Perhaps the biggest (though possibly unwitting) cheerleader for the best value stocks to buy is Federal Reserve chair Jerome Powell. During his monetary policy speech at the annual economic symposium at Jackson Hole, Wyoming, Powell mentioned that inflation effectively represents the core concern of the central bank. Curb inflation and we can eventually set the proper framework for the economy.
In addition, the Fed chair reiterated his hawkish stance on monetary policy, evangelizing the idea that if necessary, households and business enterprises should be willing to absorb some pain now for a much brighter future later. However, such a framework means that growth opportunities are gone. Instead, investors must now focus on the best value stocks.
The below-market ideas feature upside potential through relevant underlying businesses. Or in other cases, the securities are so beaten down that it might make sense to go bullish on them. To be fair, you’ll need a contrarian mindset and some risk tolerance. If that’s you, below are the best value stocks to buy.
Best Value Stocks: Bank of America (BAC)
One of the biggest financial institutions in the world, Bank of America (NYSE:BAC) suddenly makes for an intriguing case for best value stocks to buy. With the latest inflation report coming in hotter than expected, the understanding is that the Federal Reserve must get extra aggressive with its stated commitment to raising interest rates. Thus, the raising of borrowing costs would theoretically improve profitability for BofA.
However, that’s not why BAC ranks as one of the best value stocks. Instead, it comes down to the economic incentivization factor. Under an inflationary cycle, almost anyone can be a good financial advisor. Since the dollar erodes in value over time, investors have an active incentive to do something.
Deflation presents the opposite circumstance. Investors have limited incentive to do anything. That’s because, under deflation, the dollar rises in value over time. Therefore, lazy folks effectively will enjoy a positive return by simply being lazy.
Making money in such an environment requires the best experts and analysts. That’s where Bank of America’s wealth management arm could come into the picture.
Rio Tinto (RIO)
An Anglo-American multinational firm, Rio Tinto (NYSE:RIO) is the world’s second-largest metals and mining corporation. However, even with the positive implications that such a footprint brings to investors, RIO stock is down 17% on a year-to-date basis. Frankly, Wall Street may be thinking a bit too myopically when it comes to RIO. Just look at its core products.
Among its key commodity operations include copper and lithium. Now, everyone understands the implications that lithium features toward electric vehicles (EVs), given how EVs run on lithium-ion batteries. However, not as many people may arguably appreciate what copper brings for the electrification of mobility.
According to the Copper Development Association, the underlying metal is a “major component in EVs used in electric motors, batteries, inverters, wiring and in charging stations. A pure electric vehicle can contain more than a mile of copper wiring in its stator windings. The increasing demand will significantly impact the copper market.”
Best Value Stocks: Mercedes-Benz Group (DMLRY)
Bringing up premium automotive giant Mercedes-Benz Group (OTCMKTS:DMLRY) might seem like an odd idea for best value stocks to buy. Given that the brand made its fortune in combustion-powered vehicles, the hesitation is understandable. At the same time, Mercedes-Benz is aggressively pivoting toward EVs, which should make it intriguing.
First, let’s start with some basic stats. Since the start of the year, DMLRY shares slipped over 26%. Investors need to appreciate the inherent risks associated with such a steep loss. At the same time, Mercedes-Benz brings some interesting metrics to the table. For instance, the company’s forward price-earnings ratio is barely above five times, well below the vehicle sector median’s 9.06 times.
Fundamentally, though, DMLRY arguably qualifies as one of the best value stocks because it brings social cachet to its EVs. Plenty of upstart EV companies are bringing expensive electric cars to market but this momentum may not be sustainable. Over time, people may prefer the brand recognition of a Mercedes-Benz as opposed to some generic brand that popped up yesterday.
Ordinarily, people may have overlooked Nutrien (NYSE:NTR) during the pre-pandemic days. A Canadian fertilizer company based in Saskatoon, Saskatchewan, Nutrien doesn’t exactly sound riveting. Sure, it may be the largest producer of potash and the third largest producer of nitrogen fertilizer in the world. Still, NTR didn’t carry the pizzazz that other investments did.
Now, circumstances have changed dramatically, with NTR being one of the best value stocks to buy. Fundamentally, Russia’s invasion of Ukraine changed the geopolitical paradigm. In particular, Russia represents one of the biggest providers of potash for global food supply chains. But due to tit-for-tat sanctions and other retaliatory measures, Russia has essentially weaponized potash.
However, on a cynical basis, Nutrien may benefit because its products now feature intense demand. Still, NTR remains a relatively underappreciated name, making it one of the best value stocks. For instance, it runs a price-earnings ratio of 7.3 times, below the industry median of 13.8 times.
Best Value Stocks: Petrobras (PBR)
A state-owned Brazilian multinational corporation in the petroleum industry, Petrobras (NYSE:PBR) provides much intrigue among the best value stocks to buy. That’s because unlike other publicly traded firms in the hydrocarbon industry, PBR didn’t take off as much as the competition. Don’t get me wrong, being up 17% YTD is a major accomplishment in this deflationary cycle. However, it’s still relatively underweight compared to what other oil firms delivered.
Financially, the case for PBR as one of the best value stocks to buy becomes even more compelling. Particularly, the energy firm features a forward PE ratio of 2.72 times, substantially below the sector media of 7.2 For starters, Gurufocus labels Petrobras as “modestly undervalued.” In exchange for the risk capital, ownership of PBR gives you access to excellent longer-term growth metrics along with robust profitability.
Finally, the geopolitical narrative undoubtedly bolsters Petrobras. With Russia responding to European sanctions with its own energy outflow cuts, demand for hydrocarbons will likely increase. That’s a net positive for PBR.
While Intel (NASDAQ:INTC) remains one of the most important semiconductor and technology firms, these segments also suffered disproportionately from the Covid-19 pandemic. With critical components being sourced from various impacted nations, supply chains became snarled. Indeed, the matter became so serious that it went to the very top.
If that wasn’t worrying enough, INTC itself hasn’t done many favors to attract investor sentiment. For instance, shares slipped nearly 46% on a YTD basis. Even recent price action represented a source of anxiety, with INTC tanking 20% in the trailing month. Part of the problem stems from the erosion of purchasing power as inflation weighed heavily on consumers.
Nevertheless, INTC on paper may be one of the best value stocks to buy but for speculators. Gurufocus rates Intel as “significantly undervalued.” Presently, the company features a forward PE ratio of six times. That’s conspicuously below the sector median of 15 times. Additionally, Intel commands excellent profitability metrics, with a net margin of 26% being a particular highlight.
Best Value Stocks: Verizon Communications (VZ)
MoffettNathanson’s Craig Moffett really hit the nail on the head with Verizon Communications (NYSE:VZ). On Aug. 18, the market expert downgraded VZ stock to “underperform.” At the same time, the analyst lowered the price target to $41 from $55. On Sept. 15, VZ closed right on the money at $41. Well, three pennies up to be exact but who’s counting at this point?
One of the fundamental issues with Verizon stemmed from the telecom sector’s marketing blitz. Effectively, Verizon aggressively courted new wireless customers but at the risk of sustainability. In addition, the firm hawked advanced features such as 5G, even though few consumers cared for such innovations. Verizon is now on the back foot, staring up at the competition that it used to look down upon.
Nevertheless, for the extreme speculator, VZ could be one of the best value stocks. With Verizon shares reaching their downward target, they could gradually move back higher. Moreover, the company will probably attract more than a few gamblers. Its forward PE ratio presently stands at 7.8 times, well below the telecom sector’s median of 15.4 times.
On the date of publication, Josh Enomoto 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.