In this article, we discuss the 10 famous value stocks that underperformed in 2022. If you want to read about some more value stocks, go directly to 5 Famous Value Stocks that Underperformed in 2022.
As the United States economy prepares to enter the fourth quarter of 2022, investors are starting to get more optimistic about the chances of the central bank navigating a soft landing for the stock market, avoiding a sharp downturn in growth even amid plans for aggressive rate hikes to tackle soaring inflation. The signs of this optimism are evident from the change in fortunes of the major indexes over the past few weeks, with the S&P 500 up close to 13%, the NASDAQ Composite up 16%, and the Dow Jones Industrial Average up 11%.
Compared to the year-to-date performance of these indexes, which are down 10%, 17%, and 7% respectively, this represents a massive jump in performance overall. The economic indicators of a soft landing are also encouraging, with a strong employment report allaying fears of recession and inflation numbers showing the largest month-on-month deceleration of consumer price increases since 1973. However, the Fed officials remain adamant that more rate hikes are coming and economic experts have warned that inflation could make a rapid comeback.
Karim Basta, the chief economist with III Capital Management, recently told news agency Reuters that the Fed needs more evidence of slowing inflation before it can begin to roll back the rate hikes. Investors are looking towards value stocks for some cover in this topsy-turvy marketplace, but identifying winners in the value sector is proving difficult as well. Some of the top value stocks that underperformed in 2022 include Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG).
Our Methodology
The stocks that have a Price-to-Earnings (PE) ratio of 30 or under and have registered a decline in their share price year-to-date were selected for the list. The business fundamentals and analyst ratings of each company are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each company.
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Famous Value Stocks that Underperformed in 2022
10. Qorvo, Inc. (NASDAQ:QRVO)
Number of Hedge Fund Holders: 33
PE Ratio: 15.03
Percentage Decline in Share Price YTD as of August 12: 30.33%
Qorvo, Inc. (NASDAQ:QRVO) makes and sells semiconductor products. On August 3, the firm posted earnings for the first fiscal quarter, reporting earnings per share of $2.25, beating analyst expectations by $0.13. The revenue over the period was $1 billion, down more than 6% compared to the revenue over the same period last year but beating market estimates by $10 million. The firm guided 2023 revenue of $1.12 billion to $1.15 billion versus consensus of $1.13 billion.
On August 4, Craig-Hallum analyst Anthony Stoss maintained a Buy rating on Qorvo, Inc. (NASDAQ:QRVO) stock and lowered the price target to $140 from $180, noting that incremental smartphone weakeness was continuing to weigh on the stock.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in Qorvo, Inc. (NASDAQ:QRVO) with 664,704 shares worth more than $82 million.
Just like Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG), Qorvo, Inc. (NASDAQ:QRVO) is one of the value stocks that has not provided investors with the returns they were hoping for in 2022.
9. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 38
PE Ratio: 16.34
Percentage Decline in Share Price YTD as of August 12: 46.29%
Stanley Black & Decker, Inc. (NYSE:SWK) markets tools and storage for industrial users. On July 28, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $1.77, missing analyst expectations by $0.36. The revenue over the period was $4.39 billion, up more than 15% compared to the revenue over the same period last year but missing market estimates by $350 million. In late July, the firm had raised the quarterly dividend by more than 1% to $0.80 per share.
On August 11, Morgan Stanley analyst Joshua Pokrzywinski maintained an Overweight rating on Stanley Black & Decker, Inc. (NYSE:SWK) stock and lowered the price target to $110 from $130, noting that the firm has been at the center of the biggest challenge in the sector in the past five years and that execution on new programs is necessary to drive EPS growth.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Stanley Black & Decker, Inc. (NYSE:SWK) with 1 million shares worth more than $141 million.
Here is what Saturna Capital has to say about Stanley Black & Decker, Inc. (NYSE:SWK) in its Q3 2021 investor letter:
“Stanley Black & Decker, Inc. (NYSE:SWK) performed well through the first part of the year but struggled over the summer. China accounts for much of its production, and their zero-tolerance approach to pandemic safety measures has led to disruption, compounded by shipping difficulties and rising materials expenses. We still believe one outcome of the pandemic will be a buoyant home improvement market, given that one never knows when the next pandemic lockdown may occur.”
8. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 50
PE Ratio: 14.30
Percentage Decline in Share Price YTD as of August 12: 25.64%
Target Corporation (NYSE:TGT) is a general merchandise retailer. The shares of the firm have been hit after it warned in early June that margins could be pressured as it sought to clear inventories in the coming months. However, the firm remains one of the most reliable players in the retail sector. It has a dividend history stretching back over five decades. On June 9, the firm declared a quarterly dividend of $1.08 per share, an increase of 20% from the previous dividend of $0.90 per share. The forward yield was 2.76%.
On August 1, JPMorgan analyst Christopher Horvers maintained an Overweight rating on Target Corporation (NYSE:TGT) stock and raised the price target to $190 from $180, noting that the reactions to downward revisions in the retail sector were turning more positive.
Among the hedge funds being tracked by Insider Monkey, Boston-based Arrowstreet Capital is a leading shareholder in Target Corporation (NYSE:TGT), with 2.5 million shares worth more than $30 million.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target Corporation (NYSE:TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omnichannel fulfilment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target Corporation (NYSE:TGT) is an attractive holding.”
7. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 51
PE Ratio: 21.29
Percentage Decline in Share Price YTD as of August 12: 14.35%
3M Company (NYSE:MMM) is a diversified technology company. The firm is one of the most reliable dividend payers in the industry with a history stretching back over six decades. These payouts have registered consistent growth over the past sixty three years. The sector median in this regard is just one year, attesting to the incredible strength of the business model of the firm compared to peers. On August 12, the firm declared a quarterly dividend of $1.49 per share, in line with previous. The forward yield was 3.95%.
On July 27, Wells Fargo analyst Joseph O’Dea maintained an Equal Weight rating on 3M Company (NYSE:MMM) stock and raised the price target to $144 from $137, appreciating the second quarter earnings results of the firm.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM), with 6 million shares worth more than $898 million.
6. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 60
PE Ratio: 28.41
Percentage Decline in Share Price YTD as of August 12: 8.59%
Walmart Inc. (NYSE:WMT) operates as a retail firm. Reports indicate that the company is talking to popular entertainment firms like Paramount, Disney, and Comcast to include a streaming plan from these giants into the Walmart membership program. The Walmart membership program already includes free shipping on orders and discounts on fuel. It also includes a free six-month subscription to the Spotify Premium music service. Streaming firms are turning to other businesses to find more subscribers as growth slows amid rising comps.
On July 27, Deutsche Bank analyst Krisztina Katai maintained a Buy rating on Walmart Inc. (NYSE:WMT) stock and lowered the price target to $142 from $166, noting that investors were concerned that the firm had not cut guidance enough given macro headwinds.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Walmart Inc. (NYSE:WMT), with 15 million shares worth more than $2.2 billion.
In addition to Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG), Walmart Inc. (NYSE:WMT) is one of the value stocks that is feeling the pressure of soaring inflation and rising interest rates.
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Disclosure. None. 10 Famous Value Stocks that Underperformed in 2022 is originally published on Insider Monkey.
