Growth stocks have led the market but these undervalued stocks might soon show higher returns. As interest rates continue to climb in 2021, we could see a big move into value stocks. That’s with using history as a guide.
Whether you’re looking for short- or long-term opportunities, you’ll find them both here. And most of the companies below pay dividends. So, you can collect income while waiting for their share prices to climb.
If you’re interested in regular income, you can also check out these monthly dividend stocks. And here’s a free investment calculator as well. With it, you can see how big your portfolio can grow.
Now without further ado, here are some of the most undervalued stocks in 2021…
Best Undervalued Stocks 2021
- CVS Health (NYSE: CVS)
- Cardinal Health (NYSE: CAH)
- AbbVie (NYSE: ABBV)
- Wells Fargo (NYSE: WFC)
- Bank of New York Mellon (NYSE: BK)
- Intel (Nasdaq: INTC)
- IBM (NYSE: IBM)
- Verizon (NYSE: VZ)
- Dish Network (Nasdaq: DISH)
- Kroger (NYSE: KR)
These value stocks come from a wide range of industries. You’ll find companies ranging from biotech to grocery chains. So, buying into a few of them can provide diversification benefit.
When it comes to value stocks, measuring risk relative to reward is vital. So, to make this list, there were many valuation metrics to consider…
Why Did These Value Stocks Make the List?
The stock market is near its all time highs. Equity valuations aren’t looking as good compared to historical averages. This makes it hard to find undervalued stocks that are worthwhile.
There are lots of great companies out there, but they don’t trade at reasonable prices. In the words of Warren Buffett…
Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.
Keeping this value approach in mind, here are a few of the metrics I looked at to find these companies…
- Price-to-Sales (PS)
- Price-to-Earnings (PE)
- Forward PE
- Price-to-Book (PB)
- Debt-to-Equity (DE)
This is just a small sampling of valuation metrics I considered. It’s also important to note that each industry can have different averages. So, I compared these undervalued stocks not only to the overall market, but also their competitors.
Let’s now dive into some company highlights…
Undervalued Company Highlights
CVS Health’s share price has had a nice run over the last year. Although, it’s still well off its all-time high set back in 2015. Looking forward, this healthcare giant has plenty of room to run.
CVS has over 9,900 retail locations across the U.S. and over 68,000 retail network pharmacies. This reach has created economies of scale and as the U.S. population grows older, investors should see higher cashflows.
Wells Fargo stock has had a few rocky years but things seem to be turning around. The financial collapse happened over a decade ago and the new safety measure are paying off. The Fed’s stimulus is also helping out the financial sector. Wells Fargo cut its dividend but will likely return to raising it soon.
Intel has had increased competition but the industry is expanding. There have been chip shortages across the world. Car manufacturers have even had to shut down production due to those constraints.
Intel is making moves to ramp up production. It recently announced that it will build two new fabs in Arizona for roughly $20 billion. Intel plans to become a major provider of foundry capacity in the U.S. and Europe to serve customers globally. This is a great move and should reward shareholders for many decades.
Verizon is easily one of the best undervalued stocks in 2021. Warren Buffett – via Berkshire Hathaway – bought shares last year. And the position is in his top 10 largest holdings. That’s a strong vote of confidence from one of the world’s best investors.
Verizon is a defensive dividend play. During downturns, its price doesn’t usually drop as much as the broader market. It also pays above a dividend 4% dividend. That’s hard to pass up in our low interest rate world and it looks safe going forward.
Kroger is another defensive play with a long track record. It’s one of the world’s largest supermarkets and it easily clears over $100 billion in annual sales. Kroger is well positioned to help feed the growing population.
Kroger is also adapting to new consumer trends. It’s now one of the largest organic food companies around. These shifts are helping the company increase their sales and cashflows to reward investors.
Final Thoughts and More Opportunities
We’re seeing a shift from growth stocks into value stocks. And increasing interest rates might speed up the rotation.
The stocks above could see higher returns if that plays out. Even if there’s a delay, investors can collect big dividends along the way. It’s a sound investment approach that many of the world’s best investors use.
Although, the markets are always moving and the same is true with the best undervalued stocks. So, to find the more recent opportunities, consider signing up for Wealth Retirement. It’s a free e-letter that’s packed with insight from investing experts.