As is the case with many investors, the post-pandemic period really shifted my interest in growth stocks into overdrive. I was among the investors I’d say are probably more balanced in terms of my overall investing approach. But it was simply hard to ignore the trends, and I poured heavily into growth stocks during the period in time in which growth stocks really took off.
That said, after trimming back exposure significantly in 2022, I since shifted my focus to other areas of the market I hadn’t looked at much in a few years. Besides bonds, gold and other assets, my attention has increasingly shifted toward value stocks. I’d consider a company a value stock if its valuation is significantly lower than either its sector or benchmark average, and the three companies I’m going to highlight in this piece meet these criteria for me.
Of course, every investor journey is different. And for many investors, it may still make sense to be disproportionately heavily exposed to growth stocks (younger investors looking for more capital appreciation than portfolio stability over the near-term).
But for baby boomers, retirees, and other investors seeking to remain exposed to equities (but improve their risk-adjusted returns), these are three options I think can provide that kind of defensive upside right now.
Power Corporation of Canada (PWCDF)
Power Corporation of Canada (OTCMKTS:PWCDF) saw mixed performance in 2024, with moderate revenue growth of just under 4% on a year-over-year basis. The international management and holding company is a little-known insurance and wealth management company, generating more than CAD$8 billion in revenue in its most recent quarter.
The company’s stock price, like those of many other financial companies, has seen some rather broad strength as interest rates have come down and the yield curve has steepened. And with a dividend yield of 4.8%, this company is an attractive option for investors with income needs or those looking to generate passive income as they enter retirement.
Despite slowing revenue growth (and net income that actually dropped this past quarter), most analysts are forecasting revenue growth of around 10% preyer moving forward. Additionally, the company’s projected 14.1% return on equity signals strong financial health, with some room for improvement over time.
The Canadian market is a difficult one right now, and there’s undoubtedly some bearishness being built into the company’s trailing price-earnings multiple of just 11-times. However, for those looking past the near-term turmoil expected as a result of tariffs and other macro factors, this is a top value stock I’m watching right now.
Manulife Financial
Another Canada-based company to make this list, Manulife Financial (NYSE:MFC | MFC Price Prediction) is among the top insurance companies in the country, with a solid global footprint as well. Again, I’m looking mostly outside of the U.S. for value right now, as there are certain pockets of the market in other global markets that could be better-positioned for growth. For Manulife, a company that’s rapidly growing its wealth management business in China and other faster-growth markets, this is a top name worth considering.
Like Power Corporation, Manulife has a very attractive multiple, with the stock trading around 10-times forward earnings. Despite a run-up of more than 25% over the past year, this is a stock that’s still very affordable and one that also provides healthy dividends to those income-focused investors out there. With a yield of nearly 4%, this is a top value stock that’s grabbed my attention as a way to generate exposure to both the steadiness of the insurance business and the growth of wealth management services in key markets in Asia.
Over the long-term, I expect Manulife to continue to trend higher, but it should be noted that previous market-related declines did lead to selloffs from shareholders in the past. In other words, this isn’t a recession proof or recession resistant name, per se. But it’s one that I think has solid long-term upside and an attractive multiple right now.
ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) has posted impressive production growth in recent quarters, though profitability challenges and fluctuating oil prices have impacted the company’s share price of late. Currently down nearly 20% over the past year, investors appear to view the company’s recent mixed quarterly results as a sign that higher operational expenses may not offset the production increases the company has seen, particularly if oil demand slows and recessionary forces take hold.
Like the other names on this list, there’s certainly some recession risk being baked into the company’s valuation right now. The oil & gas sector as a whole tends to have lower multiples, so ConocoPhillips’ 11.5-times forward earnings multiple isn’t really out of the ordinary.
But I do think ConocoPhillips is one of the top oil players with the potential to drive oil production much further, given the company’s reserve replacement ratio that’s above 240%. In other words, this is a company that should be able to continue to deliver strong growth for a long time, and not have to pay up for additional exploration assets in the near-term. That should lead to relatively strong margins and lower CapEx than its peers.
This is certainly a more speculative option on the list. But for those seeking portfolio diversification and more exposure to the oil & gas space, this is an option worth considering in my books
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