10 Best Value Stocks To Buy In January 2022

Key Takeaways:


Wall Street has taken investors on a historically lucrative ride for more than a year. Since the market crashed as a result of the Coronavirus in the first quarter of 2020, stocks have consistently marched upwards. Pullbacks threatened to end what is turning out to be a great bull market for investors along the way but never amounted to anything more than a slight correction. When all is said and done, the S&P 500 has increased 93.3% since bottoming out in the first part of last year. However, it is worth noting that today’s unique market conditions have created inherent value in several quality equities. Despite a frothy marketplace, there’s still plenty of room for today’s value investors to go shopping. Here’s a quick look at some of the best value stocks and why investors may want to consider adding them to their own portfolios.

What Are Value Stocks?

The concept of undervalued stocks will change from investor to investor. If, for nothing else, the metrics used to value equities themselves are weighted differently by the entire investing community. While some investors emphasize price-to-earnings ratios, others choose to look at the market cap, total addressable market, and anything else that may be used to help value a company more precisely.

When all is said and done, there are too many variables and too many metrics by which a company may be objectively valued. Therefore, the definition of a value stock will largely depend on who you ask.

Regardless of who you ask, however, most investors will relate the best value stocks to cheap valuations. As their names suggest, value stocks are widely considered to be cheap, relative to their earnings and long-term growth potential. In addition to their relative affordability, value stocks typically share some or all of the following characteristics:

  • More often than not, value stocks are established, mature businesses

  • Most value stocks will boast steady growth rates, but not fast enough to be confused with growth stocks

  • Value stocks have become synonymous with stable revenues and earnings reports

In other words, value stocks are companies that have demonstrated they can provide shareholders with long-term growth that exceeds the limits set by their current valuations.


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Top value stocks

10 Best Value Stocks To Buy In 2022

  1. SoFi Technologies, Inc. (NASDAQ: SOFI)

  2. Ford Motor Company (NYSE: F)

  3. Target Corporation (NYSE: TGT)

  4. DICK’S Sporting Goods, Inc. (NYSE: DKS)

  5. The Walt Disney Company (NYSE: DIS)

  6. Ally Financial Inc. (NYSE: ALLY)

  7. Skyworks Solutions, Inc. (NASDAQ: SWKS)

  8. Wynn Resorts, Limited (NASDAQ: WYNN)

  9. Ulta Beauty, Inc. (NASDAQ: ULTA)

  10. ViacomCBS Inc. (NASDAQ: VIAC)

SoFi Technologies, Inc.

Aptly named, SoFi Technologies is a social finance company that operates a predominantly online platform specializing in many financial services. The company made a name for itself by offering more affordable student loans but has since expanded its offerings. Today, customers can expect a wide array of services that include (but are not limited to) student loan refinancing, private student loans, personal loans, auto loan refinance, home loans, mortgage loans, and investments. They also offer insurance products for renters, homeowners, automobiles, and others.

SoFi’s price-to-sales ratio makes the stock look expensive from traditional valuation metrics. At 11.58x, the company’s price-to-sales ratio is one of the highest in the consumer finance industry. On the other hand, the price to book is only slightly above the industry median. The stock looks expensive on paper, but today’s valuations don’t appear to account for the company’s ability to disrupt one of the biggest industries in the world. Additionally, many analysts have already started adjusting their price targets, with several big names suggesting nearly 100% upside over the next 12 months.

Analysts are starting to see that Wall Street may be undervaluing SoFi, and it’s about time retail investors got the opportunity they deserve. At the very least, the company’s most recent quarter suggests SoFi is on the right track (despite its lofty $14.10 billion market cap). Not only is SoFi on the brink of receiving an official bank charter, but its lending business has grown 14.0% year over year. For anyone looking for a growth company, 14.0% may not look great, but SoFi’s Galileo should pick up the slack. Add in SoFi’s growing list of services, and each customer brought in will be introduced to several new products, making acquisitions all the more valuable.

