Last year, Bank of America/Merrill Lynch released a study that aimed to answer once and for all which type of stock, growth or value, yielded the best returns over the long run. The results showed that value stocks trumped growth between 1926 and 2016, with an average gain of 17% a year to 12.6% for growth stocks. 

With value stocks winning out, and seniors living longer than ever, today's retirees need more than just income during their golden years. They need companies that can appreciate, too. Knowing this, we asked three of our Foolish investors to name one value stock for retirees to consider buying. Rising to the top of the pack were telecom giant AT&T (NYSE:T), insurer AIG (NYSE:AIG), and drug developer Teva Pharmaceutical Industries (NYSE:TEVA)

A senior man reading the money section of a newspaper.

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Dial up big dividends

Keith Noonan (AT&T): With its reasonable valuation, great dividend, and underappreciated growth prospects, AT&T looks like a top value stock for retirement portfolios. 

Even with pressure from value-focused competitors, AT&T's wireless business has significant differentiation opportunities on the horizon and looks primed to generate reliable cash flows for the foreseeable future. The roll out of 5G networks will once again expand the company's performance edge relative to competitors such as T-Mobile and Sprint, and connected cars and other Internet-of-Things markets will probably be categories in which customers prize the advantages of premium service.

The company's pending merger with Time Warner also opens up new long-term growth avenues. In addition to bringing one of the world's leading content creators under AT&T's corporate umbrella, the deal will open up opportunities for bundling wireless service and television packages and create other synergies. AT&T expects that it will be able to command much higher advertising rates for Time Warner's television content by serving ads digitally to its customers. Because these ads would have the benefit of data-based targeting, AT&T anticipates that their market value could be between two and three times more than what Time Warner is currently getting through cable distribution.

Trading at 13 times forward earnings estimates and packing a 5.1% dividend yield and a 33-year history of annual payout increases, AT&T looks like a great value stock to buy and hold for the long term.

A man in a suit holding his hands over paper cutouts of a family, a car, and a house.

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One of the few remaining values in insurance

Jordan Wathen (AIG): One of the world's largest insurance companies is also one of the cheapest. Shares of AIG trade at a 20% discount to book value, making it one of the best bets in the insurance industry, in my view.

There are reasons Wall Street isn't eager to pay a high multiple for AIG's stock. Its cost-cutting plan, while effective, hasn't led to a significantly increased return on equity because of AIG's inability to adequately reserve for losses. In early 2017, AIG signed a $10 billion deal with Berkshire Hathaway to cap its risk and put questions about its reserves behind it.

Things are changing. Brian Duperreault recently joined the company as CEO, and his experience at ACE, a commercial insurer, and AIG, in actuarial roles, should help AIG tighten its underwriting, and improve its underlying business performance. Ex-CEO Peter Hancock may have been the man for cost cuts, but AIG finally has the insurance executive it has long needed.

AIG is neither a candidate to triple in value overnight, nor one to halve in price from here. That said, I do think that buying AIG at a 20% or greater discount to book value will lead to a market-beating return over the long haul through a combination of rising book value from retained earnings and an increase in its market multiple as its performance improves.

Prescription drug capsules lying atop a pile of cash.

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You'd struggle to find a cheaper drug stock

Sean Williams (Teva Pharmaceutical Industries): According to the Social Security Administration, the average 65-year-old will live at least 20 more years, meaning that while income generation is important, you'll need to set yourself up for long-term share-price appreciation, too. One such stock that's been downtrodden recently, but has long-term competitive advantages that should come in handy, is drugmaker Teva Pharmaceutical Industries.

Teva has been thrown out with the bathwater recently. It cut its dividend by 75%, reduced its sales and profit forecast for the year, had a competitor gain Food and Drug Administration approval to market a generic of its top-branded products, Copaxone, and settled with regulators on a bribery charge in three countries. It also lost its CEO and CFO to resignation and is facing generic-drug price weakness to go along with its $35.1 billion in debt. As I said, it's had a bad go of things. But that could soon change.

Unlike other companies that have gotten themselves into trouble with debt previously, Teva has levers it can pull. It's already jettisoned its women's health business in three separate transactions totaling almost $2.5 billion, and its dividend cut will save it $1 billion annually. Combine this with the likelihood of $2 billion or more in annual free cash flow, and the expected divestment of its European pain and oncology business, and there's a good chance that Teva could slash its debt by $7 billion (20%), if not more, by the end of 2018.

The company should also benefit from the growing use of generic medicines. Teva is the world's largest generic-drug producer, and as such it should be the beneficiary of some decent pricing power over the long run. However, the company should be a winner by sheer volume alone. Whereas 88% of prescriptions written in 2015 were for generics, this figure could jump to 91% to 92% by 2020. That patents are finite on branded drugs gives Teva a growing supply of generic opportunities and patients. 

Currently valued at just four times next year's profit projections, and sporting just over a 2% yield, Teva could be the perfect value play for retirees.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.