Markets have once again become volatile, pressuring a large number of growth stocks, such as Wall Street’s tech darlings. Therefore, many investors are looking for value shares that could shine in the coming quarters. Today’s article introduces seven value stocks for the new quarter that is upon us.
Over the past decade, growth stocks have brought juicy returns to portfolios. The past 12 months have also meant cheap money from the Federal Reserve and fiscal stimuli from the government, pushing growth stocks to record-highs. As a result, many investors feel the current valuation levels of these growth names are not quite sustainable. After all, no trend can last forever.
Now, as economies open up, most value stocks could benefit from a “return to normalcy.” Value names are typically established blue chip names with stable revenues, cash flows, as well as dividends. During market declines, they are usually not as volatile as growth shares.
Do you believe the price gap between value and growth stocks could narrow down in the rest of the year? If yes, then here are seven value stock to consider for long-term portfolios. With their wide moats, clean balance sheets and strong competitive positions, they deserve your attention. They are:
- Gilead Sciences (NASDAQ:GILD)
- International Paper (NYSE:IP)
- iShares Russell 1000 Value ETF (NYSEARCA:IWD)
- PPL (NYSE:PPL)
- Subaru (OTCMKTS:FUJHY)
- Unum Group (NYSE:UNM)
- Volkswagen (OTCMKTS:VWAGY)
Value stocks: Gilead Sciences (GILD)
52-week range: $56.56–$85.97
1-year price change: Down about 7%
Dividend yield: 4.4%
Foster City, California based Gilead Sciences develops therapies mainly for HIV, cancer and viral hepatitis diseases. The biopharma group played a central role in the Covid-19 pandemic, especially in the early months. Veklury, which is Gilead’s brand name of remdesivir, has treated a large number of hospitalized patients.
The company’s latest Q4 metrics show that the top line grew by 26% year-over-year (YoY) to $7.42 billion. The catalyst was the soaring Veklury sales. Non-GAAP net income almost doubled to about $2.8 billion. Diluted earnings-per-share (EPS) jumped from $1.10 in Q4 2019 to $2.19 in fourth-quarter 2020. At the end of 2020, Gilead had $7.9 billion of cash and equivalents.
Management expects a gradual recovery in underlying market dynamics starting Q2 2021. Yet, the company’s two HIV drugs (i.e., Truvada and Atripla) lost exclusivity in the U.S. and sales are expected to continue to decline in the near future. The 2021 full year total revenue guidance currently stands between $23.7-25.1 billion. In 2020, it was $24.4 billion.
CEO Daniel O’Day said, “As we head into 2021, we have many additional opportunities to help patients, especially in oncology where Trodelvy, for example has the potential to treat a broad range of cancer types. These new opportunities, together with our continued leadership in antivirals put Gilead on a clear path to growth.”
GILD’s forward price-to-earnings (P/E) ratios and price-to-sales (P/S) stand at 8.97 and 3.3, respectively. With its impressive portfolio of assets, 2021 might become the year the company generates excitement among more investors.
International Paper (IP)
52-week range: $26.64 – $56.98
1-year price change: Up about 79%
Dividend yield: 3.98%
Our next stock is one of the most important players in its segment. The Tennessee-based International Paper manufactures packaging products and printing papers. The group operates through four segments: industrial packaging, global cellulose fibers, printing papers and consumer packaging. Increased e-commerce over the past decade as well as during the pandemic has provided significant tailwinds for IP.
The company released Q4 financials in early February. Net revenue was down from $5.5 billion in Q4 2019 to $5.2 billion in Q4 2020. The main reason was the decline in sales of the printing papers segment. As more people worked from home, there was less paper printed, due to digitalization trends. Net earnings dropped from $165 million to $153 million. Diluted EPS recorded was 39 cents. Free cash flow was $695 million at the end of the quarter.
CEO Mark Sutton cited, “In 2020, we returned $800 million to shareholders and reduced debt by $1.7 billion to enhance our financial strength, while continuing to strengthen our packaging business through targeted…
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