Great stocks to buy for value.
The 2010s were dominated by growth stocks, and when 2020 rolled around, many investors felt that it was time for value stocks to take the lead. Theoretically, a bear market would be the perfect time for value stocks to outperform growth, but year to date, many value names have underperformed their growth-minded peers; cheaply priced energy companies, in particular, continued getting cheaper as oil prices fell, with most sectors affected by the pandemic. For the prudent, patient investor, a number of solid value names look quite cheap at today’s low prices. Here are seven of the best value stocks to buy in 2020.
CF Industries Holdings (CF)
The global fertilizer and chemical company manufactures and distributes fertilizers that provide nutrients to crops. The company has been expanding its global reach and has a stable carbon footprint in the agriculture space. A Bank of America analyst upgraded CF Industries to “buy” from “underperform” in mid-July, with an improved outlook on the agriculture sector in the coming quarter. Trailing earnings are high already in 2020 compared with previous years, with a stable balance sheet and reliable dividend payments. CF’s debt-to-assets ratio has been declining year over year, which means the company is reducing its debt and can manage it well, even during this economic downturn. The agriculture giant listed similar earnings in the first quarter of 2020 compared with the same time in 2019; however, CF acknowledges demand may be affected by the current health crisis. Nevertheless, CF’s market outlook for 2020 “expects positive global nitrogen demand driven by an increase in nitrogen-consuming planted corn and coarse grain acres in North America in 2020,” as stated in the company’s press release.
After experiencing volatility in the first quarter, estimates for VIAC stock look optimistic. Viacom has been able to withstand heavy losses, with the stock trending down year to date; however, these are short-term consequences influenced by the pandemic. Fitch Ratings assigned the stock a BBB rating, with a stable outlook on the stock. VIAC is currently in a healthy financial position with assets exceeding liabilities. VIAC stock is consistently paying out its dividend annually at 96 cents, and a high annual payout ratio of 10.17%. It’s hard to ignore the broad spectrum of media brands in VIAC’s portfolio — CBS Television Network, the Showtime Networks and CBS Television Studios, to name a few — that will come as a benefit in future television programming and continued growth in its streaming services.
Chevron Corp. (CVX)
This oil giant is already well-positioned amid the pandemic given the sheer size of its market capitalization and global presence compared with its competitors and could be poised to grow even further this year. The company’s acquisition of Puma Energy in June is followed by the announcement of its acquisition of Noble Energy in July in an all-stock transaction valued at $5 billion, or $10.38 per share. “This combination is expected to unlock value for shareholders,” said Michael Wirth, chairman and CEO of Chevron. CVX has a strong balance sheet, and most of its assets are being financed through the company’s equity, posing a lower financial risk. Investors can rely on Chevron, which has been consistently paying out dividends for decades, landing it a position among the dividend aristocrats. Within the last year, Chevron’s price-earnings ratio at 16.6 is much higher than Exxon Mobil Corp. (XOM), BP (BP) and Valero Energy Corp. (VLO). This may indicate that investors are optimistic about Chevron’s future growth.
CVS Health Corp. (CVS)
CVS is an essential part of the U.S. economy in the era of a health crisis. Not only will people need to keep getting their prescriptions throughout this period of social isolation and sheltering in place, but when a suitable vaccine for the coronavirus is developed, CVS Minute Clinic locations will serve a vital role in helping build America’s herd immunity. In its efforts to encourage health safety practices and have a strong presence in the fight against the pandemic, CVS recently launched an initiative called “Time for Care” in July, focused on reducing the spread of the virus. The retail health care company might be undervalued and could pose a potential buying opportunity.
Ventas is one of the largest health care real estate investment trusts that owns a diversified portfolio of health care real estate, with senior housing being the largest portion of holdings. It has a market cap of more than $13.1 billion and has exhibited strong growth over the past several years. VTR has been managing its debt well, showing the pandemic is not going to bring this REIT down. VTR currently has a dividend yield of 5.2%. Ventas shares have gone down as some investors are concerned about tenants not being able to meet rent. If these worries persist, the high dividend may get reduced in the short term; however, once the economy recovers, tenants with existing leases will continue paying rent, and dividends will rise to normal levels again.
Verizon Communications (VZ)
Noticing a trend in the best value stocks for 2020? Many of them offer goods or services that are either essential or bound to be in steady demand indefinitely. Telecom giant Verizon is the former. Cellular service, internet access and data have essentially been utilities for some time. Verizon and IBM (IBM) announced a new partnership where they will be collaborating on 5G innovation. With the emphasis on working or learning from home to slow the spread of the virus, internet connection is more important than ever. That only adds to VZ’s competitive edge. Verizon has been recently named the highest-ranked in cellular network quality by J.D. Power, a data analytics and consumer intelligence company. This recognition is a testament to its wireless network quality. VZ’s P/E ratio has been on a steady increase, which means investors are willing to pay a higher price for the stock due to growth expectations. Verizon is one of the largest companies in the S&P 500, but it might be positioned for more growth. According to Fitch Ratings, the coronavirus will not likely impact 5G wireless network growth. This shows there is an overall lower level of risk within the company and opportunity within the sector.
Alexion Pharmaceuticals (ALXN)
Alexion Pharmaceuticals, a Boston-based biotechnology company, has several things going for it: Alexion announced its acquisition of Portola Pharmaceuticals this month and sees this partnership as an “opportunity to grow our commercial portfolio,” says CEO Ludwig Hantson of Alexion, in a statement. The pharma company has experienced sharp earnings-per-share growth within the past few years. EPS jumped from $7.92 in 2018 to $10.53 in 2019, representing around a 33% increase. The pharma company has experienced strong revenues in 2020 so far. In the first quarter of this year, Alexion’s EPS was $3.22, a 35% increase from the same time last year, pointing to profitability and investor confidence for growth.
The best value stocks to buy in 2020:
— CF Industries Holdings (CF)
— ViacomCBS (VIAC)
— Chevron Corp. (CVX)
— CVS Health Corp. (CVS)
— Ventas (VTR)
— Verizon Communications (VZ)
— Alexion Pharmaceuticals (ALXN)
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Update 07/21/20: This story was published at an earlier date and has been updated with new information.