Some stocks are cheap for a reason. Others are cheap for a season. Investors who can differentiate between the two can make money over the long run.
With the stock market trading at a historically high valuation, it's not as easy as it used to be to find stocks that are bargains. However, that doesn't mean they don't exist. I'll even step out on a limb and make a prediction: These three stocks will be the best-performing value stocks through 2030.
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1. Qualcomm
Identifying a tech stock that's attractively valued these days is almost like finding a needle in a haystack. However, Qualcomm (QCOM +10.86%) fits the bill with a forward price-to-earnings (P/E) ratio of only 13.7. The average forward earnings multiple for stocks in the technology sector is 29.8.
Qualcomm makes products for wireless connectivity, computing, and edge artificial intelligence (AI). Its technology is used in cellular infrastructure, networking infrastructure, cars, mobile devices, smart audio devices, and more.
NASDAQ: QCOM
Key Data Points
Why is this stock so cheap? Partly because Qualcomm's business has historically been heavily reliant on smartphones, a market that isn't growing nearly as rapidly as it did in the past. Apple and Samsung, the company's largest customers, are also becoming competitors by developing their own integrated circuits.
I think, though, that Qualcomm could enjoy stronger growth over the next five years than many expect. The Internet of Things (IoT), autonomous vehicle/driver assistance, and AI glasses, in particular, present tremendous market opportunities for the company.
2. Pfizer
Pfizer's (PFE +0.57%) share price has plunged in recent years. Initially, the sell-off stemmed from rapidly declining sales of the company's COVID-19 products. However, investors also know that Pfizer faces the loss of patent exclusivity for multiple drugs over the next few years.
There have been some positive side effects from Pfizer's dismal stock performance, though. For one thing, the drugmaker's valuation is much more attractive, with a low forward P/E ratio of only 7.7. Is this multiple warranted because of Pfizer's patent cliff? I don't think so. Wall Street doesn't seem to, either, considering that the stock's price-to-earnings-to-growth (PEG) ratio, which includes analysts' five-year earnings growth projections, is a reasonable 0.98.
NYSE: PFE
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I agree with Wall Street that Pfizer's growth prospects aren't as bad as they might seem at first glance. The company has several rising stars in its portfolio, notably including multiple myeloma drug Elrexfio, migraine therapy Nurtec ODT, and bladder cancer drug Padcev.
Another positive from Pfizer's sell-off is that its dividend is juicier than it's been in over a decade. The drugmaker's forward dividend yield currently stands at 7.15%. This ultra-high yield gives Pfizer a solid head start toward delivering strong total returns.
3. Verizon Communications
Verizon Communications' (VZ 0.48%) shares trade at roughly 9.2 times forward earnings. That's well below the valuations of peers such as AT&T and T-Mobile US. I think Verizon is one of the most promising value stocks on the market.
Importantly, Verizon trades at a discount to its top rivals but outshines them in several ways. For example, the company delivered the highest wireless services revenue in the industry in its latest quarter. J.D. Power recently selected Verizon as having the best wireless network quality for the 35th time. RootMetrics also named the company as the best, fastest, and most reliable 5G network provider in the U.S.
NYSE: VZ
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Like Pfizer, Verizon offers a dividend that investors should love. Its forward dividend yield is 6.3%. Earlier this month, Verizon announced its 19th consecutive year of dividend increases.
I expect that 6G wireless networks will begin to be adopted by 2030 and will lead to an explosion in IoT devices as well as the introduction of new technologies such as holographic communications. Verizon is well positioned to be a leader in 6G. The closer these super-high-speed networks get to becoming a reality, the more attractive I think Verizon will be to investors.
