incorporated in 2014 and is headquartered in Bermuda.
The shares of Höegh LNG Partners have rallied 108.10% in 2022 but there is too much room for upside potential. The PE Ratio (TTM) is 7.34, the stock offers a forward dividend yield of 0.45% and the 1-year target estimate is $11.94, signaling an upside potential of nearly 33%.
The Price to Book ratio of 0.41 and the net margin of 42.47% are very bullish.
This is a very stable business as sales are in the range of $141.26 million – $145.32 million over the past five years. It is also a profitable business and the rising energy prices for natural gas are supportive for the stock as they can turn to higher revenue and profitability.
Resolute Forest Products (RFP)
Resolute Forest Products (NYSE:RFP) is a company that operates in the forest products industry in the United States, Canada, Mexico, and internationally. The company operates through four segments: Market Pulp, Tissue, Wood Products, and Paper, was founded in 2077 and is s headquartered in Canada.
The shares of Resolute Forest Products trade at a very low PE Ratio (TTM) of 2.53 and have a 1-year estimate target of $23.36, which is a potential gain of 66%.
The Price to Sales Ratio of 0.33 and Price to Book Ratio of 0.77 make Resolute Forest Products shares a value pick.
If you think forest products are not as hot as technology, you may want to revise your opinion. The company increased its sales by 30.86% in 2021 and generated a net income growth of 2,970% ss net income grew to $307 million while in 2020 net income was only $10 million.
Value Stocks to Buy: Bright Scholar Education Holdings (BEDU)
Bright Scholar Education Holdings (NYSE:BEDU) is not just an interesting value stock, it is also a penny stock and a high-dividend stock.
The company is an education service provider, that operates and provides K-12 schools and complementary education services in China, Canada, the United States, and the United Kingdom. The firm was founded in 1994 and is based in China.
The shares are down nearly 34% in 2022 and this drop can be attributed partly to the crackdown on educational services in China. The stock trades at a PE Ratio (TTM) of 9.62 offering a very generous forward dividend yield of 16%.
The Price to Book Ratio is 0.22 and the business seems to have tough times generating profits as in the past two years the company reported a net loss. On the other hand, the free cash flow trend is strong and positive. In 2021 the free cash flow grew 70.14% to $82.61 million.
Analysts are highly bullish on BEDU stock as they have a 1-year estimate target of $3.29. Can the stock deliver a return of approximately 330%? I do not know but the high dividend yield is too attractive to ignore and even with a more conservative target there is still a lot of room for a robust stock price rebound.
Eni (E)
Eni (NYSE:E) is a company that engages in the exploration, development, and production of crude oil and natural gas.
It operates through Exploration & Production; Global Gas & LNG Portfolio; Refining & Marketing and Chemicals; Plenitude and Power; and Corporate and Other activities segments. The firm was founded in 1953 and is based in Italy.
The shares of Eni are almost flat in 2022 despite the massive rally in energy prices. The shares trade at a very low PE Ratio (TTM) of 5.16 and they offer a forward dividend yield of 7.16%.
Can the stock move to its 1-year estimate target of $38.23 for an upside of 40%? I believe the answer is positive. The Price to Sales Ratio of 0.57 and Enterprise Value to Sales of 0.69 are signals of a cheap stock.
Eni is a profitable company except for 2020 when it reported a net loss of $8.64 billion. In the past three consecutive quarters, the profitability is exceptional. The company reported a net income of $1.2 billion, $3.82 billion, and $3.58 billion for the quarter ending on Sept. 30, 2021, Dec. 31, 2021, and March 31, 2022, respectively.
The firm generates plenty of positive free cash flow too. A missed rally for this oil and gas company seems a contrarian play worth monitoring.
Value Stocks to Buy: DoubleDown Interactive (DDI)
Switching to the Electronic Gaming & Multimedia Industry, DoubleDown Interactive (NASDAQ:DDI) develops digital games on mobile and web-based platforms for casual players in South Korea. The company was incorporated in 2008.
What makes DoubleDown Interactive a great value stock now? Its Price to Book Ratio of 0.89 and the PE Ratio (TTM) of 6.11 support an attractive valuation.
If you want o beat the rising rates and high inflation, then the scenario of DDI stock reaching its 1-year estimate target of $25 is ideal. The upside potential of 127% would be a phenomenal return. Checking the profitability of the company, investors have many reasons to be confident about the business prospects. The gross margin is 60.21%, the operating margin is 27.18%, and the net margin is 21.51%.
The sales have been growing for the past three consecutive years and the company has achieved a net income growth of approximately 45% for each of the past three consecutive years. This is a gaming business that delivers great financial results.
Barclays (BCS)
Barclays (NYSE:BCS) provides various financial products and services in the United Kingdom, Europe, the Americas, Africa, the Middle East, and Asia. The company operates through Barclays UK and Barclays International divisions. The financial services include banking and credit cards among others. Barclays was founded in 1896 and is headquartered in the United Kingdom.
Getting shares of Barclays after having losses of nearly 26% in 2022 makes sense now and is justified by the fundamentals. Investors can receive a forward dividend yield of 4.13% and be confident they are not overpaying for the earnings prospects, as the stock is trading at a PE Ratio (TTM) of 4.64.
The Price to Book Ratio of 0.55 is indicative of a stock that is too cheap.
This bank knows how to make a lot of profit. The net margin of 22.72% and operating margin of 31.91% prove that this business will benefit from rising interest rates. Banks have their way to earn a bigger spread on the loans they provide and the interest they give to their customers when interest rates rise. Betting on this bank stock to the upside now seems an idea that is fully justified.
Value Stocks to Buy: Enact Holdings (ACT)
Enact Holdings (NASDAQ:ACT) is a private mortgage insurance company in the United States, founded in 1981 and headquartered in North Carolina. By providing credit protection to mortgage lenders and investors this business is now in a very busy period as mortgage rates will rise along with interest rates.
The ACT stock is another textbook example of value investing. The PE Ratio (TTM) of 5.89 is very low and the forward dividend yield of 2.46% enhances the total expected return.
The revenue growth has been going up for three straight years, and it delivers net profits. In 2021 the net income grew at a very healthy rate of 47.58% to $546.69 million. The insurance company has been accumulating positive retained earnings and the total shareholders’ equity has been steadily moving up.
This created value for the shareholders. On top of that the Price to Book Ratio of 0.82 signals an undervalued stock. If the 1-year estimate target of $26.33 is reached, the potential gains are approximately 23%.
On the date of publication, Stavros Georgiadis, CFA 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.
