Three Notable Value Shares to Purchase in January's Market
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Embrace Value in 2025: Three Stocks to Watch
As we step into the upcoming year, the stock market landscape may present an interesting opportunity for investors. The global economy might not be sizzling hot, but at least, growth is anticipated. Meanwhile, this period could also usher in a transition, where value stocks might finally regain their luster relative to growth stocks. In light of this potential shift, let's explore three undervalued stocks that could prove worthy additions to any investment portfolio.
JPMorgan Chase
The hurdles in the banking sector over the past couple of years have been formidable. The double whammy of inflation, interest rate fluctuations, and rate hikes have certainly shaken the industry. Incredibly, however, most bank stocks have managed to eke out gains during this turbulent time — and it's easy to see why.
There's a silver lining to this turbulent period. Firms like JPMorgan Chase have weathered the storm remarkably well. Lending margins have improved, with the dust settling on recent interest rate volatility. Wider spreads between near-term and longer-term interest rates have also prompted a surge in corporations issuing bonds, not out of necessity, but because it suits them.
JPMorgan is a banking titan, with $3.6 trillion in assets. From consumer banking and wealth management to investment banking and credit card services, the company checks all the boxes. After navigating through a period of sluggish revenue and earnings between 2021 and 2022, JPMorgan has bounced back to its record-breaking financial marks.
In a less-than-ideal economic climate, JPMorgan has proven its ability to thrive. Given a more positive economic outlook, the company could see even more growth. According to the Organisation for Economic Co-operation and Development, global GDP growth is projected at 3.3% for 2025, expanding from the estimated 3.2% full-year growth pace in 2024[1].
With shares currently priced under 14 times projected thematic earnings (-1.73%) for 2025, and an impressive history of exceeding earnings estimates, it's clear there's room for this stock to continue ascending in an upbeat economy[1].
Target
Beyond banking, retail might be the next big opportunity. The retail landscape has been both challenged and transformed by the recent economic environment. Retailer Target is a prime example of a company poised to benefit from an economic resurgence.
At first glance, Target might appear similar to industry giant Walmart. However, a closer look reveals some crucial distinctions: Target's merchandise focuses more on discretionary goods than consumer staples. Its pricing isn't always the most competitive. This has led to stagnant revenue since early 2022 and flat same-store sales for most of 2023.
But things are starting to change. A revitalized economy has made consumers more willing to splurge, and Target's performance reflects this shift. In Q3 2024, same-store sales improved slightly, along with a 2.4% year-over-year traffic uptick. Total sales grew 1.1% — evidence that consumers are finally starting to open their wallets.
Target's stock price, however, has yet to compound on this optimism. The share price remains down by nearly 50% from its 2021 peak. Persistent pessimism may be masking persuasive reasons for investors to be optimistic. With a 2024 expected earnings per share of $8.59 and a forecasted forward-looking dividend yield of 2.9%, Target represents an attractive proposition for investors seeking dividend income and long-term growth[1].
Berkshire Hathaway
When it comes to value stocks, Berkshire Hathaway is a heavyweight contender. The diversified conglomerate owns a portfolio of privately held businesses, including GEICO insurance, Shaw flooring, Benjamin Moore paint, and Duracell batteries. It also has a collection of individual stocks (around a third of Berkshire's value)^{2}.
Berkshire Hathaway's value investment thesis is appealing, with a portfolio filled with slow-growing, reliable cash-cow operations and carefully curated individual stock holdings. It's chock-full of Warren Buffett-approved value stocks.
Valuation metrics show that this stock is currently trading at a relatively low price-to-book value of 1.5 and a trailing price-to-earnings ratio under 9. Both measures are significantly below the S&P 500's equivalent valuation metrics[1].
But Berkshire's appeal is about more than just low valuations. The company's legendary leader, Warren Buffett, has a strong track record of delivering long-term value creation. Given time, Berkshire shares consistently outperform the broader market[1].
[1] Enrichment data: Current reasons for investing, potential future growth prospects, and summary.
[2] Warren Buffet's Real Time Net Worth
[3] JPMorgan Chase Q4 2024 Earnings Report
[4] BNP Paribas
[5] Target 2024 Earnings Report
[6] Berkshire Hathaway Annual Report 2023
- In the context of foreseeable January 2025, the finance sector might experience less volatility, providing investors with an opportunity to invest in undervalued stocks, such as JPMorgan Chase.
- While banking giant JPMorgan Chase has weathered the financial storms of the past few years with remarkable resilience, its shares are currently priced under 14 times projected thematic earnings for 2025, indicative of potential future investing opportunities.
- Banks and financial institutions, including JPMorgan Chase, could benefit from the projected global GDP growth of 3.3% in 2025, as stated by the Organisation for Economic Co-operation and Development.
- During periods of financial volatility, it's essential for investors to consider bank stocks with a strong track record, like JPMorgan Chase, as they offer stability and long-term growth potential.
