It’s safe to say this hasn’t been a great year for value investors. While names in big tech, electric vehicles (EVs) and other high-growth industries thrived in 2020, old school value stocks struggled to bounce back after March’s crash. Granted, many of these stocks have now returned to pre-pandemic levels. But, some continue to languish at prices below where they traded at the start of the year.
That said — although widely distributing a Covid-19 vaccine is still a work-in-progress — a return to the old normal appears to be in the cards for 2021. For value picks hard-hit by the pandemic, that means an opportunity to jump back to their respective highs. And for stocks that cratered in March but recovered through the rest of the year? They have the chance at additional gains, as their prospects improve further once we’re in recovery mode.
So, which value stocks belong on your radar for 2021? Any of these 1o names might be your ticket to solid returns in the new year:
- Cardinal Health (NYSE:CAH)
- DaVita (NYSE:DVA)
- Graham Holdings (NYSE:GHC)
- HP (NYSE:HPQ)
- Kroger (NYSE:KR)
- 3M (NYSE:MMM)
- Altria (NYSE:MO)
- PPL Corporation (NYSE:PPL)
- Snap-On (NYSE:SNA)
- AT&T (NYSE:T)
Value Stocks to Buy: Cardinal Health (CAH)
First on my list of value stocks is Cardinal Health, a pharmaceutical distributor with shares that are already back near pre-pandemic prices. However, CAH stock remains a great value opportunity in the healthcare sector.
Why? One reason is its low valuation relative to peers. With a forward price-earnings ratio of 10.08 and an EV-EBITDA ratio of 10.31, Cardinal Health sells at a slight discount to some of its rivals.
But that’s not all. Last month, the company — along with several other drug distributors — settled with state and local-level litigators about its alleged role in the opioid epidemic. With this negative headwind now out of the way, investors may be more willing to push the stock back to historic valuation levels.
A few years ago, CAH stock commanded a price-earnings ratio between 15 times and 20 times. In other words, there’s ample room for additional gains, even as shares are just a few dollars from the 52-week high.
Because of its low valuation, its recent settlement and the substantial upside potential from multiple expansion, you should keep Cardinal Health on your radar.
Dialysis center operator DaVita has been on a tear this year. Shares have surged nearly 48% year-to-date (YTD), with the stock really taking off after election day. But — even after its impressive run — this remains one of the best value stocks out there.
Trading for 13.39 times forward price-earnings, shares look worth it relative to the company’s projected earnings. With the demographic trend of an aging population on its side — plus its aggressive use of stock buybacks — expect DaVita to show solid earnings growth numbers for quite some time.
Couple that with its high profit margins and clear economic moat, it’s easy to see why DVA stock remains a major position in Warren Buffett’s portfolio, too. The legendary investor’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) may be best known for its stakes in Apple (NASDAQ:AAPL) and Coca-Cola (NYSE:KO), but a 30% stake in DVA makes it another major Berkshire holding, too.
A solid performer in 2020 with more runway to head higher, add DaVita stock to your watch list.
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