Investing in Value Stocks

Value investors want to buy stocks for less than they're worth. If you could buy $100 bills for $80, wouldn't you do so as often as possible? Even high-quality companies with strong fundamentals see share prices fall when the overall stock market drops. Plus, value stock companies tend to be well established and less volatile than growth stock companies.

1. Berkshire Hathaway

Berkshire Hathaway is a unique company on the stock market and has long been a top choice for value investors. That's largely because longtime CEO Warren Buffett is the world's most admired value investor, and his investing acumen is the biggest reason for the company's success.

However, Target has struggled in recent years due to weak consumer discretionary spending, inventory fluctuations, and internal issues such as theft. It's also faced customer backlash due to changes in its diversity, equity, and inclusion (DEI) policies, which may have contributed to weak results in 2025. As a result, the stock traded at a price-to-earnings (P/E) ratio of 11 in December 2025.

That's a great price to pay for a retailer with differentiated positioning and one that's still opening new stores despite its recent struggles. Target is also a Dividend King with a dividend yield of 5%, offering a reward to income investors.

Target still has a long-term growth opportunity in retail, both through new stores and e-commerce. This includes its range of same-day fulfillment options, such as curbside pickup, known as Drive Up, and same-day delivery through Shipt.

Target's stock has fallen for a number of reasons, but its challenges are fixable. The company expects to grow sales by a total of 15% over the next five years, and at its current valuation, the stock looks like it should be a winner if it can accomplish that goal.

While its recent results have been disappointing, Target is the kind of value stock that offers value because of its turnaround potential. A change in leadership could also help drive a recovery when Chief Operating Officer Michael Fiddelke becomes CEO in February.

3. General Motors

Valuation is arguably the most important test of a value stock, as a value investor is ultimately looking to buy a stock worth more than its price. As Buffett has said, "Price is what you pay. Value is what you get."

By that yardstick, General Motors (GM) may be one of the best value stocks around. GM has been a leading player in the auto industry for a century and remains one of the world's largest automakers.

Based on its adjusted earnings per share (EPS), GM trades at a P/E ratio of 7.5 as of December 2025. This is a reflection of investors' low growth expectations and uncertainty around tariffs and trade. However, forward expectations have improved due to policy changes under the Trump administration, as well as the company's own moves to scale back on money-losing ventures.

The company has started to benefit from slowing growth in electric vehicles (EVs), though it has a number of them on the market, as the transition will support sales of its combustion vehicles. GM also announced in late 2024 that it would shut down its Cruise autonomous vehicle business, which had cost it an estimated $10 billion. Investors responded positively to the move because it will help GM's cash flow.

Concerns about tariffs have weighed on the stock at times, but it's unclear how the import taxes will affect the business since higher car prices could be good for GM, or at least for its American-made inventory. A recent hike in steel tariffs to 50%, however, is expected to be a hardship for GM and its peers.

The company estimates the gross tariff impact for the year to be $3.5 billion to $4.5 billion. However, the company will benefit from a new government MSRP offset program that lowers the tariff impact, as well as relaxed fuel economy standards.

As a value stock, GM is also able to aggressively repurchase stock to lift its EPS. It has reduced shares outstanding by almost one-third over the last 18 months. That's one way value stocks can grow profits even without growing revenue.

4. Signet Jewelers

Signet Jewelers is the world's largest diamond jewelry retailer. With a market cap of just $3.6 billion, it's much smaller than any of the other stocks on this list, but value stocks come in all sizes.