SoFi still has a long way to go, and competition in the fin-tech industry is a real threat. However, if they can increase their customer base, their products should keep revenue flowing in.

Ford Motor Company

Even with its recent success, Ford’s stock trades at a relatively cheap valuation. With a price-to-earnings growth ratio of 0.36x, Ford appears to be trading below the auto industry’s median PEG of 0.46x. Competitors like GM (who has a PEG ratio of 0.52) are trading at higher valuations, but Ford remains an industry leader. The reason for the discount may be attributed to Ford’s shortcomings in some international markets in the past. Still, Jim Farley (the new CEO) has vowed to make the company more profitable by “trimming the fat.” Farley appears to be a man of his word, and investors like what they see; the stock has tested new highs for the better part of the last few years.

Despite resting right around its 52-week high, however, Ford looks to be one of the best value stocks to buy now. Not only is it an industry leader priced below its competitors, but Ford is making very promising headway in the electric vehicle (EV) department. The Mustang Mach-E is already selling well, and Ford has yet to release the F-150 Lighting ( an electric version of the world’s best-selling pickup truck). Only months away from its release, Ford had to stop preorders on the Lightning because they were receiving too many, which bodes incredibly well for the stock. If preorders are any indication, the Lightning will do well for the Ford company and its share prices.

Target Corporation

Target Corporation, otherwise known simply as Target, is a nationwide retailer with approximately 1,897 stores sprawling from coast to coast. The company offers retail shoppers just about everything they could ever need, from groceries and personal care products to apparel and home decor. As a one-stop-shop for consumer needs, Target thrived over the course of the pandemic. The retailer’s sales soared as customers turned to Target in favor of many of its competitors.

Due—in large part—to an infrastructure that was able to adapt to online shopping and a large, faithful consumer base, Target ended last year with more than $15 billion in sales growth. For context, last year’s sales grew more than the previous eleven combined. For all intents and purposes, the pandemic served as a catalyst for Target.

Despite resting comfortably as an industry leader, however, Target boasts a price-to-earnings-growth (PEG) ratio of 1.14x. Target’s PEG ratio looks inexpensive compared to the Multiline Retail industry’s PEG of 1.59x and competitors like Walmart. Additionally, Target shares are trading somewhere around 15 times trailing 12-month earnings, which low for a company doing so well.

If its current valuation isn’t enough to convince you that Target is one of the best value stocks to buy right now, the broader market transition out of tech and into tangible commodities with real revenue should do the job. The looming threat of rising inflation is causing an exodus from growth stocks into companies with real products and revenue. As a result, Target not only looks like it has some room to run because of its current valuation and promising future, but it’s reasonable to assume it will see a lot of buyers come its way in the first part of 2022.

DICK’S Sporting Goods, Inc.

DICK’S Sporting Goods is an online and physical store retailer which provides goods and services in the sporting goods industry. As its name suggests, each of its stores across the United States sells sporting goods equipment, fitness equipment, golf equipment, and hunting and fishing gear products. DICK’S Sporting Goods also owns Golf Galaxy, Field & Stream, other specialty concept stores, and a youth sports mobile app. Together, a nationwide network of stores has made DICK’S Sporting Goods one of the country’s most trusted sporting goods stores.

However, even with its popularity, DICK’S Sporting Goods was hit hard in the early stages of the pandemic. With a large footprint of physical stores, the retailer took a big loss when quarantines closed many of its locations. When the market crashed, DICK’S Sporting Goods’ stock price dropped about 132%. Since then, the stock has come roaring back and is now at an all-time high. Still, DICK’S Sporting Goods looks like one of the best value stocks to buy right now.

Over the course of the pandemic, more and more people have turned their attention towards health and fitness. As a result, DICK’S Sporting Goods entered into last year with a lot of momentum. According to CEO Edward Stack, “during this pandemic, the importance of health and fitness has accelerated and participation in socially distant, outdoor activities has increased,” and so has DICK’S Sporting Goods’ bottom line.

