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Value stocks/companies are made up of companies whose current valuation appears low relative to its fundamentals, such as free cash flows, revenue, dividends, and growth rate based on company and market trends. This can also be displayed by a low stock price compared to its intrinsic value, and investors expect the growth of these stocks to transcend market growth overall. This group of companies includes some of the world’s most well-known and largest companies, such as Procter & Gamble, Johnson & Johnson, and Berkshire Hathaway.
Stocks in the value sector, which are holistically represented by the Vanguard Value ETF (VTV), have broadly outperformed the market as VTV has provided investors with a return of 32.19% over the past 12 months, above the S&P 500’s total returns of 31.27%.
Here are the top value stocks across all sectors for the week of October 25, 2021 as inflation scares and supply chain bottlenecks have brought down valuations of companies across various sectors.
BioNTech SE (BNTX)
BioNTech is a Germany-based biotechnology company that focuses on developing cancer therapeutics, including individualized immunotherapy, as well as vaccines for infectious diseases, including COVID-19. The company’s oncology pipeline contains several classes of drugs, including mRNA-based drugs to encode antigens, neoantigens, cytokines, and antibodies; cell therapies; bispecific antibodies; and small-molecule immunomodulators. With a forward P/E ratio of 5.79 and a PEG ratio of 0.05, BioNTech played a huge part in formulating the BioNTech-Pfizer vaccine – the most effective COVID-19 vaccine in the world. BioNTech will continue to see strong growth due to accelerated vaccine and booster rollout as the Delta variant lingers.
Stellantis N.V. (STLA)
Stellantis NV was formed on Jan. 16, 2021, from the merger of Fiat Chrysler Automobiles and PSA Group. The combination of the two companies created the world’s fourth- largest automaker, with 14 automobile brands. For 2020, we calculate that pro forma Stellantis would have had a sales volume of 5.9 million vehicles and EUR 132.8 billion in revenue, albeit substantially affected by COVID-19. With major markets all over the world, Stellantis has a forward P/E ratio of 5.152 and current P/E ratio of 4.706. Recently, Stellantis and Samsung SDI agreed to form a joint venture to produce battery cells and modules for North America as planned.
Capital One Financial (COF)
Capital One is a diversified financial services holding company headquartered in McLean, Virginia. Originally a spin-off of Signet Financial’s credit card division in 1994, the company is now primarily involved in credit card lending, auto loans, and commercial lending. Boasting a P/E ratio of 6.751, Capital One has shown a jump in top-line and bottom-line growth that very few companies in this sector have experienced, resulting in a comparatively low valuation with a PEG ratio of 0.27. Moreover, as the Federal Reserve begins to taper and hike rates, this company may see further growth and an increasingly favorable valuation.
Micron Technology (MU)
Micron historically focused on designing and manufacturing DRAM for PCs and servers. The firm then expanded into the NAND flash memory market. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). The firm’s DRAM and NAND products are tailored to PCs, data centers, smartphones, game consoles, automotive, and other computing devices. With a forward P/E ratio of 7.283 and revenue growth of 29.25%, Micron recently announced its plans to invest $150 billion to increase chip output.
Features to Look for in Value Stocks
These are some of the top attributes to keep in mind while looking for value stocks:
1. Relatively low price-to-earnings ratio:
The price-to-earnings (P/E) ratio is one of the most common metrics for stock valuation. The P/E ratio tells us how expensive the stock is compared to its earnings. It is calculated by dividing the stock price by earnings per share.
Value investors look for low P/E ratios that are 15 or lower. You should compare ratios not only against the market but against the underlying industry as well. As of June 15, 2021, the S&P 500 average P/E ratio was 45.11.
2. Reasonable price-to-book ratio:
The price-to-book ratio (P/B) is a ratio that compares the market value of a company to its book value. Book value consists of total assets (tangible or intangible) deduced by the total liabilities.
P/B ratios under 1 are considered good, as they point that market value is below the book value. Yet, P/B ratios are not perfect and are often used along with return on equity (ROE). As a rule of thumb, ROE near or above 15% is acceptable.
3. Little or no debt:
Even the best business can fail if it gets overwhelmed in debt. Taking on too much debt, especially when the times are good and financing is cheap, has brought down even the titans of industries.
Debt-to-equity (D/E) ratio shows the financial leverage of a company. As a value investor, you should look for a value below 2.0 and preferably unleveraged (below 1).
4. Well-covered dividends:
A value investor is usually not buying stock to speculate but rather a long-term share in the business. A dividend is nothing more than your share of profits generated.
Yet, this has to be sustainable. During the last market downturn, many companies slashed or straight-out suspended their dividends. Most of them cultivated unrealistic expectations, refusing to adjust them and potentially spooked the investors.
A good rule of thumb is to look for a dividend payout ratio below 50%, and for defensive sectors like consumer staples or utilities, this can be as high as 75%.
Best Online Brokers for Value Stocks
Whether you’re a seasoned investor or a total beginner, the easiest way to invest is through a quality broker. Nowadays, this is conveniently available through web platforms and phone apps. Check out our broker comparison in the table below.
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
- Cost-conscious traders
- Active and Advanced traders
- Over 8,000 different stocks that can be sold short
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- No chat support
E*TRADE is an online discount trading house that offers brokerage and banking services to individuals and businesses. One of the first brokers to embrace online trading, E*TRADE not only survived both the dot-com bubble and Recession — it thrived. You can choose from two different platforms (one basic, one advanced). E*TRADE is a suitable broker for traders of most skill levels, whether you want to buy mutual funds and hold them for decades or dabble in options swing trading. E*TRADE offers a library of research and education materials to help you out.
- Active traders
- Derivatives traders
- Retirement savers
- Sophisticated trading platforms
- Wide range of tradable assets
- Exceptional customer service
- Limited currency trading
- Higher margin rates than competitors
- No paper trading on its standard platform
This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.
Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.
Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.
- Price earnings growth valuations
- Easily evaluate investment opportunities
CenterPoint Securities is ideal for active traders who demand access to advanced tools and services. While investors and casual traders are likely to be content with the basic offerings of traditional online brokerages, active traders will benefit from CenterPoint’s suite of advanced trading tools. If you value execution quality, access to short inventory, advanced trading platforms, and accessible customer service, CenterPoint is an excellent choice.
- Intermediate to Advanced traders
- High-volume traders
- Momentum traders
- Short sellers
- Unrivaled access to short inventory
- Flexible order routing for improved executions
- Discounts for active traders
- Advanced platform with fast executions
- Reliable customer service
- Not designed for beginner or low-volume traders
Biggest Value Stock Movers of the Day
Value stocks are usually low-volatility, but one can always find a few outliers. In the table below, you can see the biggest movers of the day.
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U.S. Xpress Enterprises
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Moving iMage Technologies
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Front Yard Residential
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Kelly Strategic ETF Trust Kelly Hotel & Lodging Sector ETF
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Strategic CRISPR & Gene Editing Technology ETF
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Buying Undervalued is the way to Success
Value investing created some of the largest fortunes in the world. While you might passionately track what famous value investors like Warren Buffett, Charlie Munger or Michael Burry currently have in their portfolios — take notice of your current situation!
Investing to become financially independent is different from investing to remain financially independent.
Whatever your goal is, stick with the business models you understand and look for competitive advantages, capable leadership and the right price. Be prepared to wait for good opportunities as value investing requires patience, discipline and rationality.
As Munger said himself: “A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables.”