Shares to buy: 7 value stocks with at least 50% increase
Every investor who gets a long position in a stock or fund does so because they believe the underlying asset or assets are valuable. We all want a good deal and we all want to make money. This is why value stocks in particular intrigue many investors.
More than ever, value stocks have shown their worth. As high growth stocks are squashed in a brutal bear market, many value stocks are doing very well. And by doing really well, I mean they’re actually reaching new, unprecedented heights.
Given the rise in value stocks, it can be difficult to find choices that still have a solid rise. However, this is exactly what we are looking for in this group.
Value stocks often come with a low or reasonable valuation and a dividend. This is not always the case, but it is quite common. So, let’s look at a handful of stocks with great opportunities ahead.
- Ali Baba (NYSE:BABA)
- Bristol-Myers Squibb (NYSE:BMY)
- Wynn Resorts (NASDAQ:WYNN)
- Farfetch (NYSE:FTCH)
- Dropbox (NASDAQ:DBX)
- Box (NYSE:BOX)
- Micron (NASDAQ:MU)
Value stocks to buy: Alibaba (BABA)
Alibaba isn’t one of your typical value stocks – by far. Many will either criticize this choice as a growth stock or reject it because of its controversial position in China. It is very good. Not all choices are suitable for all investors. But listen to me.
At this point, I think Alibaba is both growing and a stock of value. Stocks are down about 32% from highs reached in the fourth quarter of 2020. BABA stock was up before the Group of ants initial public offering (IPO), which was halted at the last minute for regulatory issues.
Alibaba, which owns a third-party stake in Ant, peaked around this time and has struggled to regain a foothold since. This is despite the elimination of most of its regulatory issues as well as a strong quarterly report.
That said, this company still has a ton of growth and its valuation is quite reasonable. In fact, compared to most of its US-based mega-cap tech peers, Alibaba has a very low valuation. This is despite revenue estimates calling for sales growth of 30% this year and around 21% next year.
Sometimes investors just have to buy when stocks are in disgrace. Right now, the BABA stock is pretty much in disgrace. If stocks gain 50% from current levels, that will simply send Alibaba back to its previous highs.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb just doesn’t seem to be gaining momentum. I don’t know why, but it seems like no one wants to own BMY stocks.
This is surprising, considering the number of quality brands, drugs and treatments the company has. This is especially true after its enormous acquisition of Celgene for $ 74 billion.
Of course, BMY has seen its growth slow down a bit, but the company still has a solid outlook. For this choice of value stocks, analysts forecast revenue growth of 8.3% this year and growth of around 4% next year. This goes hand in hand with profit growth of 15.2% and 7.6% this year and next year, respectively.
It’s honestly pretty solid, but even more so for a company that trades at just 8.78 times earnings over time. This is double-digit earnings growth and a single-digit price-to-earnings (P / E) ratio.
But if you want even more, investors can also take advantage of Bristol-Myers Squibb’s 2.99% dividend yield. BMY stock might not be sexy, but this “boring” company is definitely a winner.
Value stocks to buy: Wynn Resorts (WYNN)
WYNN stock should be on investors’ radar for one simple reason: the reopening of trade. However, there is much more to this story than what is seen.
Casino shares were hammered at the end of the first quarter of 2020 as the world closed. The trip also stopped, and Las Vegas Boulevard became almost empty. No one knew what the future would look like, so they sold these stocks lower and lower.
However, a little over a year later, the United States is ready to return to action. Occupancy rates jump back into Las Vegas mode, especially on weekends. Macau’s income is also on its way back. When we look at Wynn, analysts expect revenue growth of over 100% this year, followed by growth of almost 46% next year.
Unfortunately, consensus expectations don’t predict Wynn’s return to annual profitability until next year. Assuming we get the bounce everyone is hoping for, Wynn and other casinos are going to have a big tailwind to work with. On top of that, this stock pick of value recently announced new plans for its online gaming and sports betting unit.
