The market has shifted and value stocks now offer considerable appeal.
2022 was a paradigm-shifting year for investors. Prior to 2022, growth stocks had been on a tremendous winning streak. The tech-heavy Nasdaq Composite index rose every single year between 2009 and 2021. Software, e-commerce and social media stocks seemed to have no ceiling. Last year, the tables turned. Formerly hot tech stocks turned ice cold, while many left-for-dead value stocks enjoyed strong outperformance. With interest rates still at a relatively high level and the world economy remaining unsettled, 2023 could be another volatile year for the market. This could make value stocks a good safe haven once again in coming months. These 10 value stocks remain cheap, with all trading for 15 times forward earnings or less. Solid companies bought at a good price should serve investors well regardless of where the market goes in 2023.
Verizon Communications Inc. (ticker: VZ)
The telecom industry had a rough 2022. Investors tend to buy telecom stocks due to their stable cash flows and high dividend yields, but both factors have come into question recently. AT&T Inc. (T) cut its dividend in 2022, while profitability metrics are down around the industry due to heavy investments in 5G. Added competition from the cable carriers hasn’t helped matters either. However, Verizon isn’t AT&T. Its earnings still reliably cover its dividend, and Verizon’s management has taken a smarter approach to mergers, acquisitions and capital investment. The spike in inflation isn’t great news, to be sure. But at the end of the day, people are going to keep paying their phone bills because it is an essential service regardless of what’s going on in the economy. VZ stock currently goes for about 8.4 times forward earnings and offers a generous 6.5% dividend yield.
Qualcomm Inc. (QCOM)
Telecom companies have had to shell out tens of billions of dollars to upgrade their networks to 5G. Their expenses have been Qualcomm’s gain. QCOM is the leader in semiconductor technology for mobile communications. The company built its business around intellectual property for 3G and 4G telephony. Nowadays, Qualcomm is helping lead the adoption of 5G. It also develops its own chips, such as the Snapdragon platform for smartphones and tablets. Shares slumped in 2022 amid the slowdown in the tech industry and building inventories across the semiconductor sector. Qualcomm will continue to generate plenty of value for the communications industry over time, however, and shares are a bargain at 12 times forward earnings and a 2.5% dividend yield.
Goldman Sachs Group Inc. (GS)
Goldman Sachs kicked off 2023 in unceremonious fashion with an earnings miss. Shares fell more than 6% on the day following the company’s fourth-quarter earnings report. And sure, the headline numbers were ugly with revenues falling well short of expectations. This was driven by a 48% year-over-year decline in the company’s investment banking fee revenues. However, this is hardly too surprising. 2022 was a terrible year for equity markets, whereas 2021 had been tremendous. It’s only natural that deal-making activity plummeted. This won’t last forever, though. Investment banking is a cycle, and revenues will turn up as soon as market sentiment improves. In the meantime, Goldman Sachs has cut costs and is streamlining operations to adjust during this lean period. The bank has a tremendous track record spanning various economic cycles, and shares are now at less than 10 times forward earnings with a 2.9% dividend yield.
Citigroup Inc. (C)
Numerous large American banks are trading at cheap valuations right now. Citigroup is another such example. The company is known for its reputation problems, as it has been involved in a series of blunders and unfortunate transactions in recent years. But investors may be punishing Citigroup too heavily for these missteps. Citigroup is trading for less than 8 times forward earnings while offering a juicy 4.1% dividend yield. It also got the endorsement of one of the world’s most influential investors. None other than Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) bought into Citigroup stock heavily in 2022. With the long-awaited divestment of its Mexican business under way, Citigroup should free up more funds with which to repurchase shares in 2023.
Suncor Energy Inc. (SU)
Suncor Energy is one of Canada’s largest companies. It has built a notable business in the Alberta oil sands, and it has a variety of other energy assets as well. Suncor is an integrated firm that owns its own refining capacity. This has been vital for maximizing profitability, as Canadian oil has sold at a sizable discount to world prices due to the lack of adequate pipeline capacity. Suncor, however, can sidestep that by using its own processing capacity. In doing so, Suncor has achieved higher profitability than most of its peers. Currently, shares sell for only 6 times forward earnings and offer a large shareholder yield between its share buyback program and 4.7% dividend yield. Adding to that, activist investor Elliott Investment Management is pushing management for changes that should generate even more shareholder value.
