7 Best Value Stocks to Consider in 2022 - No BS Investing
Posted 239 views August 12, 2022, 10:00 - Elisabeth in Investing

7 Best Value Stocks to Consider in 2022

In 2016, interest rates were on the rise. Rather than chasing growth stocks that thrive with low-interest rates, value investors were searching for the best bargain stocks in the tumultuous market environment. 

Now, the market faces many of the same challenges from 2016 and more. Similar to the best value stocks in 2016, here’s a quick summary about value stocks and a list of best value stocks to consider in 2022 (including stocks that Warren Buffett invests in). 

Key Takeaways:

  • Procter & Gamble
  • Target Corporation
  • General Motors Company
  • Bank of America Corporation
  • Citigroup Inc.
  • Chevron Corporation
  • American Express Company
best value stocks in 2016

What are value stocks?

Value stocks are publicly traded companies. These companies are high-quality but sell relatively cheap compared to their value. They often share the following qualities: 

  • Stable and mature
  • Steady revenue and growth rates
  • Often pay dividends 

These stocks are safer investments when there are economic downturns. This is because their underlying value remains the same over time, even if their prices fluctuate. You’re still getting the same value, no matter the price (an important fact for value investors who are investing for the long-term). 

Note: Although you should analyze all company fundamentals, the price-to-earnings (P/E) ratio is an important valuation metric. It helps you determine the market value of a stock as compared to the company’s earnings.

Below we include the P/E ratio of each value company. The P/E ratio should be below the broader market (for reference, the S&P 500’s P/E is 20.91). A lower P/E ratio is normally better. 

1. Proctor and Gamble

P/E Ratio: 25.3

Procter & Gamble is a huge consumer products manufacturer and generates over $76 billion in annual sales. Its portfolio includes well-known brands such as Bounty, Crest, and Tide. This company is a reliable source of dividend income for investors. Its revenue has also steadily increased. 

According to P&G, the company’s third-quarter fiscal year 2022 net sales were $19.4 billion (increasing seven percent versus the prior year). The demand for P&G products is stable, even with the ups and downs in the market, making it a strong recession-resistant stock. 

Procter & Gamble shares have traded for an average price-to-earnings (P/E) multiple of around 25.3 (hint: the market average P/E ratio currently ranges from 20-25). It’s a brand that Warren Buffett’s Berkshire Hathaway believes in. Berkshire owned 315,400 shares of Procter & Gamble for a market value of $48.2 million as of March 31, 2022.

2. Target Corporation 

P/E Ratio: 18.41

Target is a big-box retailer selling popular company-owned brands such as Cat & Jack, Hearth & Hand, and Good & Gather. It operates more than 1,900 stores in North America. 

The retailer only increased revenue during the pandemic. Target’s annual revenue for 2021 was $93.561B, a 19.78% increase from 2020. Target has a P/E of 18.41. The company doesn’t just sell in-stores. Target has a strong digital presence. Its competitive advantage includes stores fulfilling all orders (physical and online), resulting in decreased costs. 

Another advantage? Target reached Dividend King status in 2021 since it boosted its dividend payout for 50 consecutive years.

3. General Motors Company

P/E Ratio: 7.32

The General Motors Company (GM) is an American multinational automotive manufacturing company with more than 94,000 employees in the USA. It generates millions of dollars in economic activity. 

Thanks to its history and brand recognition, GM is doing well, despite uncertainties in the automotive market. Although GM’s annual revenue declined year-over-year, its revenue for the quarter ending June 30, 2022, was $35.759B, a 4.66% increase year-over-year.

Buffett’s Berkshire Hathaway owned just over 62 million shares of General Motors (GM) for a market value of $2.7 billion as of March 31, 2022. 

Hint: Instead of calculating valuation metrics manually for value stocks, use a tool like Investing Pro Plus to automatically view key financial ratios. 

4. Bank of America Corporation

P/E Ratio: 10.75

The Bank of America Corporation is a multinational investment bank and financial services holding company. In 2021, it generated $89.11 billion in revenue. The well-established giant still thrives in a high-interest rate environment. 

BAC has many offerings, such as credit cards, home loans, and auto loans. The firm also has strong mobile offerings. “We believe the company’s mobile offerings are among the best in the industry, and as usage increases, we expect BAC to see an increase in its profitability and earnings growth,” says RBC Capital Markets analyst Gerard Cassidy.

BAC’s long-term prospects are good. Its P/E ratio is 10.75, which is below the U.S. average. As of March 2022, Buffett’s Berkshire Hathaway owned $41.6 billion of Bank of America (this holding comes only second to Apple).

5. Citigroup Inc. 

P/E Ratio: 5.82

A rival of Bank of America, Citigroup is a global bank and financial services company. The firm serves more than 200 million customer accounts with business in more than 160 countries and jurisdictions. 

For 2021, Citigroup reported a net income of $22.0 billion on revenues of $71.9 billion. The P/E ratio of Citigroup is 5.82. This means it trades at a less expensive P/E ratio than the market average. The firm also offers a 4.00% annual dividend yield.

Warren Buffett’s Berkshire Hathaway began scooping up shares of Citigroup while the company was underperforming. Since Buffett is an expert in financial stocks, following his lead might not be a bad idea. 

Citigroup shares jumped 7% after Warren Buffett revealed a nearly $3 billion stake or 55 million shares in the bank at the end of March 2022. 

6. Chevron Corporation 

P/E Ratio: 15.34

Value investing works with energy companies! Take Chevron. A multinational oil and gas corporation, Chevron Corporation generated $155.61 billion in operating revenue in 2021. The firm sells over three million barrels of refined products daily. Chevron is active in more than 180 countries.

The current dividend yield for Chevron is 3.51%. Its P/E ratio is 15.34. Its competitive advantage comes primarily from its size. 

In April 2022, Warren Buffett made another massive investment in Chevron. Buffett first bought the energy stock in the third quarter of 2020. At the end of 2021, the value of Buffett’s investment was $4.5 billion. By the end of March 2022, his Chevron investment increased to $25.9 billion!

7. American Express Company

P/E Ratio: 9.2

American Express Company is a multinational payment and travel services company. Known for its rewards and strong customer service, the company is the leading issuer of personal, small business, and corporate credit cards. 

American Express generated $43.66 billion in revenue in 2021. It pays $1.90 per share with an annual dividend yield of 1.21%. Now that the pandemic restrictions have lifted significantly, people are once again traveling. American Express profits are soaring as customer spending has risen 121% for entertainment and travel. 

Berkshire Hathaway has noticed. The company owned 151.6 million shares of American Express Company at the end of the fourth quarter of 2021. These shares are worth $24.8 billion.

Research the best value stocks

These high-quality stocks are set to grow over the long term. They also produce dividends. This means that you can take advantage of these value stocks when the prices are low. 

However, remember that the P/E ratio is just one element for evaluating a stock. Before investing, carefully research your chosen company (hint: you want to avoid value traps).

Complete a fundamental analysis and calculate valuation metrics. Manually calculating valuation metrics can be very time-consuming though. You can use a fundamental analysis tool to simplify the process. We recommend Investing Pro Plus. This tool helps you easily evaluate stock fundamentals. Sign up for a free trial for Investing Pro Plus here.

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Elisabeth O. is an MBA graduate with a specialization in International Finance & Investments and over six years of financial writing experience. She is passionate about long-term investing to build wealth, avoids day trading and speculations, and loves a good Warren Buffet quote.