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In this piece we will take a look at the ten value stocks that are too cheap to ignore. For more stocks, head on over to 5 Value Stocks That Are Too Cheap To Ignore.
The current bloodbath that stock markets are facing could not have been predicted by Nostradamus himself if he were alive last year. The ongoing Russian invasion of Ukraine has led to the disruption of the global energy markets, which, when paired with the lax monetary policies of central banks all around, has resulted in skyrocketing inflation. The banks are now on an interest rate hike spree, which is leading to capital flowing out of the markets into more secure assets such as the U.S. dollar.
This has caused high growth stocks, and those that have invested in them, such as Cathie Wood's Ark Investment, to make big losses this year. For instance, shares of the consumer electronics giant Apple, Inc are down a massive 21% year to date and those of Tesla have bled an even more massive 45% in value this year. Similarly, Ms. Wood's Ark Investment has lost large sums of money as well, with its flagship Ark Innovation fund down a painful 60% year to date as of October 2022.
Against this backdrop, value stocks, or those that are trading in more modest price to earnings ranges, are starting to look attractive. As opposed to eye catching technology players that have the potential for vast amounts of growth due to disruptive technologies forming the backbone of their operations, value stocks are those that chug along at a stable pace, in the background, and without demanding much attention. The price to earnings ratio is used to measure the 'premium' that market participants are willing to pay for a company over its bottom line earnings, and high growth stocks have higher P/E ratios as their future earnings potential is judged to be higher than current earnings.
Not only the P/E ratio but industries can also be used to pick out value stocks. For example, large-scale pharmaceutical retailers tend to have low growth estimates but stable revenues - with the latter becoming even more important now as the threat of a recession looms in the not so distant future. While all stocks lose their value in a recession, value stocks are less prone to large swings in investor or market sentiment, and some have even managed to grow during troubling times due to stable earnings from essential products such as medicines.
In today's piece, we have selected some top value stocks for you, and some notable picks include CVS Health Corporation (NYSE:CVS), T-Mobile US, Inc. (NASDAQ:TMUS), and QUALCOMM Incorporated (NASDAQ:QCOM).
Photo by Ruben Sukatendel on Unsplash
Our Methodology
We took a broad look at several industries to identify the value players in sectors such as energy, pharmaceuticals, and retail. The firms were then selected after analyzing their financials and market dynamics, following which they were ranked through Insider Monkey's 895 hedge fund survey for the second quarter of this year. These stocks are cheap when compared to their peers and true value.
10 Value Stocks That Are Too Cheap To Ignore
10. CVR Partners, LP (NYSE:UAN)
Number of Hedge Fund Holders: 4
CVR Partners, LP (NYSE:UAN) is a nitrogen fertilizer company that is headquartered in Sugar Land, Texas, the United States. The firm provides its products to both industrial and agricultural customers, and it deals through retailers and distributors.
CVR Partners, LP (NYSE:UAN) is one of the cheapest stocks in the fertilizer industry, as it is currently priced only four times its expected earnings for the full year 2022. Additionally, there is some negative sentiment about the firm's upcoming third quarter earnings, since its plants had to be shut off for unavoidable maintenance. Yet, after the maintenance, they will run at full capacity for the next year, implying that there is a strong potential upside to the shares.
Additionally, UAN28 nitrogen prices have started to rise again after dropping earlier this year, and the shortage of gas in Europe is believed to further contribute to the growing prices. By the end of this year's second quarter, four out of the 895 hedge funds polled by Insider Monkey had invested in CVR Partners, LP (NYSE:UAN). The firm pays a 5.2% dividend for a 16.7% yield and its shares are up 47% year to date.
CVR Partners, LP (NYSE:UAN)'s largest investor in our database is Ken Griffin's Citadel Investment Group which owns 43,651 shares that are worth $4,3 million.
Along with T-Mobile US, Inc. (NASDAQ:TMUS), CVS Health Corporation (NYSE:CVS), and QUALCOMM Incorporated (NASDAQ:QCOM), CVR Partners, LP (NYSE:UAN) is a top value stock.
9. ICL Group Ltd (NYSE:ICL)
Number of Hedge Fund Holders: 13
ICL Group Ltd (NYSE:ICL) is an Israeli chemicals and specialty minerals company that sells different products such as bromine, potash, salts, and magnesium chloride. The company is headquartered in Tel Aviv, Israel.
