There's no denying growth stocks have been leading the charge for the past few years. If you sense it's time for a change, however, you're not crazy. Between higher interest rates, slowing economic growth, and richly priced growth names, the market may soon start rewarding its less-exciting tickers.
To this end, here's a rundown of three value stocks to consider stepping into now and sitting on for several years. Not only are they all more than reasonably priced, but their services and products are sure to be in demand well into the future.
1. ExxonMobil
Energy stocks are always tricky to trade. They tend to move in tandem with the ebb and flow of crude oil prices, which is unpredictable in and of itself. Making them even trickier to navigate right now is the growing adoption of alternative energy sources like solar power, as well as the advent of all-electric cars. Oil increasingly seems to be on its way out.
Don't be too quick to write oil's obituary, however. The fact is, the world's going to need plenty of crude oil -- and the gasoline it becomes -- and natural gas for several more decades. The Organization of Petroleum Exporting Countries (OPEC) predicts daily demand for oil in 2045 will be 116 million barrels, up from the planet's current consumption rate of around 100 million barrels per day, according to numbers from the U.S. Energy Information Administration. OPEC's projection is also in line with outlooks from Standard & Poor's, as well as McKinsey.
What happened to renewables? Nothing. But the shift to cleaner sources of energy is slow-moving in addition to being expensive. For perspective, despite all the strides made within the U.S. alone, the United States' EIA reports that less than one-fourth of the nation's electricity comes from renewable sources like solar and wind.
The biggest single source of electricity generation remains natural gas. And that domestic breakdown of energy sources is comparable to the rest of the world, too. Meanwhile, the International Energy Administration reports there were only 26 million electric vehicles in regular use as of 2022, or less than 2% of the planet's total vehicle count of just under 1.5 billion.
In other words, we've got a long way to go before we can wean ourselves off of oil.
There are obviously many ways to plug into this reality. Oil giant ExxonMobil (XOM -2.78%) is one of the best, though, while its stock is priced at less than 12 times its trailing per-share earnings. The company's not only big enough to full fund the acquisition of new projects, but is also aggressively investing in exploration and the development of new resources. For instance, earlier this month, ExxonMobil began planning a major exploration in Guyana waters near wells that are already producing hundreds of thousands of barrels per day.
2. Bank of America
If you're not stoked about the idea of owning any bank stocks right now, you're not alone. Economic lethargy hurts them as well, and with loan delinquencies and defaults starting to creep higher, banks' charge-off rates could seemingly soon grow as well. Lower-risk, higher-reward options are probably out there.
What if, however, the risks banks are facing at this time are overblown, while at the same time banks themselves are being underestimated?
That's arguably the case right now, making Bank of America (BAC -0.21%) an interesting prospect while its shares are priced at less than 10 times last year's earnings, and less than 11 times this year's projected per-share profits. Its fourth-quarter provision for overall credit losses actually fell from Q3's level, and was in line with the Q4-2022 provision despite a bigger loan portfolio and a higher likelihood of loan defaults (although its credit card charge-offs and delinquencies were measurably higher). Interest income was well up last quarter too -- thanks to higher interest rates -- while deposits, loans, leases, and assets were all up slightly year over year as well, despite the headwind that's supposed to be blowing at this time.
The analyst community is calling for a modest dip in earnings this year despite modest revenue growth, but both the top and bottom lines are expected to start growing at long-term rates again next year as the world works its way through an economic lull.
It's also just difficult to argue that BofA isn't a stalwart in an industry the world is going to need as long as money exists.
Boring? Maybe a little. Don't sweat it, though. Just because a stock is boring doesn't make it any less productive for investors. New Bank of America shareholders will also be getting in while the dividend yield's a healthy 2.9%.
3. Taiwan Semiconductor Manufacturing
Last but not least, add Taiwan Semiconductor Manufacturing (TSM 1.26%) to your list of value stocks to consider buying for a few years if you've got $5,000 you know you won't be needing anytime soon.
OK, it's not usually categorized as a growth stock. It's even pushing the limits of what qualifies as a value stock, in fact, trading at a trailing price/earnings ratio of 25 and at a little over 22 times this year's expected per-share profits. That's not cheap by marketwide standards.
This stock is cheap by its own historical standards, though, particularly when paired with Taiwan Semiconductor's growth pace. Revenue is projected to improve more than 20% this year, and grow by almost that same amount next year. Earnings growth is expected to really accelerate in 2025 as well, once the global economy begins humming again and demand for semiconductors, microchips, and processors firms up.
Data source: StockAnalysis.com. Chart by author. Figures are in billions of New Taiwan dollars.
Even those estimates could be too conservative, however. Technology market research outfit IDC believes the global semiconductor market will grow 20% this year.
This growth obviously matters to all chipmakers, but it's particularly pertinent to investors interested in owning Taiwan Semiconductor. Nearly two-thirds of the world's semiconductors are made in Taiwan, and over 90% of the planet's most advanced chips are also made in the tiny country. Taiwan Semiconductor Manufacturing accounts for the vast majority of that production. Ergo, any industrywide growth disproportionally benefits this company.
The rest of the world is trying to wean itself from its dependence on Taiwan and Taiwan Semiconductor Manufacturing Company -- sort of. Following the supply chain disruptions stemming from COVID-19 lockdowns in 2020 and 2021, several major technology names began planning production facilities that will operate in the United States and Europe.
A wide swath of these plans, however, actually include Taiwan Semiconductor rather than displacing it. For instance, the chip foundry planned for Phoenix that will supply iPhone maker Apple will actually be a facility owned and operated by Taiwan Semiconductor Manufacturing.
Connect the dots: As long as the world uses technology, it's going to need Taiwan Semiconductor.
