Three Value Stocks for 2022 and Beyond

The market has been wildly volatile in 2022 creating what may seem like attractive buying opportunities in some big names.  It may seem tempting to look for bargains among some of the flashy, high growth names that have suffered double digit losses since the start of the year.  But don’t be fooled, many of these names were so over inflated before that it was hard to begin to assign a reasonable price.

Investors who are looking to preserve their precious 2021 returns may want to consider buying something that’s been tracking relatively well so far in 2022: value stocks.  The Invesco S&P 500 Pure Value ETF (RPV) is up 2.65% this year.  Compare that to the Invesco S&P 500 Pure Growth Fund (RPG) which is down about 13%, and it’s easy to see why it could make sense to increase holding in value names for 2022. 

Considering that many of the best growth stocks continue to trade lower, our team put together this list of attractive value stocks to add to your watchlist right now.  

Ford Motors (F) share price sank last week after projecting 2022 guidance that was in line with Wall Street expectations, leaving room for doubt to creep in.  “Investors are starting to worry about peak earnings,” wrote Credit Suisse analyst Dan Levy, who believes fears are overblown and that Ford continues to improve.  

Ford may be suffering production setbacks caused by the chip shortage and disruptions in the supply chain, but these difficulties are affecting the entire industry.  If it seems more dramatic in Ford’s case, that’s because demand for their affordable electric pickup, the Maverick, was off the charts, to the point that they had to stop taking new 2022 orders while they work on fulfilling backlogged orders.  

Anyone looking to purchase a Maverick, with prices starting at around $20,000, will have to wait until summer when pre-order for the 2023 model begins.  Ford has some catching up to do now, but investors with a long term outlook should not let these setbacks deter them from taking advantage of the opportunity to get in at a low price.  

Ford CEO Jim Farley is taking an aggressive approach to autonomous and electric vehicles. He recently announced that Ford would be raising its investments in AV and EV tech to $29 billion through 2025.  This major investment includes plans of their own to create an electric cargo van and a plug-in version of their bestseller F-150 pickup truck. And this is just the beginning for the heavyweight automaker.

Investors looking for exceptional value in the beaten down market should not overlook Ford.  A trailing twelve month P/E ratio of 11.11 makes F a tempting choice against other stocks in its sector.  The S&P 500 Consumer Discretionary Sector SPDR Fund (XLY) currently has a trailing twelve month P/E ratio nearly triple that of Ford at 33.17. 

The current recommendation among 22 polled analysts is to Buy Ford stock.  A median twelve month price target of $22.30 represents a 25% increase from the last price.  

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Next up, CVS Health Corporation (CVS).  The pharmacy innovation company recently outlined its long-term growth strategy at its 2021 Investor Day, aiming at capitalizing on the significant market opportunity to make healthcare more convenient, personalized and affordable for consumers.  The company will optimize the retail portfolio to serve as community health destinations by closing nearly 900 stores over the next three years to reduce store density and ensure it has the right kinds of stores in the right locations for consumers and the business.

Moreover, CVS Health is driving a digital-first, technology-forward approach that will expand the company’s reach and engagement with its more than 35 million online members.  The company will also enhance omnichannel health services to meet the needs of consumers as and when required.

CVS Health recently presented a long-term outlook and growth targets.  As part of its growth trajectory, the company targets a return to low double-digit adjusted EPS growth in 2024 and beyond.

Goldman Sachs analyst Nathan Rich recently initiated coverage of CVS with a Buy rating and $121 price target.  The analyst started the U.S. Managed Care sector with a positive outlook and sees potential for 13% annual earnings growth for the large-cap names over the next two years.  He sees “under-appreciated optionality” in CVS’s new provider-focused strategy, with leverage to the value-based care theme and “strong” underlying fundamentals.

Our final recommendation on the list is a lower risk option for our readers who are looking to cast a wide net over value stocks.  

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The iShares Russell 1000 Value ETF (IWD) offers exposure to large-cap companies that show strong signs of value.  Large-caps as they can add benefits to any well balanced portfolio including rock solid stability and dividends.  Companies within this segment are considered some of the safest companies to invest in and tend to be in stable industries as well.

IWD is linked to the Russell 100 Value Index, which consists of roughly 650 holdings and is tilted heavily towards financials, energy, and health care.  IWD is a staple in many savvy investors’ portfolios, thanks to the fund’s level of diversification and cheap price.  The fund has a relatively low expense ratio of 0.19% and a dividend yield of 1.57%.

So far in 2022 is down 2.8%, outperforming the S&P 500 which is down nearly 7.5% in the same period.  IWD is the perfect choice for those who are looking to invest in names like Walt Disney (DIS), JPMorgan Chase (JPM) and Johnson & Johnson (JNJ), which are among the fund’s top holdings.   

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