Growth stocks are floundering with the tech-heavy Nasdaq Composite Index down over 10% to roughly 14,000 year to date. But investors have another option: value stocks. Let's explore why Ford Motor Company (F 0.42%) and Altria Group (MO 0.38%) could offer exceptional bang for your buck in this challenging market.
1. Ford Motor Company
Ford Motor Company is a legacy automaker reinventing itself with a pivot to electric vehicles (EVs). The company's established brands and rock-bottom valuation could make it a great bet as the opportunity expands.
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According to analysts at Fortune Business Insights, the global EV market may grow at a compound annual growth rate (CAGR) of 24.3% to $1.3 trillion by 2028 as people become more environmentally conscious and battery technology improves. Ford will compete for market share against pure plays like Tesla and Rivian, which currently attract the lion's share of investor interest.
But Ford has some key advantages. Among them is a reasonable valuation. It has a market cap of $64 billion, and the stock trades at just 0.5 times 12-month revenue. For comparison, Tesla has a price-to-sales (P/S) multiple of 17 while Rivian has a P/S of 28,000.
On top of the rock-bottom valuation, Ford's strong brands such as the F-150 (the top-selling pickup truck in America) and the Mustang give it a captive audience for new, electrified offerings. This built-in demand could help sustain Ford's goal of producing 600,000 EVs annually by 2023.
2. Altria Group
Tobacco stocks are ideal for investors who wish to invest in this area and are focused on profitability vs. breakneck growth. U.S. cigarette maker Altria Group fits into this category. The company's reliable income and modest valuation make it an excellent pick for defensive investors.
Altria's net revenue declined 0.5% year over year to $26 billion in 2021. But the company did better on its bottom line where adjusted, diluted earnings per share rose 5.7% year over year to $4.61.
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The company doesn't hesitate to return this value to shareholders. In 2021, it spent $1.7 billion to repurchase and retire a staggering 35.7 million shares. This move can help support the company's stock price by reducing the number of shares relative to revenue and earnings. Altria also paid out $6.4 billion in dividends for the year, boasting a dividend yield of 6.76%. Management aims to maintain a dividend payout ratio of 80% of Altria's net income over the long term.
With a forward price-to-earnings multiple of just 10.5, Atria is dirt cheap compared to the S&P 500 average of 25 and rivals, such as Philip Morris International, which trades for 14 times forward earnings. Altria's focus on the U.S. also helps shield it from geopolitical challenges such as the conflict in Eastern Europe, which may disrupt multinational rivals.
Betting on value
This is an uncertain time in financial markets as soaring inflation and geopolitical tension put everyone on edge. But savvy investors can rest a little easier by betting on stocks with fewer expectations baked into their prices. Ford Motor Company and Altria Group fit the bill because of their reasonable valuations compared to industry rivals.
