Investors usually rush into tech stocks when rate cuts loom on the horizon, as they do now. Federal Reserve Chair Jerome Powell just said that those cuts could come in September. However, it makes sense to also consider value stocks.

Lower lending rates benefit all sectors, and value shares must not be overlooked. Although the relationship between value stocks and rate cuts isn’t as well established as in tech stocks, there are reasons to invest. 

Many value stocks exist in cyclical sectors that also tend to perform well during expansionary periods. That bodes well for many value stocks, which will also be stimulated by the breakouts.

The economic stimulus of lower rates should also serve to increase earnings growth. That should make value stocks more attractive in the process. There’s also the issue of mean reversion. Growth stocks have been overvalued for quite some time, and the pivot toward a more value-oriented investment style is overdue. That suggests that value stocks could win big from rate cuts.

Pfizer (PFE)

The notion that Pfizer (NYSE:PFE) stock makes sense for its value is one thing, its performance is another. 

Pfizer just released better-than-expected earnings, with revenues and per-share earnings beating consensus expectations. The $13.28 billion in sales bested the $13.02 billion expected, representing 2% growth. Per share earnings fell by 11% to $0.60, but that was better than the 46 cents Wall Street had anticipated. 

Pfizer continues to deal with issues related to the decline of pandemic revenues and concerns over its future, which has led to its undervaluation. Yet, the company has a strong pipeline, particularly in oncology, following its Seagen acquisition. The potential is there over the long term, and the recent outperformance should serve to bolster that notion. 

Pfizer seems to believe so, as the company raised the midpoint of its full-year revenue and EPS guidance following the earnings release. Rate cuts should help Pfizer increase its research and development spending, especially in relation to GLP-1 drugs, which it intends to push into regulatory studies next year. 

Prologis (PLD)

Prologis (NYSE:PLD) is an industrial REIT, which should offer immediate clues as to why it’s undervalued. The company operates and leases logistics facilities that aren’t as attractive in a high-rate environment. Business slows as rates rise, and those same firms are less able to shore up their logistical capabilities. Thus, they are less likely to contract with Prologis. 

As rates fall, the opposite is true. That results in all kinds of positives for Prologis. One of the most important factors is the increase in operating funds. That’s important for REITs because they pay required dividends from operating funds. Prologis’ trailing 12 months of funds from operations is $4.85. The company currently pays dividends per share of 96 cents. That equates to $3.84, meaning Prologis is paying a lot to fund its dividend. That should fall with lower lending rates, increasing the attractiveness of the dividend in the process. 

RTX (RTX)

Big public-side firms like RTX (NYSE:RTX) aren’t normally the first to pop into mind when considering stocks that should benefit from rate cuts. 

Generally speaking, big defense firms benefit in a sort of trickle-down fashion when rates fall. The idea is that RTX and others generally benefit from the economic stimulation of decreased lending rates, which spurs increased tax revenues and bigger defense budgets. Big defense firms don’t benefit as much from the positive effects of rate cuts on lending: They tend to remain highly creditworthy due to their Coles government ties. 

Nevertheless, RTX is poised to benefit from rate cuts overall. It’s really about those general factors that help all defense firms and RTX’s internal strengths. I’m referring to something called the PEG ratio. It factors in the effects of the regular P/E ratio and projected growth. If it is under one, it suggests that the firm is undervalued and poised for growth. RTX is exactly that, with impressive earnings growth on the horizon. 

On the date of publication, Alex Sirois 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.