Rising interest rates and the persistent threat of inflation continue to erode profit margins for some businesses, and investor confidence when it comes to once high flying tech names.
Considering many of the best growth stocks continue to trade lower, investors may want to look at something that’s been tracking relatively well so far in 2022: value stocks. The Invesco S&P 500 Pure Value ETF (RPV) is up 8% this year. Compare that to the Invesco S&P 500 Pure Growth Fund (RPG) which is down about 16%, and it’s easy to see why it makes sense to increase holding in value names.
Many formerly cheap value stocks increased sharply as investors have flocked out of speculative names. However, there are still bargains to be had if you know where to look. Here are three attractive value tickers to add to your watchlist right now.
The Fed has signaled that it will continue to move aggressively until inflation has shown clear signs of downward momentum – potentially including a 0.50% rate hike at the May and June meeting. One of the single best ways to hedge against rising interest rates is through insurance companies. The reason being that insurance companies invest heavily into fixed income assets like corporate and government bonds. As interest rates rise insurers earn a higher yield and profits rise.
After more than a decade of zero-interest-rate environment, things are finally set to improve for the insurance industry and American International Group (AIG) is one of the well-positioned companies from the group.
Making the stock even more attractive – it seems like a bargain at current levels, when compared to peers. AIG is currently trading at less than 6 times forward earnings, cheap when compared to top competitor Cigna Corp. (CI), which trades at more than 17 times forward earnings. Further, the company’s price to book ratio of 0.74 is attractive compared to the insurance industry where the average price to book ratio is more than twice that at 1.65.
The 13 analysts offering a 12-month price forecast for AIG have a median target of $69, representing a 7.3% increase from Wednesday’s closing price. The stock comes along with a 2% dividend backed by a sustainable 12% payout ratio.
Next up is a real estate investment that should appeal to readers seeking value and growth along with a consistent payout.
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. REITs allow investors to buy shares in commercial real estate portfolios – something that was previously only available to wealthy individuals and through large financial intermediaries. REITs generate a steady income stream for investors but offer little in the way of capital appreciation.
To qualify for REIT status, a company must primarily own income-generating real estate for the long term and pay a minimum of 90% of taxable income in the form of shareholder dividends each year.
Virginia-based, Apple Hospitality REIT, Inc. (NYSE:APLE) owns and manages a portfolio of upscale hotels in the U.S. including 219 hotels located in 86 markets across 36 states in the country.
Along with a strong recovery in domestic travel last year, APLE’s net income rebounded with gusto from a loss of $173.2 million in 2020, to $18.8 million in 2021. The company reported full-year 2021 revenue of about $934 million, compared to a revenue of $602 million in 2020.
Barclays analyst Anthony Powell recently raised the price target on Apple Hospitality from $19 to $21 and maintained an Overweight rating on the shares. The analyst cited the company’s strong operating results, leading sub-sector dividend, and latest acquisition activity for the target upgrade.
APLE garners a Buy rating and a median price target of $19, which represents an increase of 15% from Wednesday’s closing price. The REIT rewards investors with an attractive monthly payout of $0.05 per share which amounts to a 3.56% yield.
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.
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%.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.
Should you invest in AIG right now?
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