For much of the past year, equity investors have had reason to smile. Since hitting a bear market bottom on March 23, the benchmark S&P 500 has risen by 76%, while the tech-heavy Nasdaq Composite has rocketed higher by as much as 106%.
Investors have piled into cryptocurrencies
But compared to the cryptocurrency markets, both indexes have been left in the dust. As of this past Saturday, March 13, 2021, the aggregate value of all cryptocurrencies catapulted to $1.83 trillion, according to CoinMarketCap. For some context, the cumulative value of all tokens on March 23, 2020 was $183 billion. That's a 900% increase in just shy of a year.
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Investors are excited about crypto for a variety of reasons. From a financial perspective, tokens like Bitcoin (BTC +0.64%) promise to speed up the process by which transactions are validated and settled. With traditional banking networks, international payments can take up to a week to settle. With Bitcoin, it can happen in an average of just under 10 minutes.
There are also applications for digital currency and blockchain outside of finance. For example, Ethereum's (ETH +0.67%) blockchain contains smart contracts, which are protocols agreed upon by parties that result in the execution of an action once specified parameters are met. Ethereum could be behind the reshaping of supply chains as we know it.
Even Dogecoin (DOGE +1.43%) has gotten in on the action. The Shiba Inu-inspired token has rallied big-time following the support of Tesla Motors' CEO Elon Musk.
But this monster rally in cryptocurrencies may not last. Dogecoin lacks utility and differentiation, Bitcoin has countless potential flaws, and Ethereum is reliant on blockchain going mainstream, which has not been a winning bet, thus far.
Value stocks look like a smarter buy than digital currencies
Rather than putting your money to work in an unproven asset class, I'd suggest buying into value stocks. Though value-oriented stocks have taken a backseat to growth stocks for more than a decade, value has historically outperformed growth over the very long-term. Plus, value stocks have performed substantially better than growth stocks during the early stages of an economic recovery.
With this in mind, here are three blazing-hot value stocks to buy right now, instead of crypto.
Image source: Getty Images.
For those of you wondering why social media superstar Facebook (FB 0.82%) is on a value stock list, let me clue you into a little secret: it's a value stock and a growth stock. Facebook is valued at just shy of 20 times forward earnings -- its average price-to-earnings ratio over the last five years is 36.7 -- and sports a price-to-earnings-growth ratio (PEG ratio) below 1. It's a value stock!
It's also an incredibly dominant social platform that shows little signs of slowing down. It ended 2020 with 2.8 billion monthly active users visiting its namesake site, and a grand total of 3.3 billion people visiting all of its owned assets each month. This latter figure includes unique visitors to WhatsApp and Instagram. There aren't any social destinations that come close to the audience, both broad and targeted, that Facebook can offer advertisers. That's why its ad revenue rose (yes, rose) by 21% during the worst economic downturn in decades.
Though it's a point I've driven home many times before, Facebook hasn't even monetized all of its assets in a meaningful way. Of the more than $84 billion in ad revenue generated in 2021, virtually all of its came from Facebook and Instagram. It hasn't popped the champagne cork on WhatsApp or Facebook Messenger yet. That's four of the top six social media platforms in the world, and Facebook is only generating bank from two of them. This is why Facebook remains such an underrated growth story.
With Facebook also having multiple avenues with which to diversify its revenue away from advertisements (e.g., Facebook Pay), it looks like a much more convincing long-term buy than cryptocurrencies.
Image source: Getty Images.
Walgreens Boots Alliance
Another blazing-hot value stock that investors should consider buying before crypto is pharmacy chain Walgreens Boots Alliance (WBA +0.00%). Investors can scoop up Walgreens for approximately 10 times forward-year earnings, and they'll net a handsome 3.6% dividend yield in the process.
Although most healthcare stocks were shielded from any negative effects tied to the coronavirus pandemic, Walgreens and its peers weren't so lucky. Initial lockdowns dramatically slowed foot traffic into its stores and closed many of its clinics. Even with its pharmacy generating the juiciest margins, the company's bottom-line took a hit with fewer people coming into its stores.
Thankfully, this is ancient history. Nowadays, Walgreens is benefiting from vaccine appointments and the expectation that people will return to their doctors for checkups and maintenance care.
Walgreens is also in the midst of an aggressive multistep turnaround plan that's emphasizing cost-efficiency, digitization, and healthcare personalization. The company is aiming to cut $2 billion in annual operating expenses by 2022, but is aggressively investing in its fast-growing online platform. It also recently announced the divestment of its wholesale drug distribution business to AmerisourceBergen for $6.5 billion in cash-and-stock. The nearly $6.3 billion in cash from this deal will be put to work in Walgreens' digitization initiatives.
Equally exciting is Walgreens' partnership with VilageMD to create full-service clinics in 600 to 700 of its stores. These full-service clinics should effectively draw in repeat business, and provide a seamless organic boost to the company's higher-margin pharmacy operations.
The 2021 Ford F-150. Image source: Ford.
Ford Motor
Finally, instead of buying unproven crypto assets, value stock investors can mash the gas pedal on Ford Motor (F 0.69%). Buyers of Ford are paying less than nine times forward-year earnings for the Detroit automaker.
Similar to Walgreens, Ford had a rough go of things during the pandemic. With people losing their jobs left and right, it wasn't clear when life would return back to some semblance of normal. This meant a slowdown in new car purchases worldwide, even with lending rates at or near historic lows in the United States. But with coronavirus vaccines now being administered, an end to the pandemic is in sight. That puts Ford's value and growth proposition back in focus.
On one hand, Ford is rich with history and brimming with operating success. It's a brand-name company that, over more than a century, has been able to transcend generations to create emotional attachments. The success of its brand can be seen in the sales of its F-Series pickups. Despite a drop-off in auto sales in 2020, the F-Series remained America's top-selling pickup for the 44th consecutive year, and was the best-selling vehicle (period!) for the 39th straight year. As long as fuel prices remain reasonably low, demand for these higher-margin trucks should be robust.
On the other hand, investing is Ford is all about its future in electric vehicles (EV) and autonomous vehicles. Originally, the company allocated $11 billion to EV investments between 2018 and 2022. However, Ford has increased its commitment to cleaner-energy vehicles to $29 billion through 2025, with $22 billion for EVs and $7 billion for autonomous innovation.
Ford has seen especially strong growth in China, where sales rose 30% last year and the company delivered successively higher market share with each passing quarter. By 2035, roughly half of all vehicles sold in China are expected to be EVs, which marks an incredible opportunity for Ford.
