These Value Stocks Could Be Bargains At Current Levels
It’s definitely tempting for investors to get excited about opportunities in certain areas of the market that have been beaten down over the last few months. With many retail investor favorites like growth stocks, SPACs, and Chinese stocks down big, some might try to rationalize taking a position in these risky assets given how far they have fallen.
While that approach might work out for you in the long term, the truth is that these stocks have been sold off relentlessly for a reason. Until we see those types of stocks breaking out of their downtrends, it makes a lot more sense to explore value stocks instead.
These are companies with reasonable valuations and solid business models that are actually generating a profit, which is extremely important when you think about how interest rate increases can affect certain companies. Additionally, value stocks offer good deals for investors because they are trading at prices below peers or the overall market.
If you’re looking for some of the best value stocks to buy now, here are 3 attractive companies to check out:
1. Peabody Energy Corporation
The bull case for this value stock is fairly straightforward—with energy consumption on the rise as the world recovers from the pandemic and sanctions on Russia increasing the need for coal, Peabody Energy (NYSE:BTU) could be in for a strong year ahead.
It’s the largest coal producer in the United States and owns an interest in 17 active coal mining operations in the U.S. and Australia. Peabody operates in five business segments including Seaborne Thermal Mining, Seaborne Metallurgical Mining, Powder River Basin Mining, Other U.S. Thermal Mining, and Corporate and Other.
This stock has been on fire over the last year, yet is still trading at an attractive P/E ratio of 9.16, which is much lower than the average P/E of 24.36 for the S&P United States BMI Energy Sector.
It’s also worth noting that the stock recently pulled back sharply from its highs but is still above all of the major short-term moving averages, which tells us that shares are holding the uptrend. Peabody Energy also recently reported a Q4 revenue increase of 72% to $1.26 billion, which is a reminder of just how helpful rising coal prices are to the company’s top line. With coal demand expected to reach all-time highs this year, this is certainly an intriguing value stock to watch.
2. JPMorgan Chase
The financial sector as a whole has been incredibly weak to start the year, which might be telling us something about what’s going on with the economy. With that said, shares of this blue-chip bank have been beaten down so bad that it’s definitely in value stock territory.
JPMorgan Chase & Co (NYSE:JPM) is one of the world’s largest diversified banking firms, with leading investment banking, credit card, retail banking, commercial banking, and asset and wealth management businesses. It’s a truly dominant company that should benefit from higher net interest income this year and could end up being a bargain at its current valuation.
Just look at JPMorgan's 8.48 P/E ratio, which is significantly lower than the S&P 500 P/E ratio of 21.65, for confirmation that shares could be a great deal at current levels. The stock also offers a 3.07% dividend yield, which is certainly appealing given how inflation is impacting our financial lives.
According to MarketBeat’s consensus analyst price targets, JPMorgan might have 30% of upside from its current levels given the $173.39 average price target. Finally, the fact that JPMorgan recently confirmed a deal to acquire Irish fintech company Global Shares for $730 million should be a reminder that the company continues to invest in innovative expansion opportunities that might pay off in a big way over the years.
3. Metlife
MetLife (NYSE:MET) is another great value stock to consider, especially since it’s a company that is poised to benefit from rising interest rates thanks to higher reinvestment yields. It’s the largest life insurer in the United States and a company that also provides employee benefit plans and other financial services.
Metlife has taken quite a few steps to improve its business over the last few years, including a spinoff of its variable annuities business, Brighthouse, and a divesture of its property and casualty insurance business. This has resulted in a leaner and meaner company that should allow Metlife to focus on what is working and help the company generate more stable cash flow.
Metlife is also worth a look as the U.S. labor market recovers from the impacts of the pandemic since that could lead to better group life insurance sales. Shares are up over 4.5% year-to-date and outperforming the market, another reason why this value stock stands out at this time.
Finally, Metlife is trading at an 8.85 P/E ratio and also offers a 2.97% dividend yield, which are excellent additional reasons to consider adding shares.