There's no denying growth stocks led the marketwide bullish charge over the past several years. But rightfully so. Interest rates were low, and the economy was persistently strong. It's an ideal setting for growth companies.
There's also no denying things are different now. Interest rates are still near their multi-year highs reached late last year. And the economy is on wobbly footing. Inflation may be abating, but expensive consumer debt could prove to be a lingering overhang. It's an environment that favors value stocks over growth stocks, if only because the backdrop strongly disfavors growth.
To this end, here's a closer look at three value stocks that could outperform most others between now and 2030.
Chubb
Chubb (CB +0.21%) has been a curiously strong performer for a while now. Certainly, other stocks have dished out bigger gains than this insurer's 200%-plus run-up from its early 2020 pandemic-prompted low. But not many. Even more surprising is just how persistent this progress still is. Chubb shares are knocking on the door of their record high reached late last month, rising in step with the company's earnings growth.
NYSE: CB
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The most surprising detail of this long-term advance, however, is that it hasn't pushed Chubb stock's valuation to uncomfortably rich levels. As of the most recent look shares are trading at a trailing price-to-earnings ratio of only 11.5, and 12.6 times projected earnings for the coming four quarters. Also bear in mind that Chubb tops its earnings estimates far more often than not. The forward-looking earnings estimates may actually understate the results in store here. That's seemingly what all the buyers since early 2020 are counting on, anyway.
But is it a stock worth owning for the next several years? Yes it is, and not just for its decent dividend (Chubb's forward-looking dividend yield stands at a respectable but modest 1.34% although its annual payout has now been raised for 31 consecutive years).
See, the insurance business is less risky and more consistent than you might think. While there's always the prospect of losses stemming from big payouts to customers in any given year, one year's premiums are generally based on the previous year's total costs. Given enough time, insurers will recover and eventually thrive again. Chubb is no exception.
Chubb's competitive edge on these other insurers is its sheer size. With more than $225 billion in assets and nearly $60 billion worth of premiums collected every year it's not only able to ride out the occasional storm, but it's physically present in most markets all over the planet. Would-be customers can readily find it, and just as readily purchase coverage from it.
Boring? You bet. Don't confuse boring with unproductive, though.
On Semiconductor
On Semiconductor (ON +1.49%) isn't one of the market's most visible semiconductor names. In fact, there's a good chance you've never even heard of it. On the other hand, there's also a good chance that you or someone you know regularly relies on its technology without even realizing it.
On Semiconductor's products are frequently found in cellphone tower equipment, military hardware, and advanced automated factories. Its claim to fame (if it only has one) is on the automotive front. In addition to offering charging and power-management solutions for electric vehicles, On's wares are found behind dashboards, managing LED lighting, or even optimizing an automatic transmission. Without its solutions, the world would look and function noticeably differently.
NASDAQ: ON
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That doesn't mean this company's business or bottom line grows consistently. Indeed, demand for On's hardware regularly ebbs and flows, reflecting extreme sensitivity to economic changes. Its customers sometimes postpone or outright cancel purchases, deciding this technology is something they don't absolutely need right away. On is occasionally forced to cancel an order as well, simply because it can't procure the materials it needs. That's just the nature of the business.
CB Revenue (Quarterly) data by YCharts
When you're talking about a five-year time frame, though, customers simply can't forego On's specialized tech. The advent of next-generation vehicles and AI-capable smartphones alone is set to drive enormous demand for On-made chips in the foreseeable future. In this vein, analysts believe On's per-share profits are set to more than double between 2024's lull and 2030.
You can step into the stock at only 16 times next year's expected earnings of $4.74 per share.
Berkshire Hathaway
Last but not least, add Berkshire Hathaway (BRK.A 0.24%) (BRK.B 0.38%) to your list of value stocks that could dish out great performance over the course of the next few years.
OK, it's not a value stock in the traditional sense; in some regards it's not a stock at all! Berkshire Hathaway is actually a conglomerate of many different privately owned companies that just so happens invest its idle cash in publicly traded organizations. As it turns out, chief Warren Buffett also just happens to be a big fan of value stocks, and gravitates toward them when doing deals or deploying Berkshire's capital.
More important to value-minded investors, he's a particularly good stock picker and a wise judge of a business's current value and eventual potential. That's why Berkshire reliably outperforms the S&P 500 in the long run even if it occasionally lags behind it. In time, a corporation's or conglomerate's value always shines through.
NYSE: BRK.B
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With all of that being said, maybe it's the best long-term value prospect of all right now simply because -- to the extent it can be meaningfully calculated -- Berkshire Hathaway shares are dirt cheap. They're priced at only about 14 times their trailing earnings generated by all of the conglomerate's cash-driving businesses plus all of its stock holdings.
Do take that number with a grain of salt. Again, Berkshire is an unusual mix of public and privately owned entities, with more of the latter and less of the former (by a factor of roughly two to one). It's difficult to get a precise read on its valuation.
Even if the number is only in the ballpark, though, it bodes well for Berkshire Hathaway shareholders in an environment that favors Buffett's value-minded approach to selecting stocks. It's also just a simple, easy-to-own holding with a great track record.
