All of the value stocks listed below are well-known, large-cap companies that provide conservative and defensive exposure to any portfolio. These companies also possess reasonable upside, driven by a number of growth catalysts. Indeed, I’m a believer that each company could reasonably surge higher, given the quality of these key catalysts.
Fortunately, each of these companies are relatively low-risk, given their size and dominant market positions. That means they aren’t likely to suffer extreme downside moves in their stock prices, like many of their smaller counterparts. In short, these are relatively safe stocks providing a combination of value and growth potential. Even if these particular picks don’t interest a given investor, other value stocks may be worth considering, due to the balance and stability these stocks can provide in a balanced portfolio.
Southern Copper (SCCO)
Southern Copper (NYSE:SCCO) is a value stock that investors should consider, primarily due to the company’s ties to the all-important copper mining sector. Currently, it might not be the best time to buy SCCO stock, as it appears the company’s shares are fully-priced. However, if this stock falls to its average target price (around $65 per share), I think that will represent a good potential entry point.
So, why is copper so important? Well, copper is considered to be a broad indicator of overall economic health. Copper is used in just about everything, from homebuilding to electronics, because it is an excellent conductor of electricity. So, as overall economic demand increases, so too does the demand for copper. Accordingly, when copper prices are rising, that correlates to a strengthening economy. Thus, for those bullish on global demand growth picking up, copper is a great way to play this trend.
In 2023, copper prices have traded in a relatively narrow range, after jumping in January. That said, there’s reason to consider SCCO stock aside from its capital appreciation upside – its dividend currently yields more than 4.5%. That dividend can partially or fully offset some of the commodity price-related declines the stock sees over time, providing improved return stability for investors.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is likely to catch on in the coming weeks and months as another way to benefit from AI-related growth in the semiconductor sector. Chatter is beginning to pick up on this topic, but investors appear more focused on Qualcomm’s handset-related issues than the stock’s potential upside.
Essentially, handset demand is worsening, as economic pressures are forcing consumers to reconsider buying expensive new cell phones. That directly affects Qualcomm, as the company is a major chip supplier for the smartphone industry.
This waning demand resulted in weak quarterly results for Qualcomm when it released earnings in early May. The company’s revenue fell by 17%, and its net income dropped by 42%.
But there’s a silver lining, of sorts. The company’s automotive chip revenues increased 20% year-over-year, and Qualcomm also increased its dividend by 7%. Even after this increase, the company’s dividend remains sustainable, given its reasonable payout ratio of only 32%.
Qualcomm is also quietly making inroads into various AI-related verticals, positioning itself as a potential key supplier in this high-growth area. In short, it’s easy to make a “buy the dip” case for QCOM stock right now.
Pfizer (PFE)
Pfizer (NYSE:PFE) has been on a prolonged downturn in 2023, resulting in PFE stock sinking from more than $50 per share to around $35 per share at the time of writing. That said, this slide has left the stock seriously undervalued in the eyes of many investors (myself included).
Wall Street thinks Pfizer shares are roughly 33% undervalued, at the time of writing. Some experts, including those at Gurufocus, believe there’s even more upside, with this group suggesting PFE stock could nearly double from current levels.
Aside from analyst price targets, I see another reason to be upbeat about Pfizer. The key growth driver I’m focused on is the recent rise in obesity treatments.
Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) are chasing blockbuster revenues with the launch of their injectable obesity drugs that have received FDA approval. Pfizer has announced that it will be chasing those same revenues, utilizing a different path forward.
Instead of an injectable drug, Pfizer will seek FDA approval for an obesity treatment in pill form. Undoubtedly, this is a complex space, with many variables and competitive factors to consider. But Pfizer is blazing its own path forward, looking to create the latest blockbuster pill, utilizing the vast resources it gained from the success of its Covid-19 vaccine.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is a tech stock that typically doesn’t get lumped together with its more exciting counterparts in the technology sector. That’s because Cisco provides networking and security solutions that are far less exciting and groundbreaking than many of its high-growth peers. This reality also helps explain why CSCO stock remains a value option for tech investors.
