Here are seven top value stocks to buy today.
The S&P 500 has put together three strong years in a row. But with stock prices at all-time highs, lingering inflation and supply chain issues, as well as the potential for multiple interest rate hikes in 2022, it’s becoming increasingly difficult for investors to track down true value stocks. Fortunately, the JPMorgan Chase analyst team recently put together a list of their top value stock picks. These seven undervalued stocks could be top performers in 2022 and beyond, especially if investor sentiment starts to shift in favor of stocks with cash flow, profits and strong business fundamentals.
Bank of America Corp. (ticker: BAC)
Among U.S. megabanks, analyst Vivek Juneja says Bank of America’s profits are sensitive to interest rates. The higher interest rates rise, the more wiggle room banks have to expand their net interest margin — the percentage difference between the interest they pay on deposits and the interest they collect on loans. The Federal Reserve expects three interest rate hikes in 2022, which Juneja says could serve as a profit tail wind. Juneja says BAC stock is also attractively valued given loan growth expectations. JPMorgan has an “overweight” rating and a $50 price target for BAC stock, which closed at $44.64 on Dec. 27.
Broadcom Inc. (AVGO)
Broadcom is one of the world’s largest diversified semiconductor producers. Analyst Harlan Sur says Broadcom is highly exposed to some of the largest growth themes in tech, including data center networking, artificial intelligence and 5G wireless communications. Sur says Broadcom is a major beneficiary of the current cloud-networking semiconductor upgrade cycle and will have an increasing amount of content in 5G models of the Apple Inc. (AAPL) iPhone. Sur says Broadcom generates impressive free cash flow that will continue to fund between 8% and 12% annual dividend growth. JPMorgan has an “overweight” rating for Broadcom stock and gave the stock a price target of $655 on Dec. 1, when it closed at $554.76. According to The Wall Street Journal, the average price target among analysts is now $692.58 for AVGO stock, which closed at $674.28 on Dec. 27.
AbbVie Inc. (ABBV)
AbbVie is a global pharmaceutical business. The company’s key drug is rheumatoid arthritis medication Humira. AbbVie has the lowest forward earnings multiple of any stock on this list at 9.6, and analyst Chris Schott says AbbVie is his top pharmaceutical value stock pick. He’s particularly bullish about the company’s growth products, including Skyrizi, Rinvoq, Vraylar and calcitonin gene-related peptides. Schott says these commercial drugs coupled with the company’s mid- to late-stage development pipeline will help AbbVie navigate Humira’s loss of exclusivity looming in 2024 and support long-term valuation upside. JPMorgan has an “overweight” rating and a $140 price target for ABBV stock, which closed at $134.41 on Dec. 27.
Qualcomm Inc. (QCOM)
Qualcomm is a semiconductor company focused on advanced wireless broadband technology. Analyst Samik Chatterjee says Qualcomm has diversified its business beyond mostly supplying parts for Apple devices and is exposed to high-growth tech themes, such as Android devices, advanced automotive technology and the “internet of things.” Chatterjee says Qualcomm shares are attractively valued given the company’s growth levers and potential for margin expansion. The company’s recently updated three-year financial targets exceeded expectations, and Chatterjee says there is room for upside in Qualcomm’s current consensus analyst earnings estimates. JPMorgan has an “overweight” rating and a $225 price target for QCOM stock, which closed at $186.33 on Dec. 27.
McDonald’s Corp. (MCD)
McDonald’s is the largest fast food company in the world and has roughly 35,000 locations. Analyst John Ivankoe says McDonald’s is insulated from inflation given more than 93% of its locations are franchised, meaning the company receives a combination of rents and royalty payments from its franchisees. In the third quarter, McDonald’s reported an impressive 14.6% same-store sales growth and Ivankoe says the company’s international business will drive the next stage of its growth as global restrictions on dine-in restaurants continue to ease. JPMorgan has an “overweight” rating and gave MCD stock a $260 price target on Dec. 1, when it closed at $244.18. The average price target among analysts is now $276.06 for MCD stock, which closed at $268.24 on Dec. 27.
Caterpillar Inc. (CAT)
Caterpillar is one of the world’s largest producers of construction and mining equipment. Analyst Ann Duignan says Caterpillar’s earnings power and free cash flow generation will create significant value for investors during the upcoming cycle of global gross domestic product growth. Resource cost-cutting measures should also boost Caterpillar’s mining equipment profitability. Duignan says Caterpillar is the biggest winner from the new U.S. infrastructure spending bill, which includes $450 billion in baseline funds and has another $550 billion committed to new infrastructure projects over the next five years. JPMorgan has an “overweight” rating and a $248 price target for CAT stock, which closed at $206.38 on Dec. 27.
Lam Research Corp. (LRCX)
Lam Research is a leading semiconductor wafer fabrication equipment supplier. JPMorgan projects another big year for semiconductor stocks in 2022. Sur says Lam is gaining market share in its foundry and logic business, and a growing percentage of its sales are from etching and deposition equipment. Sur projects an expanding serviceable addressable market for Lam in the years ahead. He says the company’s free cash flow generation will support growing capital returns to shareholders, and Lam shares trade at an earnings multiple discount compared to semiconductor peers. JPMorgan has an “overweight” rating and a $735 price target for LRCX stock, which closed at $723.40 on Dec. 27.
Undervalued stocks to buy:
— Bank of America Corp. (BAC)
— Broadcom Inc. (AVGO)
— AbbVie Inc. (ABBV)
— Qualcomm Inc. (QCOM)
— McDonald’s Corp. (MCD)
— Caterpillar Inc. (CAT)
— Lam Research Corp. (LRCX)