ICL Group Ltd (NYSE:ICL) is significantly undervalued, with its forward price to earnings ratio of 5.43x, nearly half of the industry average of 10.52x. The firm also provides innovative agricultural products such as a biodegradable coated fertilizer that increases nutrient efficiency by up to 80%. ICL Group Ltd (NYSE:ICL) is playing in a $2.3 billion market with a CAGR of 6.37%, and its stock price stands to sharply accelerate should it further improve its market position.
ICL Group Ltd (NYSE:ICL) pays out a $1.16 dividend for a strong 10.76% yield. Insider Monkey's Q2 2022 survey of 895 hedge funds outlined that 13 had held a stake in the company.
8. Exelon Corporation (NASDAQ:EXC)
Number of Hedge Fund Holders: 32
Exelon Corporation (NASDAQ:EXC) is an American energy company. The firm operates and generates electricity through nuclear, wind, fossil, solar, biomass, and hydroelectric power plants. It is headquartered in Chicago, Illinois.
Exelon Corporation (NASDAQ:EXC) has one of the lowest price to earnings growth (PEG) ratios of 0.68, which is a fraction of the industry multiple of 3.1. The company is also slated to grow its earnings until 2024, and its second fiscal quarter revenue was $4.2 billion, beating consensus estimates by more than $200 million.
Exelon Corporation (NASDAQ:EXC) also pays a 34 cent dividend for a 3.71% yield. As this year's June quarter ended, 32 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Out of these, Rajiv Jain's GQG Partners is Exelon Corporation (NASDAQ:EXC)'s largest investor. It owns 26.5 million shares that are worth $1.2 billion.
7. GSK plc (NYSE:GSK)
Number of Hedge Fund Holders: 34
GSK plc (NYSE:GSK) is one of the largest pharmaceutical companies in the world. The firm sells a wide variety of medicines and products such as tablets, sprays, lozenges, and infant syrups. Its medicines also target a large list of diseases such as cancer and nervous system disorders. GSK plc (NYSE:GSK) is headquartered in Brentford, the United Kingdom.
GSK plc (NYSE:GSK)'s latest quarter saw the firm bring in ￡14 billion in revenue, which marked a strong 25% increase, ￡4 billion in operating profit for a 26% increase, and ￡0.67 in earnings per share that saw a 27% increase. At the same time, the firm increased its full year guidance to a 6% growth.
GSK plc (NYSE:GSK) pays a 46 cent dividend for a 5.88% yield and the firm has eleven new drugs in its portfolio, with the cumulative potential of adding ￡20 billion to its revenue. As part of their second quarter of 2022 holdings, 34 out of the 895 hedge funds polled by Insider Monkey had owned a stake in the company.
GSK plc (NYSE:GSK)'s largest investor is Ken Fisher's Fisher Asset Management which owns 19.5 million shares that are worth $851 million.
6. Macy's, Inc. (NYSE:M)
Number of Hedge Fund Holders: 39
Macy's, Inc. (NYSE:M) is one of the oldest retail companies in the world that was set up in 1830 and is based in New York, New York, the United States. The company operates department stores in the U.S. and in Dubai, and it sells several different products such as cosmetics and home furnishings.
Macy's, Inc. (NYSE:M) is a strong stock when it comes to its balance sheet. The firm has $3 billion in debt, and $1.5 billion in cash, with the fourth quarter expected to let it bring in another $1 billion in free cash flows. This will boost the company's current share buyback program, which is slated to last as long as 24 months and reduce its outstanding shares by 30%.
A $1.4 billion projected net income for 2024 with a 30% share reduction leads to earnings per share of $5.7 for the company, and even with its current low price to earnings ratio of 3.68, leads to an estimated share price value of $21 - an upside over the current share price of $18. Insider Monkey's Q2 2022 survey of 895 hedge funds outlined that 39 had invested in Macy's, Inc. (NYSE:M).
Out of these, Jim Simons' Renaissance Technologies is Macy's, Inc. (NYSE:M)'s largest investor. It owns 12.3 million shares that are worth $225 million, with the hedge fund growing its stake by 225% during Q2 2022.
Macy's, Inc. (NYSE:M) joins CVS Health Corporation (NYSE:CVS), T-Mobile US, Inc. (NASDAQ:TMUS), and QUALCOMM Incorporated (NASDAQ:QCOM) in our list of value stocks that are too cheap to ignore.
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Disclosure: None. 10 Value Stocks That Are Too Cheap To Ignore is originally published on Insider Monkey.