The company has performed well, and the stock still trades at a bargain. With a price-to-earnings ratio of 8.74x, DKS is trading well under industry peers. If that wasn’t enough, DKS seems inexpensive with a PEG value of 0.42x, below the Specialty Retail industry median PEG of 1.08x. There’s no doubt about it; DKS looks relatively cheap, especially when compared to how most stocks are trading today. Additionally, the company appears to have a lot of secular tailwinds working in its favor.

The Walt Disney Company

To be clear, Disney is not a value play in the traditional sense. With a PEG ratio of 3.23x, it’s easy to suggest Disney may be overvalued. Subsequently, Disney’s 138.25x PE ratio is amongst the highest in the entertainment industry. Every pure valuation metric suggests Disney is trading for more than it should. However, today’s best stocks deserve high valuations. Disney is highly valued because it is one of the most beloved companies globally with perhaps the most valuable intellectual property ever seen.

Despite its valuation, Disney looks like a great deal at the moment. In particular, investors weren’t happy with the number of new Disney+ subscribers. Fewer people signed up than expected, which sent the stock tumbling about 10% in after-hours trading. However, it needs to be noted that Disney has more up its sleeves than its streaming service. Most notably, Disney parks worldwide are up and running again, and revenue was up $3.5 billion in the third quarter. The latest selloff suggests people may have forgotten how profitable the company’s theme parks are. Revenue is returning, and customers are paying more than before the pandemic ever happened. Price increases haven’t scared anyone away and could make today’s stock valuation look like a great deal.

Ally Financial Inc.

Ally Financial is a bank that operates primarily in the United States and Canada. Ally Financial provides its customers with automotive loans, insurance options, mortgage loans, and corporate finance in both countries. Not unlike all businesses in the banking sector, however, Ally was hit hard by the pandemic. When the Fed dropped interest rates to combat stagnation, every bank in the country lost leverage, and Ally was no exception. Consequently, Ally’s “bread and butter” deals in the auto insurance industry also took a big hit during the pandemic. With fewer people driving, Ally lost a lot of revenue last year, which would explain why it’s one of the best undervalued stocks to buy right now.

In addition to its actual valuation, Ally is already benefiting from the reopening of the economy. As more people hit the road, microprocessor shortages fade, and auto inventories grow, Ally’s auto insurance branch will return to its dominant form. In association with its future growth, Ally’s strong valuation is more than enough evidence to make it a top-value stock to add to any portfolio.

Skyworks Solutions, Inc.

In association with its own subsidiaries, Skyworks designs, develops, manufactures, and markets proprietary semiconductor products to be sold globally. However, the recent chip shortage has called into question Skyworks’ short-term prospects. The inability to fulfill many of its biggest clients’ orders has forced the market to discount its stock price unfairly. That’s not to say the market isn’t right, but rather that it’s a bit short-sighted. It’s true: the chip shortage does hurt Skyworks’ immediate potential.

As a result, Skyworks is trading with a price/earnings-to-growth ratio of 1.43x, which is low enough to bring it under the industry average. The semiconductor industry trades with a price/earnings-to-growth ratio of 1.99x, making Skyworks look like a bargain. Skyworks looks even more undervalued when comparing its P/E ratio to the industry average—17.95x and 28.69x, respectively.

From a pure valuation standpoint, Skyworks looks undervalued. However, long-term secular trends within the semiconductor industry and Skyworks’ position as an industry leader suggest the stock is one of the best value stocks to buy right now. As more technology continues to rely on semiconductors, Skyworks will continue to grow at a rate investors can be comfortable with. Once the chip shortage sorts itself out and the auto industry increases orders, analysts expect revenues and earnings to increase exponentially, along with share prices.

