In this piece we will take a look at the ten 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.
5. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 46
Teck Resources Limited (NYSE:TECK) is an energy, metals, and minerals miner that is headquartered in Vancouver, Canada. The firm sells products such as copper, zinc, coal, lead, and bitumen.
Teck Resources Limited (NYSE:TECK)’s second quarter earnings saw the firm more than triple its operating income, as it brought in CAD 3.3 billion in EBITDA. This also led to the company quintupling its net income to CAD 1.7 billion for a $3.12 in earnings per share Another key factor about the firm is that the strengthening U.S. plays to its advantage as it earns the bulk of revenues in the currency but pays out its costs in CAD. Therefore, it gets cheaper for Teck Resources Limited (NYSE:TECK) to operate as the CAD weakens but at the same time, the stronger USD brings it more revenue.
Teck Resources Limited (NYSE:TECK) pays a 10 cent dividend for a 1.12% yield and its shares are up by 17% year to date. Insider Monkey studied 895 hedge fund portfolios for their second quarter of 2022 investments to discover that 46 had held a stake in the company.
Out of these, Eric W. Mandelblatt’s Soroban Capital Partners is Teck Resources Limited (NYSE:TECK)’s largest investor. It owns 13 million shares that are worth $416 million.
4. Global Payments Inc. (NYSE:GPN)
Number of Hedge Fund Holders: 57
Global Payments Inc. (NYSE:GPN) is a payments technology and solutions firm that is headquartered in Atlanta, Georgia, the United States. The company provides funding solutions, prepaid debit and payroll cards, and a commercial payments platform.
Global Payments Inc. (NYSE:GPN) managed to reduce the headwinds from shutting down its Russian business by acquiring another large payments firm that will end up expanding its customer base to 4.5 billion for a 500 million increase from last year. Following the acquisition, the firm aims to increase its revenue by as much as 11% annually this year to sit at $8.55 billion.
Global Payments Inc. (NYSE:GPN)’s second quarter revenue stood at $2.2 billion, marking 6.7% annual growth. It pays a 25 cent dividend for a 0.87% yield. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that 57 had also bought the company’s shares.
Global Payments Inc. (NYSE:GPN)’s largest investor is William B. Gray’s Orbis Investment Management which owns 5.6 million shares that are worth $626 million.
Manole Capital Management mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Over the next week or so, we will be publishing a stock-specific note on payment processor Global Payments Inc. (NYSE:GPN). We have owned GPN for nearly two decades and it currently is one of our largest positions. We will begin by highlighting recent spending trends, eCommerce developments and how many of our payment companies can actually benefit from inflation and higher costs. We will discuss their business, industry trends, what is driving their growth, and then highlight their compelling valuation.”
3. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 65
CVS Health Corporation (NYSE:CVS) is a healthcare company that operates pharmacies, sells prescription and over the counter drugs, and provides health plans. The firm is headquartered in Woonsocket, Rhode Island, the United States.
CVS Health Corporation (NYSE:CVS) is one of the strongest performing stocks in the healthcare sector, and its shares have appreciated by 5% over the past year, outperforming the Health Care Select Sector ETF fund which has posted a loss over the same time period. The consensus Wall Street share price target for the company sits at $122 per share, which is significantly higher than the current share price of $91.68.
CVS Health Corporation (NYSE:CVS) is also a strong contender for a stock that can hold against a recessionary storm, as its products are unlikely to see their demand drop during an economic downturn. By the end of this year’s June quarter, 65 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
CVS Health Corporation (NYSE:CVS)’s largest investor in our database is Cliff Asness’ AQR Capital Management which owns 3.3 million shares that are worth $312 million.
Vitava Funds mentioned the company in its Q3 2022 investor letter. Here is what the fund said:
We took advantage of this in the summer of 2020 and brought the stock into our portfolio at a time when its price was pressed down still further by the coronavirus pandemic. CVS is a giant. It has revenues of USD 300 billion, making it one of the largest companies in the world. It is a relatively stable and highly profitable company with strong free cash flow. Over the past few years, CVS has focused primarily on reducing debt.
This is already much lower than it had been after the Aetna acquisition, and most of the cash is now likely to go to shareholders through share buybacks or be used for smaller acquisitions to grow the company further. CVS trades at about 11 times annual earnings, which is a very appealing valuation given the expected future growth in profitability and overall modest cyclicality in its business.”
2. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the largest semiconductor firms in the world. The company designs and sells processors, graphics processing units (GPUs), modems, and a host of other semiconductor products that are used in smartphones and other devices. The firm is headquartered in San Diego, California, the United States.
QUALCOMM Incorporated (NASDAQ:QCOM)’s fiscal third quarter earnings saw the firm report a whopping 54% annual growth in its GAAP EPS, which came at a time the technology industry was struggling to keep up with inflationary headwinds. Data from S&P Capital IQ suggests that the firm is expected to deliver a 23%+ return on assets for its fiscal years 2022, 2023, and 2024.
Another key fact about QUALCOMM Incorporated (NASDAQ:QCOM) is that its licensing model lets it earn revenue even without selling any products, as not only do companies pay it for its hardware, but also for the ability to use its products in gadgets. JPMorgan raised the company’s share price target to $190 in October 2022, as it revealed that the firm’s expected revenue growth in the fiscal year 2023 goes against a low 9x P/E ratio. QUALCOMM Incorporated (NASDAQ:QCOM) pays a 75 cent dividend for a 2.59% yield, and 71 out of the 895 hedge funds polled by Insider Monkey for their June quarter of 2022 investments had held a stake in the company.
QUALCOMM Incorporated (NASDAQ:QCOM)’s largest investor is Panayotis Takis Sparaggis’s Alkeon Capital Management which owns 4.2 million shares that are worth $541 million.
1. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 96
T-Mobile US, Inc. (NASDAQ:TMUS) is an American telecommunications carrier. The firm has more than 100 million customers all over the U.S. and its territories, and it is headquartered in Bellevue, Washington.
T-Mobile US, Inc. (NASDAQ:TMUS) has been one of the strongest performing stocks on the market this year, with its shares up by 20% year to date amidst broader index downturns. The company aims to add more than six million customers by the end of this year, and its first and second fiscal quarters saw it bring in three million additions. During the same time period, both its rivals, Verizon and AT&T, saw their additions either drop or stay below two million.
Additionally, T-Mobile US, Inc. (NASDAQ:TMUS)’s shares have returned 127% over the past five years, while its peers have lost value. Insider Monkey’s Q2 2022 survey of 895 hedge funds saw 96 investors in the company.
Out of these, Andreas Halvorsen’s Viking Global is T-Mobile US, Inc. (NASDAQ:TMUS)’s largest investor. It owns 9.1 million shares that are worth $1.2 billion.
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Disclosure: None. 10 Value Stocks That Are Too Cheap To Ignore is originally published on Insider Monkey.
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