For years, analysts and portfolio managers have anticipated the return of value stocks as the market has moved higher. And for years they have continued to underperform growth stocks. However, that appears to have changed in 2022, as almost every metric from valuations to earnings for the growth arena have started to roll over in a big way.
Value stocks are typically defined as shares of a company with solid fundamentals that are priced below those of its peers, based on analysis of price-to-earnings ratio, yield and other factors. When you combine all the positives for owning value now, and match that with steady income, the potential for solid total return is big. And after all the selling this year, many of these stocks are trading at their cheapest in years.
We screened the BofA Securities top value ideas looking for stocks that will hold up better than the overall market if the inflation-induced decline continues. We also looked for the top “strong buy” ideas that paid solid and dependable dividends. Five stocks hit our screen, and all look very timely now. While all are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
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Citizens Financial
This top value stock in the financial sector is offering a very solid entry point. Citizens Financial Group Inc. (NYSE: CFG | CFG Price Prediction) operates approximately 2,700 ATMs and 1,000 branches in 11 states in the New England, Mid-Atlantic and Midwest regions, as well as through online, telephone and mobile banking services, and it maintains approximately 130 retail and commercial non-branch offices.
Citizens Financial operates in two segments. The Consumer Banking segment offers traditional banking products and services, including checking and savings accounts, home and education loans, credit cards, business loans, mortgage and home equity lending and unsecured product finance and personal loans, as well as wealth management and investment services to retail customers and small businesses. This segment also provides indirect auto finance for new and used vehicles through auto dealerships.
The Commercial Banking segment offers various financial products and solutions, such as loans and leasing, trade finance, deposit and treasury management, cash management, and foreign exchange and interest rate risk management solutions. It also provides loan syndications, corporate finance, merger and acquisition, and debt and equity capital markets capabilities.
Shareholders receive a 4.92% dividend. BofA Securities has a $44 target price on Citizens Financial stock, which is in line with the $44.03 consensus target. The shares closed on Wednesday at $34.17.
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Exelon
This top utility stock makes good sense now for conservative investors. Exelon Corp. (NYSE: EXC) engages in the energy generation, delivery, and marketing businesses in the United States and Canada. It owns nuclear, fossil, wind, hydroelectric, biomass and solar generating facilities.
Exelon also sells electricity to wholesale and retail customers, and it sells natural gas, renewable energy and other energy-related products and services. Furthermore, it is involved in the purchase and regulated retail sale of electricity and natural gas, as well as the transmission and distribution of electricity and distribution of natural gas to retail customers.
The company also offers support services, including legal, human resources, information technology, financial, supply management, accounting, engineering, customer operations, distribution and transmission planning, asset management, system operations and power procurement services. It serves distribution utilities, municipalities, cooperatives and financial institutions, as well as commercial, industrial, governmental and residential customers.
Investors receive a 3.90% dividend. The BofA Securities target price is $55, and the consensus target is $49.65. Exelon stock closed 4% lower on Wednesday at $35.96.
Hartford Financial Service
This insurance giant is a dependable idea for conservative investors, and it offers incredible value at current trading levels. Hartford Financial Services Group Inc. (NYSE: HIG) provides insurance and financial services to individual and business customers in the United States, the United Kingdom and elsewhere.
Its Commercial Lines segment offers workers’ compensation, property, automobile, liability, umbrella, bond, marine, livestock and reinsurance, as well as customized insurance products and risk management services, including professional liability, bond, surety and specialty casualty coverages through regional offices, branches, sales and policyholder service centers, independent retail agents and brokers, wholesale agents and reinsurance brokers.
The Personal Lines segment provides automobile, homeowners and personal umbrella coverage through direct-to-consumer channels and independent agents, while its Property & Casualty Other Operations segment offers coverage for asbestos and environmental exposures.
The Group Benefits segment provides group life, disability and other group coverages to members of employer groups, associations and affinity groups through direct insurance policies; reinsurance to other insurance companies; employer paid and voluntary product coverages; disability underwriting, administration and claims processing to self-funded employer plans; and a single-company leave management solution. This segment distributes its group insurance products and services through brokers, consultants, third-party administrators, trade associations and private exchanges.
The Hartford Funds segment offers investment products for retail and retirement accounts; exchange-traded products through broker-dealer organizations, independent financial advisers, defined contribution plans, financial consultants, bank trust groups and registered investment advisers; and investment management and administrative services, such as product design, implementation and oversight.
Hartford Financial Service stock comes with a 2.41% dividend. The $87 BofA Securities target price compares with the $82.35 consensus target and the closing share price on Wednesday of $63.67.
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KeyCorp
Shares of this top regional player are quite cheap at current levels for investors looking at financials. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.
KeyCorp also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.
The stock modestly has outperformed its peers after posting solid second-quarter results with forward guidance relatively unchanged. The bank also successfully rolled out Laurel Road for Doctors, its national digital bank, adding 2,500 new clients.
Investors receive a 5.00% dividend. KeyCorp stock has a $21 price target at BofA Securities. The consensus target is $21.32, and the shares closed at $15.59 on Wednesday.
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Pfizer
This top pharmaceutical stock was one of the biggest winners in the COVID-19 vaccine sweepstakes, and it is on the BofA Securities US 1 list of top stock ideas. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.
The company offers medicines and vaccines in various therapeutic areas, including the following:
- Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
- Biologics, small molecules, immunotherapies and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena and Braftovi brands
- Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga and Paxlovid brands.
- Pneumococcal disease, meningococcal disease, tick-borne encephalitis and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba and the Prevnar family brands
- Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis and Cibinqo brands
- Amyloidosis, hemophilia and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX and Genotropin brands
Shareholders receive a 3.81% dividend. BofA Securities has set a $65 price objective, well above the consensus target. Pfizer stock ended Thursday’s session trading at $42.03.
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These five stocks are extremely cheap on a relative basis, and the companies pay very dependable dividends and are strong names in their respective sectors. While volatility may persist in the equity markets, these are excellent ideas to start nibbling at and building positions for a potential move higher later this year or early in 2023.
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