Like Alibaba, Farfetch can be a growth stock on the minds of most investors. In fact, he is a growth stock. However, with FTCH stock’s recent 47% drop from its February high, this name has landed squarely on my list of value stocks.
Farfetch is an online marketplace for luxury goods. It’s no surprise that as these products have grown in popularity, so has Farfetch. Recently, the company also announced a partnership with Alibaba, allowing it to enter the Chinese market with the country’s largest retailer.
This should pay dividends on the go.
Until then, however, let’s go look at the estimates. Analysts expect the company to increase revenue by 33% this year, 29.5% next year and more than 30% in 2023. For this, investors pay only 6.18 times forward sales. I don’t find the price-to-sell (P / S) to be expensive at all, especially since Farfetch has been underestimated for some time now.
For this kind of valuation and growth, FTCH stock seems like a good deal after its recent decline. A 50% rebound here doesn’t seem out of the question.
Value stocks to buy: Dropbox (DBX)
Dropbox is an attractive candidate for this valuable stock list, due to its size and rate of growth. With its market capitalization of $ 10.5 billion, it is far from being a large-cap tech giant. However, its growth rate is not high enough to justify a high valuation.
Basically, DBX stock finds itself in this sort of weird middle ground where it is a low value, stable but slow producer with a mid cap market cap.
For example, consensus expectations call for revenue growth of 11% this year and 9% next year. However, the income estimates look better. Expectations call for a five-year period growth rate of almost 17%.
For its strong growth, investors pay only 4.82 times forward sales and 19.46 times forward profits. But that’s not all – there’s even more value under the hood.
Dropbox has over $ 1 billion on its balance sheet. Last year, the company generated $ 2 billion in recurring annual revenue, while free cash flow exceeded $ 500 million. These are impressive numbers. Thus, at this valuation, the DBX share is either up or could be a complementary acquisition.
Remove the above company’s “Drop” and you just have Box. This company has a lot of makeup similar to Dropbox. However, there are also some obvious differences.
First off, with a market cap of just $ 3.8 billion, it’s significantly smaller than Dropbox. With a current forward P / E ratio of around 28.85, it is also more expensive on an earnings basis. However, trading at 4.46 times futures sales makes it cheaper based on income. More, some of its financial data are worth a look.
In the fourth quarter of 2021, the company had nearly $ 600 million in cash and cash equivalents (page 38), while last year it generated free cash flow of $ 180 million. Analysts expect revenue growth of just 9.6% this year, but an acceleration of 10.1% next year and another acceleration by 11.7% the following year.
Box is also profitable and is expected to earn 80 cents per share this year, before generating more than $ 1 per share in profit in 2022.
Is the BOX stock the most exciting stock in the world? No not necessarily. But this choice of value stocks has decent growth, solid fundamentals, and a reasonable valuation.
Value stocks to buy: Micron (MU)
The micron can be a delicate stock because it can easily slip into the “value trap” category. What do I mean by that? Well, many investors will often look at the P / E ratio of this name, see that it is low, and buy MU shares accordingly. According to Yahoo finances!, Micron is trading at just 7.89 times earnings at futures.
The thought becomes, “If that gets even a 50% valuation of the S&P 500, its price will more than double. While this is nice in theory, that’s not really how it works. At least not with Micron. We cannot just assume that we will re-evaluate an action.
However, this company should be on the investor radar as the world continues to suffer from its massive chip shortage. At the end of March, the company raised its outlook due to the shortage, which has no short-term solution at hand. Trade wars, supply chain disruptions and difficult to predict demand during Covid-19 have caused many problems in this regard.
But companies like Micron should be doing very well. Consensus estimates predict revenue growth of nearly 26% this year and an acceleration to almost 32% growth next year. Additionally, expectations are for profit growth of over 90% for both this year. and Next year. Maybe this won’t pay Micron huge dividends, as Wall Street lets its valuation drop and the share price stagnates. However, if the stock MU Is reacting to this growth, this one value stocks could have a lot of benefits.
As of the publication date, Bret Kenwell held a long position on FTCH. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Publication guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.