Further, despite Cisco Systems’ strong recent quarter in which it beat guidance, there are concerns that continue to hamper its stock price. Analysts and investors are concerned that enterprise networking demand may fall as oversupply becomes an increasingly important issue.
Now, Cisco Systems did provide guidance that revenue growth this quarter should be just as strong as it was during the first three months of 2023, if not slightly stronger. The company estimated that revenue growth could come in as high as 16%.
Additionally, the firm believes sales should grow 10% over the course of this fiscal year. Those projections suggest that demand concerns are likely overstated. Indeed, CSCO stock looks a lot like QCOM stock, in that both offer reasonably-strong upside, dividend income, and a chance to prove the critics wrong.
General Motors (GM)
I’m about to corroborate the same argument that has propelled General Motors (NYSE:GM) stock higher over the last few years. Electric vehicles are going to be a game-changer for GM, sooner or later. While an immediate impact may not necessarily be felt in July, it’s clear that the company’s heavy investment in EVs should eventually be reflected in a rising share price.
Now, GM stock hasn’t exploded higher yet, due to a few key issues plaguing the company. A significant gap remains between General Motors and Tesla (NASDAQ:TSLA) in terms of raw sales. Additionally, GM sold only 20,760 EVs in the first quarter. That was approximately 1/8th as many as the 161,000 EVs that Tesla sold in the U.S. over the same time frame.
Competitive factors are important to consider when it comes to GM stock. While things don’t look bright when one compares General Motors to Tesla, GM did just about double Ford’s (NYSE:F) EV sales in Q1. An arguent could be made that Mustang production was shut down for retooling, benefiting GM in that volume race, but a win is a win.
Last year, GM announced that it anticipated it would overtake Tesla in terms of sales volume some time around the middle of this decade. GM stock is dirt-cheap relative to earnings, so there’s a strong argument for buying GM stock now and holding for the long-term, for those bullish on increased competition in the EV race.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) is essentially in the best position of any U.S. bank right now. It was already the biggest U.S. bank prior to the recent regional banking crisis. However, JPMorgan capitalized on its size and resources to deftly maneuver into an even stronger position as a result of that crisis.
JPMorgan played an important role as an anchor for the entire banking sector, being among the consortium of banks that propped up the regional banking sector. Indeed, the company wins PR points in that regard, considering the cynical headlines that were spinning at the time.
Additionally, JPMorgan picked up some of the best assets from many of the failed regional banks in this crisis. It took First Republic’s wealth management clientele in one deal. So, it’s clear that JPMorgan’s intent wasn’t purely altruistic in its bid to stave off a crisis of confidence in the banking sector.
UPS (UPS)
UPS (NYSE:UPS) is a stock investors should consider both for its leading position within the logistics industry and its reasonable valuation on a price-earnings basis currently.
There are a few things to consider in relation to UPS’ moderate price-earnings ratio. One, it simply suggests this stock trades at a discounted level, given how important UPS is to the U.S. economy. Investors should arguably be willing to pay more for a dollar of UPS earnings, given its position within its industry and within the economy overall.
Two, the company’s median price-earnings ratio over the past decade is roughly 50% higher than it is currently. This suggests that investors have long known that UPS’ earnings are more valuable than they are being priced right now. As capital looks for bargains, I’d bet that some of this capital flows into UPS stock due to this simple fact.
Like some of the other stocks on this list, UPS is a company that’s greatly impacted by macro economic factors. Accordingly, it may be unsurprising to see the company’s revenue decline from $24.4 billion to $22.9 billion in the first quarter on a year-over-year basis. That said, UPS will continue to act as a barometer for the overall economy, so for those bullish on long-term growth, this is a great value pick right now for optimists.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
