In this article, we will take a look at the 16 most profitable value stocks now. To see more such companies, go directly to 5 Most Profitable Value Stocks Now.
Value stocks were clear winners in 2022. As inflation spiked and the Federal Reserve started to boost interest rates, investors fled risky stocks with huge valuations and favored cheap value stocks with realistic multiples. Come 2023, the economic realities that caused a panic in the market remain intact. That’s why major analysts are still recommending piling into value plays
According to Wall Street Journal, investment firm GMO expects growth stocks to fall further while the firm believes value stocks remain discounted.
The report added that about 21% of GMO’s $4.3 billion portfolio was invested in hedge funds seeking to profit from the fall in growth stocks.
Tech stocks jumped to new highs recently on the back of optimism that the Federal Reserve’s rate-hike spree is nearing its end. Some analysts believe the market is incorporating the possibility of rate cuts. Prudent investors and analysts are rejecting this optimism and warning that the latest rally in stocks might not last.
In February, Goldman Sachs analyst’s analyst Lisa Shalett issued a similar warning:
“We remain cautious about the direction of the equities market this year, as these other assets do not confirm the optimistic outlook implied by stocks’ performance. Equity investors are sending prices and valuation multiples higher, with little consideration for broader implications. The likely impacts of tightening monetary policy, corporate earnings vulnerability and uncertainty around the path of inflation are additional reasons for prudence.”
In January 2023, Goldman Sachs analyst Peter Oppenheimer gave a bullish outlook for value stocks and said that tech valuations were inflated despite massive declines in share prices, According to the analyst,
“As big cap technology sees further margin pressure, commodity prices rise and real interest rates remain higher, we think this trend has further to go.”
“Priced for Perfection”
Similarly, Bob Doll, Crossmark Global Investments CIO, recently said in a program on CNBC that the market is priced for “perfection.” The analyst said that economic indicators “haunt” him as he believes the possibility of a soft landing is thin. Doll said last year’s market decline was mostly due to “valuation compression” while this year’s declines will be because of “earnings problems” and “recession.” Answering a question about the possible options for investors in this environment, Doll recommended diversification and said he’s underweight tech. He thinks many tech stocks have been “lagging and struggling.” Doll recommended investors to own value stocks that are not just cheap but has some “current momentum.”
Value has “returned with a vengeance,” to quote a JPMorgan’s report, which said that while growth stocks have outperformed value stocks for a long time in the past, the future outlook for value plays look strong. Here’s what the report said:
“Value’s potential for future returns remains great. Valuation spreads between Value and Growth are still extreme, and higher than those at the peak of the technology, media and telecom (TMT) bubble. The proportion of equity assets invested with a Value investment style is also very low, meaning flows could provide a significant tailwind.”
In this backdrop, it’s a good idea to take a look at stocks that have attractive value multiples, strong profits and fundamentals.
Our Methodology
For this article, we first used a stock screener to find stocks with PE ratios of less than 15 as of April 27 and positive revenue growth. From this list, we picked stocks that have the highest net income (TTM) and the highest number of hedge fund investors. We gauged hedge fund sentiment from Insider Monkey’s database of 943 hedge funds.
Most Profitable Value Stocks Now
16. OGE Energy Corp. (NYSE:OGE)
Number of Hedge Fund Holders: 17
OGE Energy Corp. (NYSE:OGE) ranks 16th in our list of the most profitable value stocks now. In February OGE Energy Corp. (NYSE:OGE) posted full-year 2022 results. GAAP EPS in the quarter came in at $3.32, easily beating estimates. Revenue in the period totaled $3.37 billion, beating estimates by $2.31 billion. OGE Energy Corp. (NYSE:OGE) is a high-yield dividend stock, with an over 4% yield.
17 hedge funds in Insider Monkey’s database of 943 hedge funds were long OGE Energy Corp. (NYSE:OGE) at the end of the fourth quarter of 2022.
15. Royal Bank of Canada (NYSE:RY)
Number of Hedge Fund Holders: 17
Royal Bank of Canada (NYSE:RY) ranks 15th in our list of the most profitable value stocks now. In March Royal Bank of Canada (NYSE:RY) posted solid Q1 results. GAAP EPS in the period came in at C$3.05, beating estimates by C$0.12. Revenue in the quarter jumped 15.5% year over year to a total of $15.09 billion, beating estimates by C$1.56 billion.
Royal Bank of Canada (NYSE:RY) is also a solid dividend-paying stock with a healthy yield. Royal Bank of Canada (NYSE:RY) in March declared a quarterly dividend of CAD 1.32 per share, in-line with the previous dividend. The forward dividend yield at the time came in at 3.81%.
14. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 21
French energy giant TotalEnergies (NYSE:TTE) is one of the most profitable value plays. During the first quarter, TotalEnergies SE (NYSE:TTE)’s adjusted EPS came in at $2.61, in line with estimates. Over the past 12 months, the company’s net income stands at over $20.5 billion. As of the end of the fourth quarter of 2022, 21 hedge funds tracked by Insider Monkey were long TotalEnergies SE (NYSE:TTE).
ClearBridge International Value Strategy made the following comment about TotalEnergies SE (NYSE:TTE) in its Q4 2022 investor letter:
“Stock selection in the energy sector was also a strong driver of returns, benefiting from an improving global macro outlook. Prospects for a milder recession, increased demand from China reopening from its COVID-19 restrictions, and the recognition that the market hasn’t discounted oil company valuations based on commodity prices all served to benefit energy company stock prices. Holdings such as TotalEnergies SE (NYSE:TTE), a leading French oil, and natural gas company, was a recipient of these macro tailwinds. We are constructive on the long-term prospects of the energy sector, with it being the second largest relative overweight in the portfolio. We believe that as the market becomes more comfortable with the industry’s intermediate earnings and capital discipline from producers, our high-quality companies in the sector should continue to perform.”
13. AGCO Corporation (NYSE:AGCO)
Number of Hedge Fund Holders: 31
Agriculture machinery company AGCO Corporation (NYSE:AGCO) ranks 13th in our list of the most profitable value stocks.
During the fourth quarter, AGCO Corporation (NYSE:AGCO)’s EPS came in at $4.47, beating estimates by $0.58. Revenue in the period jumped 24% year over year to reach $3.9 billion, beating estimates by $160 million. For 2023, AGCO Corporation (NYSE:AGCO)’s net sales are expected to total $14 billion, versus the consensus estimate of $13.80 billion.
12. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 39
With a PE ratio of 6.4 and a dividend yield of over 4%, NRG Energy, Inc. (NYSE:NRG) is a notable value stock to buy today.
As of the end of the last quarter of 2022, 39 hedge funds tracked by Insider Monkey had stakes in NRG Energy, Inc. (NYSE:NRG), significantly higher than 27 hedge funds in the previous quarter. The biggest stakeholder of NRG Energy, Inc. (NYSE:NRG) was Richard S. Pzena’s Pzena Investment Management which owns a $266 million stake in the company.
Legacy Ridge Capital made the following comment about NRG Energy, Inc. (NYSE:NRG) in its Q4 2022 investor letter:
“NRG Energy, Inc. (NYSE:NRG) was covered in the 2019 letter with VST. We sold the shares as COVID induced volatility presented better risk/reward opportunities, but never subsequently repurchased shares—as we did with VST. Not only do we think VST is a better value, but the management team at NRG appears to have gone astray. Despite coming to his position during an activist campaign by Elliott Management in 2017, when the prior empire-building CEO was shown the door, the replacement CEO has seemingly embarked on the same failed strategy. In early December they announced the purchase of Vivint Smart Home, a smart home platform company, for $2.8 billion. The transaction diversifies NRG’s business, increases leverage, dramatically reduces intermediate-term shareholder capital returns, and most importantly, is the opposite of what management told us they were going to do when they assumed the role in 2017. The stock fell 15% on the day of the announcement and is down another 5% since then, and now 10% lower than when we first wrote about it. We like the generation business at NRG and the valuation is almost back to interesting, but we’d probably have to see turnover in the C-suite and a refreshed corporate strategy to reignite our enthusiasm.”
11. WESCO International, Inc. (NYSE:WCC)
Number of Hedge Fund Holders: 39
Raymond James recently gave a Strong Buy rating for WESCO International, Inc. (NYSE:WCC). The firm said WESCO International, Inc. (NYSE:WCC) is “deleveraging and benefiting from inflation.”
As of the end of the last quarter of 2022, 39 hedge funds tracked by Insider Monkey had stakes in WESCO International, Inc. (NYSE:WCC). The biggest hedge fund stakeholder of WESCO International, Inc. (NYSE:WCC) was Leonard Green’s Leonard Green & Partners which owns an $802 million stake in the company.
10. Graphic Packaging Holding Company (NYSE:GPK)
Number of Hedge Fund Holders: 41
Graphic Packaging Holding Company (NYSE:GPK) posted its Q4 results back in February. Graphic Packaging Holding Company (NYSE:GPK)’s adjusted EPS in the period came in at $0.59, beating estimates by $0.01. Revenue in the quarter jumped 20.1% year over year to reach $2.39 billion, beating estimates by $70 million. Graphic Packaging Holding Company (NYSE:GPK) recently announced plans to invest $1 billion over three years toward coated recycled paperboard production.
As of the end of the fourth quarter, 41 hedge funds tracked by Insider Monkey had stakes in Graphic Packaging Holding Company (NYSE:GPK). The biggest hedge fund stakeholder of Graphic Packaging Holding Company (NYSE:GPK) was Ian Simm’s Impax Asset Management which owns a $179 million stake in the company.
9. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 47
Chemicals and fertilizer company The Mosaic Company (NYSE:MOS) ranks 9th in our list of the most profitable value stocks now. In February The Mosaic Company (NYSE:MOS) posted its Q4 results. Adjusted EPS in the period came in at $1.74, missing estimates by $0.46. Revenue in the quarter jumped about 16.7% year over year to $4.48 billion, beating estimates by $260 million.
In February The Mosaic Company (NYSE:MOS) declared a special dividend of $0.25 per share, which was payable on March 30.
White Brook Capital made the following comment about The Mosaic Company (NYSE:MOS) in its Q1 2023 investor letter:
“The Mosaic Company (NYSE:MOS): Despite favorable midterm fertilizer dynamics, Mosaic (MOS) performed worse than expected during the quarter. Significantly, the Company began to rally in the last days of the quarter after it preannounced production at the low end of the guidance for the first quarter when market fears were for an even worse outcome. Given March weather, particularly in the northern United States, where a significant snow pack continued to cover farmland (as of the first days of April), I expect their 1stquarter earnings call will speak to significant second-quarter demand, particularly as the weather was more favorable for fertilizer usage in early April. Prices during the second week of April for fertilizers broadly also have begun to lessen their decline despite a continued rapid decline in other feedstock commodities.
The stock has been driven by concern about destroyed 2023 demand that I believe, given the state of the world’s depleted fields, issues that demand can no longer be destroyed, only delayed, and even that may not be necessary given the rapid improvement of the US’s northern grain basket and the solid fundamentals in Brazil. The Company continues to trade for a very cheap valuation even though it generates strong free cash flow, returns that cash flow to shareholders, and is under levered. We continue to hold our position.”
8. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 49
Defense giant Northrop Grumman Corporation (NYSE:NOC) is one of the most notable value stocks right now. Northrop Grumman Corporation (NYSE:NOC) keeps winning major contracts from the US government for several defense and aerospace activities. It was recently awarded a $158.13 million definitized contract action for Global Hawk (RQ-4) aircraft sustainment.
Morgan Stanley added Northrop Grumman Corporation (NYSE:NOC) in its 30 for 2025 stock picks list.
LRT Capital made the following comment about Northrop Grumman Corporation (NYSE:NOC) in its October investor letter:
“Based in Virginia, Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors with annual revenue more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation the US defense market is now controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This industry structure has allowed Northrop to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x, next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ division submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-35 and F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; and so on…” (Click here to read the full text)
7. United Rentals, Inc. (NYSE:URI)
Number of Hedge Fund Holders: 53
Equipment rental company United Rentals, Inc. (NYSE:URI) has gained about 21% over the past 12 months. As of the end of the fourth quarter of 2022, 53 hedge funds tracked by Insider Monkey held stakes in United Rentals, Inc. (NYSE:URI). The total worth of these stakes was $1.6 billion. The biggest hedge fund stakeholder of United Rentals, Inc. (NYSE:URI) was Ian Simm’s Impax Asset Management which owns a $311 million stake in the company.
Carillon Tower Advisors made the following comment about United Rentals, Inc. (NYSE:URI) in its Q4 2022 investor letter:
“United Rentals, Inc. (NYSE:URI) rents equipment primarily to construction and industrial companies, as well to as manufacturers, utilities, homeowners, municipalities, and other government entities. The company has benefitted from the continued tightness throughout the machinery sector, as original equipment manufacturers struggle to meet demand due to ongoing supply chain constraints. Activity within most of its major customer verticals remains strong, and the company sees itself as well-positioned to capitalize on secular trends such as the reshoring of global supply chains and increased infrastructure investment.”
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 57
Oil giant Chevron Corporation (NYSE:CVX) received bullish comments from Scotiabank’s Paul Cheng recently. The analyst upgraded Chevron Corporation (NYSE:CVX) to Outperform from Sector Perform and increased his price target to $200. Chevron Corporation (NYSE:CVX), which has over 3 decades of consistent dividend hikes under its belt, is also highly popular among hedge funds. A total of 57 hedge funds tracked by Insider Monkey had stakes in Chevron Corporation (NYSE:CVX). The biggest stakeholder of Chevron Corporation (NYSE:CVX) is no other than legendary Warren Buffett’s Berkshire, which owns a $29 billion stake in the company.
Carillon Eagle Growth & Income Fund made the following comment about Chevron Corporation (NYSE:CVX) in its Q4 2022 investor letter:
“Energy performed well during the fourth quarter, with the sector up about 23%. Investors returned to the sector after the Organization of the Petroleum Exporting Countries (OPEC) signaled it would reduce production. Chevron Corporation (NYSE:CVX) reported strong quarterly results while buying back stock, paying a healthy dividend, and maintaining a strong balance sheet.”
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Disclosure: None. 16 Most Profitable Value Stocks Now is originally published on Insider Monkey.
