Value stocks have been some of the best performing stocks this year as investors look for companies that are taking advantage of the improving economic outlook at the expense of high-growth technology stocks.
The current time reflects investors who are shifting from risky assets that have characterized growth stocks in the past year to more risky stocks, given the uncertainty about future market direction.
Indeed, the iShares S&P 500 Value ETF (NYSE:) has outperformed the iShares S&P 500 Growth ETF (NYSE:) by a wide margin since the beginning of the year, amid speculation that an environment will harm the market with longer-term cash flow horizons.
Given the shift in investor risk appetite, we highlight three leading value-themed names worth considering as market participants continue to dump risky stocks for safer bets.
1. British American Tobacco (LON:)
Q4 Earnings Release: Thursday, February 3, before market open
P/E ratio: 12.1
Dividend yield: 7.89%
Market Capitalization: $98.3 billion
Performance to date: +15.2%
British American Tobacco (NYSE:) is a UK-based multinational cigarette and tobacco manufacturing company. The most recognized and best-selling products, sold in more than 180 countries around the world, are the Newport and Lucky Strike brands.
With a P/E ratio of 12.1 and an annualized dividend of $2.96 per share on a skyrocketing yield of 7.89%, British American appears to be a good option for investors looking to hedge against further volatility in the coming months.
Good quality blue chip dividend stocks typically perform well in a turbulent environment as market players seek out defensive consumer staples with relatively sober valuations.
Indeed, the quantitative models on InvestingPro indicate an approximately 39% increase in BTI stocks from current levels over the next 12 months, bringing stocks closer to their fair value of $60.06.
Source: InvestingPro
BTI rose to its best level since February 2020 at $43.90 on Monday. It closed out Tuesday's session at $43.11. At current valuations, British American, whose primary listing is on the London Stock Exchange, and a constituent of the , has a market capitalization of $98.3 billion.
London, UK-based company Big Tobacco, which has benefited from its recent shift to lower-risk non-combustible products, has seen its inventory rise nearly 15% year-to-date, much better than its peer yield of both the and the .
2. Chevron
Q4 Earnings Release: Friday January 28th before market opening
P/E ratio: 24.6
Dividend yield: 4.57%
Market capitalization: $255.5 billion
Performance to date: +13%
Chevron (NYSE:) is one of the world's largest energy companies. The company's core activities include exploring, manufacturing, refining, and transporting and related products.
As the Fed tightens monetary policy and inflation continues to rage, we expect high-quality companies sensitive to the improving economic outlook to outperform the broader market. That makes the San Ramon, California-based oil giant, which operates in about 180 countries, a solid choice for the weeks and months ahead.
Chevron's stock has a relatively low P/E ratio of 24.6, making it cheaper than other notable names in the energy sector such as ConocoPhillips (NYSE:), Schlumberger (NYSE:), Pioneer Natural Resources (NYSE:), and Devon Energy (NYSE:).
Source: InvestingPro
In addition, Chevron's relatively high dividend, currently $1.34 per share, implying an annual dividend of $5.36 per share, further enhances the company's appeal. The stock's dividend yield is currently 4.57%, more than triple the implied yield for the S&P 500, which is 1.39%.
CVX has gained 13% so far in 2022. It ended yesterday at $132.59, the best level since January 2018. At current valuations, the Big Oil company has a market cap of $255.5 billion.
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Chevron, which reported revenues that easily exceeded expectations in the previous quarter, has a consensus among analysts calling for earnings per share of $3.10 for the fourth quarter after a loss of $0.10. 01 per share in the challenging period from a year ago.
Revenues are expected to grow nearly 77% year-over-year to $44.7 billion. Aside from the top and bottom-line numbers, investors will be happy to hear if the energy giant plans to return more cash to shareholders in the form of higher dividend payments and share buybacks.
3. Coca-Cola
Q4 Earnings Release: Thursday February 10, before market opening
P/E ratio: 29.5
Dividend Yield: 3.08%
Market Cap: $258.3 Billion
Performance to date: +1.1%
Coca-Cola (NYSE:) is a North American multinational beverage company, best known for manufacturing, selling and marketing the Coca-Cola brand of the same name. The other notable soft drink brands are Sprite and Fanta, as well as non-carbonated drinks Powerade, Nestea and Dasani water.
While sharp losses have dominated unprofitable high-growth technology stocks to kick off the new year, defensive areas of the United States are seeing strong gains as investors pile into cyclical groups that do well in an economic recovery.
With a P/E ratio of 29.3, Coca-Cola stock is moderately discounted compared to its notable competitors, such as PepsiCo (NASDAQ:), Keurig Dr. Pepper (NASDAQ:) and Monster Beverage (NASDAQ :).
The creator of the iconic Coca-Cola brand is also a quality dividend stock. KO currently offers a quarterly payout of $0.42 per share, representing an annualized dividend of $1.68 on a yield of 3.08%, one of the highest in the industry. Source: InvestingPro (19459002]
Taking that into consideration, we expect Coca-Cola to continue its momentum in the near term as the Fed begins to raise interest rates and completes its pandemic-era bond-buying program.
KO hit a record high of $61.45 on Jan. 14 and closed last night at $59.82, earning the Atlanta, Georgia-based beverage giant a valuation of $258.3 billion.
Coca-Cola reported on Oct. 27, providing optimistic guidance thanks to a favorable demand environment. For the upcoming release, consensus estimates call for earnings per share of $0.41 on $8.99 billion in revenue.