Wynn Resorts, Limited

Wynn Resorts is perhaps most famously known for one of its most prominent flagship resorts on Las Vegas Boulevard. However, it is worth noting that Wynn Resorts develops and operates integrated resorts on a global scale. American investors are probably all too familiar with the 194,000 square feet of casino space, two luxury hotel towers with 4,748 guest rooms, 513,000 square feet of meeting and convention space, 152,000 square feet of retail space, and every lavish amenity you can think of. International investors, on the other hand, are probably already acquainted with Wynn’s more impressive Macau segment. All things considered, Wynn Resorts owns and operates some of the most lucrative gambling resorts in the world.

Despite sitting comfortably at the forefront of the Hotels, Restaurants and Leisure industry, Wynn Resorts looks to be trading at a bargain. That’s not to say its current 2.46x price-to-sales ratio isn’t lofty, but rather that it seems to be trading at a discount, relative to where it was at the first part of this year. With a 52-week high of $143.88, shares of Wynn are now down about 66.4%. The decline is due primarily to the rise of COVID-19 variants (particularly Delta) that threaten the travel and leisure industry. However, the stock doesn’t seem to have bounced back like many of the “reopening plays.” Now that the threat of the Omicron variant appears to be similar to previous variants, it appears as if the market is ready for the world to reopen—again. In the event “the reopening” is able to play out, Wynn Resorts will benefit immensely, and so will its share price.

Ulta Beauty, Inc.

Aptly named, Ulta Beauty is a retail powerhouse amongst the specialty retail industry. Each of the company’s 1,264 retail stores across 50 states offers shoppers a wide variety of beauty and healthcare products, from cosmetics and fragrances to make-up and salon styling tools. Ulta has established itself as the country’s premier health and beauty retailer, whether shoppers are on a budget or willing to spend more on high-end products.

However, despite sitting comfortably at the forefront of its industry, Ulta trades at an attractive valuation. When just about everything seems overvalued, Ulta boasts a price/earnings-to-growth ratio of 0.42x. The entire specialty retail industry, on the other hand, has a slightly less modest PEG ratio of 1.08x, which makes Ulta look very affordable.

In addition to its valuation, Ulta is set to benefit immensely from a reopening economy. As people go back to work and out in public more, Ulta products will see an uptick in use, and share prices will reap the rewards.

ViacomCBS Inc.

ViacomCBS is the media entertainment company behind the wildly popular CBS Television Network. Most recently, however, ViacomCBS released its own streaming service: Paramount+. Viacom’s new streaming service expects to compete with the likes of Disney+ and Netflix. The move simultaneously increases revenue and mitigates the risk of “cable cutting.” That said, Viacom’s stock didn’t move up on the Paramount+ announcement. Instead, the company’s stock was victimized by what amounts to a poor margin call.

In the first part of this year, investment banks serving as Archegos’ broker made a mistake in asset allocation; instead of adding cash to individual accounts, the broker sold Archegos Capital Management’s large position in ViacomCMS. The large sale created an artificial dip in the company, and the stock dropped more than 60% from March’s high.

The drop corresponded with Viacom’s release of Paramount+ and seems to be an unfair correction. If for nothing else, Viacom’s 6.56x price-to-earnings ratio is well below the media industry median PE of 12.43x. Like every other stock on this list, Viacom has long-term trends working in its favor, and the current valuation doesn’t seem to be reflected correctly.

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The Best Value Stocks For Beginners In 2022

  • Berkshire Hathaway Inc. (NYSE: BRK-B)

  • Bristol-Myers Squibb Company (NYSE: BMY)

  • Morgan Stanley (NYSE: MS)

Berkshire Hathaway Inc.

It is typically better for new investors to build their portfolios on solid foundations, and no foundation is stronger than starting a position in Berkshire Hathaway. The product of Warren Buffett himself, Berkshire Hathaway, has become synonymous with Wall Street’s greatest stocks. The company represents the unique convergence of more than 60 wholly-owned businesses and more than four dozen different positions in some of today’s greatest equities. Buffett himself is a value investor and rarely strays from his ideology, which means an investment in Berkshire Hathaway represents an investment in value.

