For more than a decade, growth stocks have been the talk of Wall Street. Historically low lending rates have rolled out the red carpet for fast-paced companies and allowed them to borrow cheaply in order to hire, acquire, and innovate.
But what you might not realize is that value stocks have actually outperformed growth stocks over the very long run. Since value stocks are profitable and time-tested, they're the perfect place for patient investors to put their money to work.
Below are five value stocks that could make you richer in 2022.
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General Motors
The days of General Motors (GM 4.95%) being just another stagnant auto stock are gone. The electrification of automobiles has placed a multi-decade growth opportunity on the company's doorstep, and it'll undoubtedly run with it.
In June, General Motors announced plans to up its investments in electric vehicles (EVs), autonomous vehicles, and batteries to $35 billion by 2025. The ultimate goal is to roll out 30 new EVs globally by mid-decade. Further, the company anticipates having two plants devoted to EV battery production up and running by 2023.
The great thing about EVs is that they're a global trend with incredible momentum. Not only does GM have excellent branding power in the U.S., but it has a good chance of gobbling up significant market share in China, the world's top auto market. General Motors likely delivered in the neighborhood of 3 million vehicles in China last year, which should provide it with the branding power and infrastructure to grow EV sales rapidly in the No. 1 auto market.
Best of all, General Motors is inexpensive. Shares can be purchased for less than nine times forward-year earnings and a price-to-earnings growth (PEG) ratio below one -- a PEG ratio below one is considered to be undervalued.
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AGNC Investment Corp.
Mortgage real estate investment trust (REIT) AGNC Investment Corp. (AGNC 0.87%) is another value stock that could make you richer in the new year.
The mortgage REIT industry might sound complicated, but it's fairly straightforward. AGNC aims to borrow money at low short-term rates and use this capital to purchase higher-yielding long-term assets, such as mortgage-backed securities (MBS). The difference between the average yield from MBSs and its average borrowing rate is known as net interest margin.
What's interesting for mortgage REITs is that they often perform best during an economic recovery, which is where we are now. Recoveries are typically characterized by a steepening yield curve -- i.e., when the gap between short-term and long-term Treasury yields widens. When long-term yields jump, it tends to boost the average yield on MBSs and widen the company's net interest margin.
What's more, AGNC Investment almost exclusively purchases agency securities. An agency asset is backed by the federal government in the event of default. This added protection allows the company to utilize leverage to its advantage.
With AGNC trading below its book value and parsing out a 9.6% dividend yield, it looks ripe for the picking by value investors.
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AT&T
Another deep-discount value stock that could make investors richer in 2022 is telecom giant AT&T (T 0.92%). Although AT&T's growth heyday has long since passed, the company is counting on two key catalysts for value creation moving forward.
To begin with, the company's wireless segment should benefit from the ongoing rollout of 5G wireless infrastructure. Consumers and businesses went a full decade without any significant upgrades to wireless download speeds. The rollout of 5G provides an incentive to upgrade devices over the next couple of years. Since AT&T generates its juiciest margins from data consumption, 5G investments should pay off handsomely.
The other big catalyst is AT&T's pending spinoff of content arm WarnerMedia, which'll be merged with Discovery to create a new media entity. This new entity will have approximately 85 million pro forma subscribers and broader appeal with its original content library, and is expected to result in more than $3 billion in annual cost synergies. Spinning off WarnerMedia will also allow AT&T to reduce its dividend to around 5% and focus on debt reduction.
A forward price-to-earnings ratio of less than 8 is simply too cheap for this time-tested moneymaker.
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Exelixis
Keep in mind that even growth stocks can qualify as value stocks under the right circumstances. Biotech stock Exelixis (EXEL 1.47%) is a perfect example of a company with sustainable double-digit growth potential and a PEG ratio that's well below one.
Exelixis' claim to fame is the company's cancer drug Cabometyx, which is approved to treat first- and second-line renal cell carcinoma, as well as advanced hepatocellular carcinoma (HCC). These indications alone are enough to push Cabometyx above $1 billion in sustained annual sales.
Last year, Exelixis was clobbered after announcing that a late-stage trial in first-line HCC was unlikely to demonstrate a statistically significant improvement in overall survival. While certainly disappointing, this modest setback overlooks Cabometyx's other wins. It also negates the roughly six dozen ongoing studies of the drug as both a monotherapy and combination treatment. Even a handful of label expansions could turn Cabometyx into a therapy capable of $2 billion or more in annual sales.
The exceptionally high margins associated with cancer drugs have also allowed Exelixis to reignite its internal growth engine. With the company expected to have ended 2021 with $1.8 billion in cash and investments, Exelixis has a war chest at its disposal to either go shopping for new drug candidates or greatly expand its research department. Either way, it looks set for an excellent year.
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Meta Platforms
Have I mentioned that growth stocks can be value stocks, too? A fifth value stock that could make you richer in 2022 is Meta Platforms (META 2.35%), the parent company of social media platform Facebook.
One of the easiest ways to make money on Wall Street is to buy best-of-breed companies. Facebook is the unquestioned best of breed in the social media space. During the third quarter, Facebook attracted 2.91 billion monthly active users (MAUs), with another 670 million unique visitors heading to Instagram or WhatsApp, which Meta also owns. This 3.58 billion MAUs represents more than half the world's adult population, and is a big reason why the company has such incredible ad pricing power.
As I've previously noted, Meta Platforms hasn't even fully monetized all of its core assets yet. The company very likely surpassed $100 billion in ad revenue in 2021, almost all of which came from Facebook and Instagram. If and when Meta monetizes WhatsApp and Facebook Messenger, it'll likely experience another surge in sales and profit growth.
But as its new name implies, Meta is about more than just advertising these days. The company's Oculus virtual reality devices put it on track to be a major player in the metaverse. The metaverse is the next iteration of the internet, and will allow users to interact in 3D virtual environments. Meta invested $10 billion in metaverse-related projects last year, and plans to spend successively more in subsequent years.
With a PEG ratio under one, Meta Platforms is a stock value investors can confidently buy in 2022.