Medtronic PLC (MDT)
Medtronic is a medical devices company. The firm built its reputation on products for the cardiology field. In recent years, it has diversified more broadly into other categories such as neurology and diabetes care. Medtronic is different from many peers in that it has more revenues tied to essential treatments rather than elective fields such as joint replacements. Regardless, Medtronic’s business was seriously disrupted during the pandemic, as hospitals delayed surgeries and many patients preferred to stay at home rather than going in for medical treatments. Medtronic had another bumpy year in 2022, and shares fell sharply. However, analysts see earnings recovering in 2023, putting shares at less than 15 times forward earnings. That’s an impressive deal for a company selling essential products that sees a growing addressable market thanks to America’s aging population. Medtronic is also a “dividend aristocrat,” having raised its dividend for more than 25 years in a row. Medtronic pays a 3.4% dividend.
New York Community Bancorp Inc. (NYCB)
Speaking of dividends, regional bank New York Community Bancorp is a great high-yielding value stock. The firm has built a unique business model primarily lending against multifamily apartment buildings. As this makes up a big portion of the housing stock in New York City, the bank has found a profitable niche for itself. While yields on this type of loan are fairly low, risk is minimal. New York Community Bancorp remained profitable and kept its dividend steady even during the 2008 financial crisis. After many years of conservative operations, management has now made a play for significant growth, acquiring Flagstar Bancorp in 2022. This will give the combined firm the ability to mix Flagstar’s strong deposit base with New York Community’s larger lending operations. Analysts expect a significant jump in profitability. For now, shares trade for less than 9 times forward earnings and offer a 7.2% dividend yield.
3M Co. (MMM)
3M is one of America’s most well-known industrial companies. The firm has a dizzying array of products ranging from safety equipment and adhesives to Post-It notes and dental tools. 3M has been a tremendous stock historically, but shares have now been flat over the past decade. The biggest cause for the slowdown has been due to various product liability lawsuits which have been a dark cloud over the company. While there is risk to the company, arguably investors have overreacted. MMM stock used to trade at a P/E ratio of higher than 20. Now, shares are selling for less than 13 times forward earnings. The rise of re-shoring and renewed enthusiasm for products made in America should give 3M an additional boost as well. The firm is another dividend aristocrat, as it has raised its dividend for more than 50 consecutive years. With the recent sell-off, shares now offer a generous 5% dividend yield.
MetLife Inc. (MET)
MetLife is one of America’s oldest life insurance firms, as it has been in business since 1868. With approximately 100 million customers around the world, MetLife has enjoyed tremendous business success. That said, shares have had a pretty uneventful past decade, as they were essentially flat for most of the 2010s. MetLife is now gaining momentum, however, and that makes sense. After all, insurers tend to make a lot more money when interest rates go up. The life insurance model is to collect premiums from customers and invest them for decades before paying out benefits. When interest rates were close to zero, MetLife’s ability to earn investment income was greatly decreased. But a more historically normal interest rate environment should lead to far more successful investment returns in coming years. Despite the upturn in MetLife’s fortunes lately, shares still trade for less than 9 times forward earnings and offer a 2.9% dividend yield.
LyondellBasell Industries NV (LYB)
LyondellBasell Industries NV is a global specialty chemical company. It produces goods such as olefins, polymers, ethylene and many other such items. These go into a wide variety of products, including packaging, insulation and plumbing materials. LyondellBasell, like most chemical companies, is a cyclical business that sees its fortunes rise and fall with the broader economy. Investors are preparing for a recession and, as such, have been selling off cyclical companies such as LyondellBasell. That’s understandable enough. But at some point, LYB’s price will be low enough to compensate for economic risk, and it appears that point is here. Shares go for just 9.4 times forward earnings. The stock offers a dividend yield of 5.2%. And the company is repurchasing its stock aggressively as well, making this a great situation for value investors.
10 best value stocks to buy for 2023:
— Verizon Communications Inc. (VZ)
— Qualcomm Inc. (QCOM)
— Goldman Sachs Group Inc. (GS)
— Citigroup Inc. (C)
— Suncor Energy Inc. (SU)
— Medtronic PLC (MDT)
— New York Community Bancorp Inc. (NYCB)
— 3M Co. (MMM)
— MetLife Inc. (MET)
— LyondellBasell Industries NV (LYB)
More from U.S. News
Update 01/20/23: This story was previously published at an earlier date and has been updated with new information.