After starting the year out on a dour note, the markets made a complete reversal. These days, the major averages — like the S&P 500 and Nasdaq Composite — continue to hit new record highs. The Dow Jones isn’t doing too shabby either.
But as the overall market surges higher, many stocks are quickly moving out of bargain status and perhaps into the expensive category. For those investors looking for value stocks, pickings are slim.
Or are they?
The truth is, there are plenty of value stocks still out there to be had. Sure, you may not find them among the FANGs, but bargain hunters can still find great deals on value stocks with low P/Es, strong earnings profiles, sales and even strong dividends.
And considering that over the long haul, value tends to beat growth, now could be the best time ever to load up on some of these value stocks.
With that, here are three great value stocks to buy this July and hold for a long time.
Goldman Sachs (GS)
Trailing P/E: 8.9
The vampire squid is becoming a kinder and gentler, well, vampire squid. Investment bank Goldman Sachs (NYSE:GS) has become one of the best value stocks around. Today, shares can be had for a trailing P/E of just 8.9. That’s dirt cheap considering its future potential.
The reason behind the numbers is simple and comes from its former vampire squid name. Stock, currency, and derivatives trading used to make up the bulk of GS revenues in previous years. Those operations are still there to some extent. But thanks to regulation, Goldman has had to look for other ways to grow. Without those, investors have sort of abandoned the major financial name.
However, Goldman has found the solution in consumer banking to the mass affluent. The firm’s personal lending and deposit account platform, Marcus, has been extremely successful — gathering more than $46 billion in deposits and issuing $4.6 billion in loans. Meanwhile, its deal to buy out wealth manager United Capital Financial Partners adds technology, investment management, and additional mass affluent assets into its umbrella. The idea is that Goldman is going back to its roots as more of a banking institution than a trading one.
This is wonderful for investors. These are the kind of operations that throw off plenty of steady cash flows. And they already have, thanks to strong numbers, Goldman was able to increase its dividend and announce a massive $7 billion buyback program.
However, investors continue to ignore the potential. That makes Goldman Sachs a great value stock to buy today.
Trailing P/E: 5.09
Modern life runs on semiconductors. However, there is a big difference between the chips needed for self-driving cars and the one in your garage door opener. For Micron Technology (NASDAQ:MU), the fact that it focuses on the boring, analog side of that equation hasn’t been so good in recent years.
Analog chips are so standard that pricing for them is actually traded like a commodity. There’s a spot market for these chips … just like a barrel of oil or bushel of corn. So, with supplies of DRAM and other basic analog chips being in a glut, Micron has been largely ignored — unlike say, NVIDIA (NASDAQ:NVDA) — and has become one of the cheapest value stocks around. You can currently snag MU stock for P/E of around 5.
At that bargain price, you should snag all you can.
For starters, the glut of DRAM may end as soon as the trade war goes. Already, Micron has seen a boost since President Donald Trump announced that firms can start selling chips to China’s Huawei. Without trade issues, China should once again start consuming DRAM with reckless abandon.
But what is really exciting is that MU has lucrative chipsets. At the same time, Micron continues to improve its memory chips to make them less like commodities and more irreplaceable to manufacturers. This includes its 3D XPoint technology — which allows for very rapid storage and release of data. The kind of chip that is perfect for autonomous cars and A.I.
Over the long haul, these chips will help reduce Micron’s dependency on boring DRAM and allow it to profit from higher margins and demand. In the meantime, investors can score this value stock for basically free while they wait for the turnaround.
Trailing P/E: 14.6
By nature, most consumer staples are considered value stocks. That’s because many of them aren’t fast-growing anymore and are mostly known for their dividends. So, when you can find a steady-eddy consumer stock, trading for a low valuation that also has some serious growth behind it, you have to consider it for your portfolio. And that sums up PepsiCo (NYSE:PEP) to a “T.”
PEP doesn’t need an introduction. We all know the global provider of sweet beverages and salty snacks. The firm giant is pulling in billions in annual revenues across more than 200 different countries. But despite its size, Pepsi is still growing — with management looking to score 4% to 6% organic growth this year.
How PEP will do that comes down to continued improvements to its product mix. That includes new organic, healthy snacks as well as the continued foray into ready-to-drink coffee and sparkling water.
Meanwhile, CEO Ramon Laguarta has continued to act on his promise of a “faster, stronger, better” PepsiCo. That includes investing a hefty dose of tech, consuming intimacy initiatives and looking to cut costs. So far, Laguarta’s moves are working. Last quarter was simply smashing for PEP.
And yet, the market still doesn’t seem to care.
That has made PEP a wonderful value stock to buy. With a P/E of just under 15, investors aren’t pricing in any of the firm’s growth potential. And with its 2.88% dividend, you’re paid while waiting for that potential to be realized.
At the time of writing, Aaron Levitt did not hold a position in any stock mentioned.
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