Bristol-Myers Squibb Company

Bristol-Myers Squibb is a biopharmaceutical company specializing in three particular healthcare sectors: oncology, immunology, and cardiovascular therapeutics. BMY has become one of the most credible names in an industry which could use more of them. Despite being one of the biggest players in the healthcare industry, the stock actually ended 2020 down from where it started. At a time when the entire market shot up, BMY remains relatively stagnant. That said, BMY has many tailwinds expected to work in the company’s favor moving forward. The 2019 acquisition of Celgene and other promising drugs should help BMY grow from today’s cheap valuation. On top of that, BMY has a relatively low P/B and price-to-sales ratio, making the stock look more attractive than alternatives in the same industry.

Morgan Stanley

The entire financial sector lagged in every major market index, and Morgan Stanley was no exception to the rule. Over the course of the last few years, Morgan Stanley underperformed the broader market because of low interest rates. Nonetheless, the company’s recent performance wasn’t due to its own shortcomings but rather the lasting impact of the Coronavirus. Morgan Stanley is still one of the best names in the financial sector, and its recent performance makes it a good value, especially with the economy about to open back up again. Additionally, Morgan Stanley’s P/E and P/S ratios suggest that the company is undervalued compared to its peers.

How To Find Value Stocks

To find value stocks, investors must first know what to look for. It isn’t enough to look for stocks that are cheaper today than they were in the past; that’s not how value stocks work. Instead, investors need to look at the underlying fundamentals relative to the company’s prospects (along with other indicators). Not surprisingly, there are many things investors need to look into to find value stocks, which begs the question: Which metrics will help investors find value stocks?

Investors need to consider several important metrics when finding the top value stocks, but there are three which demand a little more attention than the rest of the pack:

  • P/E ratio: Otherwise known as a price multiple (or earnings multiple), the P/E ratio (price-to-earnings ratio) is a metric used to value a company based on its current share price relative to its earnings per share. Typically the most common and most popular valuation tool, the P/E ratio, is best used to compare companies within a similar industry. To calculate the P/E ratio, divide a company’s stock price by its earnings last year. To be clear, there’s no objectively “good” P/E ratio, but 15 is usually the differentiator between value stocks and expensive stocks; those below 15 are usually considered “cheap,” while those above 15 are either fair value or expensive.

  • PEG ratio: Short for “price-to-earnings-to-growth” ratio, the PEG ratio isn’t all that different from the previously discussed P/E ratio. While the PEG ratio helps prospective investors identify a value, it also adjusts to account for different growth rates. To calculate the PEG ratio, divide the P/E ratio by the company’s annualized earnings growth rate. Anything lower than 1.0 typically suggests the stock is cheap.

  • Price-to-book (P/B) ratio: Many investors have grown accustomed to valuing companies based on their book value, or the company’s total net assets. However, investors may use a stocks’ respective share price as a multiple of its book value to identify cheap buying opportunities. Stocks trading for less than their book value may represent buying opportunities.

It should be noted that these metrics aren’t the only things investors should use to find value stocks but are instead used in addition to other tools. If, for nothing else, these metrics aren’t guaranteed to identify undervalued stocks, nor do they work for every company or even the growth stage the company is in. For example, some companies may not even have earnings, which would render these metrics moot. Therefore, it is better to look at these metrics as compliments to a larger valuation strategy.

Summary

The market has experienced every end of the spectrum in one year. Last year, the market experienced one of the most dramatic downturns in history when COVID-19 was officially declared a pandemic. However, the market always drops faster than it rises and rises more than it drops (at least that’s what history tells us). Since the crash, the market has done nothing but improve, less a few corrections here and there. In that time, investors were introduced to some of the best value stocks the market has ever seen. In a matter of weeks, the market gave out some of the best discounts anyone could ask for. Those fortunate enough to be able to find the top value stocks are reaping the rewards. Those listed above have already paid off well, but identifying the best value stocks moving forward well hey new investors establish lucrative positions in the future.


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FortuneBuilders is not registered as a securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”), or any state securities regulatory authority. The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only is not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned.

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