Value investing is one of the best ways to build wealth. Just ask Warren Buffett, the king of modern value investing, and arguably the most successful investor of his time. 

Value stocks generally trade below their true value based on assets, revenue, or other metrics, and savvy investors anticipate share prices rising to match the true value. The companies are usually well-established and profitable, and they often pay dividends. They don't typically reward investors with high growth, but they provide security and low risk, which are key components of a diversified portfolio. Slow and steady wins the race.

Target (TGT 1.55%), Coca-Cola (KO -0.82%), and Kroger (KR -0.91%) are three top value stocks to add to your portfolio in August.

A Target team member looking at phones with a drive-up customer in a car.

Image source: Target.

Cheap and chic go digital

Target's ascent to the top of retail has been quick yet calculated. Those who recognized the company's potential as it transitioned from cheap and chic retailer to omnichannel giant a few years ago have benefited, with the share price rising 255% over the past five years.

That's strong and long growth, mirroring Target's supersized success as it launched a potent mix of digital shopping options before the pandemic started and then reaped the rewards while customers shopped from home.

Target is a leader in same-day shipping options, something even e-commerce ruler Amazon has a hard time matching. Same-day services, which comprise pickup, drive-up, and Shipt deliveries, grew triple-digits throughout the pandemic and remained high at 90% growth in the first fiscal quarter (ended May 1). Target makes use of its more than 1,900 store locations to get products to homes faster and cheaper, and stores took care of more than 75% of digital orders in Q1.

It has been doing well with its small-store format, which allows it to service denser, urban areas, and about half of its planned new store openings are set to be in the smaller format.

But Target can succeed in any environment, and a 23% revenue increase in the first quarter was fueled by store comps as people began to go out again.

Target stock trades at a reasonable 22 times trailing 12-month earnings, and the company pays a dividend that yields 1% at the current price. It releases second-quarter earnings next week.

Person in red hat drinking from a glass of cola with a straw.

Image source: Getty Images.

Basking in beverage bliss

The pandemic was a challenge for beverage master Coca-Cola. But it demonstrated high resilience through ramping up take-home product innovation and distribution when it mattered, driving up at-home sales to pick up some of the slack from closed restaurants and other away-from-home establishments. That helped it climb out of serious sales declines and notch a 42% increase in net revenue year over year, which was 14% above 2019 levels.

It managed that feat through a rigorous company restructuring and stripping away about half of its labels to steer resources toward higher-producing products. Its strong global distribution system was also pivotal to the success. So while rival PepsiCo did better during the pandemic, thanks to its diverse product line which includes breakfast and snacks, Coke is still the leader in beverages and has made a huge comeback.

If last year was difficult, the company responded to the pressure by implementing growth strategies that will serve it well into the future. It has also raised its revenue, earnings, and cash flow outlook for 2021, and it's well-positioned to make inroads into new markets for many years.

Coca-Cola is known for its dividend, which yields 2.9% at the current price, and this Dividend King has raised its dividend for 58 years.

Adult holding child on back who is picking a product off a supermarket shelf.

Image source: Getty Images.

Going all in on digital grocery delivery

Kroger is the third-largest grocery purveyor in the U.S., behind Walmart and Costco. Its stock hasn't kept up with those competitors, though, as sales don't typically grow in high increases, and digital has been on the back burner.

But things have started to change at the supermarket chain, which operates 2,750 grocery stores. It revamped its digital channels last year and opened new warehouses to service more customers more quickly, and comps increased 14% in 2020.

Comps decreased 4% in the fiscal first quarter ended May 22, which was better than expected as pandemic-fueled demand began to subside. Kroger raised its full-year outlook from $2.75 to $2.95 in earnings per share to $2.95 to $3.10. Digital sales grew 16% on top of 92% in Q1 2020, which is continued progress as stores reopened.

Kroger raised its dividend 17% in June, higher than usual, in light of the solid performance in 2020. It yields 1.7% at the current price, and shares trade at 22 times TTM earnings. Warren Buffett's Berkshire Hathaway has a large position in Kroger stock, and it's an excellent value stock to consider.