The age-old debate, growth vs value, has been going on since stocks started changing hands. It’s no secret growth stocks are outperforming value over the last few years, with technology leading the way. But, the top value stocks in 2022 are leading the charge so far as investors are taking a more defensive approach.
Seeing as Federal Reserve officials are suggesting interest rates will rise quicker than expected, many stocks started selling off. In particular, growth stocks with high valuations and low profits are getting hit the hardest.
With this in mind, higher interest rates mean fewer future earnings. And many investors will buy growth stocks based on the company’s ability to generate profits in the future.
On the other hand, value stocks are well-established businesses with consistent sales. If interest rates rise, they may still be affected, but they have the cash to continue doing business.
Having said that, this year, it will pay to own companies that reward shareholders. Above all, paying a dividend and repurchasing stock can boost shareholder value.
For this reason, here are the top value stocks in 2022 to get the most of your money.
Top Value Stocks in 2022: No. 5 Berkshire Hathaway (NYSE: BRK.B)
- P/E: 0.01
- EPS: 4.59
- Market Cap: 708.5B
- Dividend Yield: N/A
Warren’s Berkshire Hathaway has lost some appeal as growth stocks took over the market after the pandemic. Yet, Berkshire is starting the year +6% when crowded trades like tech stocks continue falling.
Although Berkshire doesn’t pay a dividend, the money is invested back into the business. Instead, Warren Buffet believes the cash is best used to invest in new projects. In other words, Warren continues creating shareholder value through consistently growing earnings.
Rather than paying a massive sum to investors via a dividend, Berkshire will invest in a new business that can further the company’s value.
With this in mind, Berkshire’s top holdings include Apple (Nasdaq: AAPL), Bank of America (NYSE: BAC), American Express (NYSE: AXP) and Coca-Cola (NYSE: KO).
Despite Apple often being grouped with growth stocks, the company has returned over $128 billion to shareholders in the past five quarters. This is just one example of Berkshire’s many companies focusing on rewarding investors. It’s no wonder why investors are putting this stock on their list of best value stocks in 2022.
No. 4 JP Morgan Chase (NYSE: JPM)
- P/E: 10.57
- EPS: 15.81
- Market Cap: 483.77B
- Dividend Yield: 2.39%
The strongest of all bank stocks, JP Morgan Chase, looks to solidify its position as the largest bank in the U.S. this year. With a rock-solid balance sheet, growing top line, and high return on equity, JPM is what investors look for in a value stock.
Not only that, but when the Fed does decide to hike rates, it could benefit JPM. In fact, banking stocks generally outperform other assets when interest rates rise. The reason for this is banks can then charge higher rates, improving margins.
At the same time, for banks to make money, it requires strong economic activity. If people take out loans for various projects, banks make more money.
On the other hand, if activity slows and consumers borrow less, it can negatively affect banks. With a robust economic forecast this year, JPM looks to continue its strong momentum.
No. 3 Ford (NYSE: F)
- P/E: 33.74
- EPS: 0.71
- Market Cap: 96.15B
- Dividend Yield: 1.68%
Looking at Ford’s stock chart, you would think it’s a growth stock being up over 160% in the past year. In fact, the legacy automaker beat out Tesla (Nasdaq: TSLA) to become the top-performing car stock last year.
But Ford has a long history of selling its cars and rewarding shareholders. At the same time, the auto industry is changing, with electric now becoming a priority. And Ford is seeing high demand for its electric model sales second only to Tesla in 2021.
After suspending dividend payments during the pandemic, the company is back on track. The first payment this year was 10 cents per share.
With this in mind, if Ford can continue leading the EV charge, shareholders should continue seeing the returns.
Keep reading to find the top value stocks in 2022.
No. 2 CVS (NYSE: CVS)
- P/E: 18.53
- EPS: 5.73
- Market Cap: 140.17B
- Dividend Yield: 2.09%
CVS is another good bet to be one of the top value stocks in 2022, with the company crushing expectations. After another impressive earnings beat, CVS stock is within a few dollars from its ATH of $113 per share set in 2015.
On top of this, CVS is growing in all aspects of the company. The company’s growth strategy is paying off in a major way. In the third quarter, CVS advanced in all three segments (Health Care, Pharmacy and Retail) for 10% total revenue growth.
Furthermore, the Aetna acquisition allows the company to combine healthcare benefits with CVS services. The merger is helping improve the healthcare experience for everyone while boosting profits.
Although the merger created over $70 billion in debt, CVS is aggressively paying it down. Since the deal closed, CVS has repaid $18.7 billion of the outstanding debt.
No. 1 Caterpillar (NYSE: CAT)
- P/E: 23.55
- EPS: 9.35
- Market Cap: 119.08B
- Dividend Yield: 2.00%
Another pandemic winner, Caterpillar, is up over 150% since its lows in March 2020. Propelled by strong construction activity and home repair demand, Caterpillar stock climbed to ATHs over $246 per share.
Yet since reaching ATHs in June, CAT stock is trending in the wrong direction. At the same time, many stocks are selling off, with investors taking profits in anticipation of rate hikes next year.
Caterpillar is in a unique position with the U.S. and other governments worldwide focusing on rebuilding. With this in mind, the building benefits Caterpillar’s business, requiring more equipment to complete the projects.
That said, the company is growing, with third-quarter revenue climbing 25% year-over-year (YOY) to reach $12.4 billion. Also, Caterpillar is a dividend aristocrat with 27 years of investor payouts.
Earning a Return With the Top Value Stocks in 2022
Although growth stocks have gotten all the attention these past few years, its value stocks leading the way in 2022.
As the economy transitions from the low-interest environment to possibly three or four rate hikes next year, it’s sure to create volatility. With this in mind, it will pay to own companies that reward shareholders.
Companies can create shareholder value between dividends and stock buybacks, which is exactly why these are the top value stocks in 2022. These companies are leading their industries while paving a path to continue growing in the future.
And lastly, these are also companies that will continue paying you so long as you hold the stock. By reinvesting dividends, you can compound your growth, leading to higher returns in the future.