10 Value Stocks to Buy Before Everyone Else Does

If 2020 was the year of tech stocks, 2022 could be the year of value stocks.

Much of the tech sector has crashed over the past year as the pandemic tailwinds have faded and investors are preparing for a higher interest rate environment.

In this kind of market, value stocks tend to thrive as investors look for reliably profitable stocks that trade at a discount and pay dividends.

For a list of 10 value stocks that could be winners this year, keep reading.

5 Stocks Under $49
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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

The home goods sector boomed during the pandemic as lockdowns, remote work, and soaring home prices drove people to spend more on home-improvement projects and home furnishings.

That was good news for Williams-Sonoma (NYSE: WSM), the high-end home furnishings company and parent of West Elm and Pottery Barn. The stock climbed through 2020 and much of 2021, but is now down about a third from its peak in November.

As a result, Williams-Sonoma now trades at a price-to-earnings ratio of just 10.5 and offers a 2% dividend yield. Two-thirds of its sales come from e-commerce, making it much more than just a brick-and-mortar chain.

While the company faces difficult comparisons this year, it's still poised to grow profits, and its set of well-respected brands, international growth, and emerging marketplace business should make it a long-term winner.

ALSO READ: 3 Undercover E-Commerce Stocks That Are Way Too Cheap

Like other commodities, lumber prices have soared during the pandemic, and as a result, lumber stocks are among the cheapest you'll find on the market, at least according to trailing results.

Resolute Forest Products (NYSE: RFP) -- a Canadian lumber company specializing in wood products, paper, tissue, and pulp -- currently trades at a trailing P/E of just 2 as profits soared due to higher lumber prices.

Even on a forward basis, the stock still trades at a price-to-earnings ratio close to 2, and lumber prices should remain elevated as there's a national housing shortage and a backlog of construction and home-improvement projects as well.

The company, which doesn't pay a regular dividend, rewarded investors with a $1 special dividend last year and could do something similar this year considering its strong cash flow.

Wells Fargo (NYSE: WFC) investors have gotten burned once before as the company was saddled with billions in fines after the 2016 scandal that involved fraudulent bank accounts and falsifying records.

However, CEO Charlie Scharf, who took over the company in 2019, has done a lot to improve the company's image and get it back in regulators' good graces. Wells is still under a Federal Reserve-mandated asset cap preventing it from growing its balance sheet, but that should be lifted eventually, especially since the company passed its last Fed stress test with flying colors.

As a commercial bank, Wells Fargo should also benefit from rising interest rates, which will improve net interest margins, or the spread between deposits and loans, a key profit driver.

At a P/E of just 10 and a dividend yield of 2.1%, the bank stock looks like a good buy in today's market.

ALSO READ: Will Wells Fargo's Asset Cap Be Removed in 2022?

Apparel stocks aren't thought of so highly by the market. It's a competitive, highly fragmented, mature industry with few barriers to entry.

However, The Children's Place (NYSE: PLCE), the leading specialty children's apparel retailer, is trading at such a deep discount that it deserves a closer look.

The company, which gets nearly 40% of its sales through the digital channel, boomed last year as consumers were flush with stimulus cash and the enhanced Child Tax Credit. Profits soared, and it now trades at a P/E of just 4 based on last year's results. Even looking ahead, it's trading at just around 5 on a forward basis.

The Children's Place is slowly closing stores to shift its business to e-commerce, but its strong profits show that the strategy has paid off. The market hasn't seemed to notice, however.

Perion Network (NASDAQ: PERI), an ad tech company providing an intelligent hub that connects ad buyers and sellers, isn't your typical value stock.

In fact, the small-cap Perion is still growing quickly, with revenue up 39% in the first quarter to $125 million, but the market seems to think little of the company's growth as it is trading at just 13 times 2022 run rate earnings before interest, taxes, depreciation, and amortization.

The company has a scalable model, meaning once its tech infrastructure is in place, incremental sales should help it expand profit margins.

Still, the market seems skeptical of the ad tech space after a boom earlier in the pandemic, but considering the strong growth and profits in the industry, that seems to be a mistake.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Meta Platforms (NASDAQ: FB), the company formerly known as Facebook, is flashing the value stock sign like never before.

Meta trades at a price-to-earnings ratio of just 15, but there's a good reason it's so cheap. First, the company forecast its revenue growth slowing to just 3% to 11% in the first quarter as it faces headwinds related to Apple's ad-tracking restrictions and other macroeconomic headwinds. Second, Meta is shifting its business model as its name change implies. The company is investing heavily in reality labs, its division focused on augmented reality and virtual reality, or the metaverse, as CEO Mark Zuckerberg calls it.

Meta lost $10 billion on reality labs last year and is set to lose more this year. Still, if the big bet pays off, this stock will certainly look cheap at its current price. Meanwhile, the company still has a high-margin cash machine in its ad business and that should continue rewarding investors.

ALSO READ: Where Will Meta Platforms Be in 3 Years?

If you're looking for a sector full of value stocks, the homebuilding industry is where you want to go. Homebuilders have sold off in recent months amid rising interest mortgage rates and expectations that the economy is going to cool. However, home prices are still sky high and there's a lot of demand for new housing as many communities are facing housing shortages.

One appealing option here is Lennar (NYSE: LEN), one of the nation's biggest homebuilders, which is trading at a price-to-earnings ratio of just 6. The company has yet to experience any macro headwinds as revenue was up 16% in its most recent quarter, and it expects home deliveries to increase by double digits this year, along with higher sales prices.

While higher mortgage rates should eventually cool off the housing market, unless it really crashes, Lennar looks to be in a great position.

These days, AMC Networks (NASDAQ: AMCX) looks to be the last company standing in the cable media universe. Nearly every other company has merged in order to make the transition to streaming. Disney and Fox joined forces. Warner Media and Discovery just combined, and Viacom and CBS got back together.

It only seems natural to ask who is going to snatch up AMC, which has a track record of making award-winning shows, including Mad Men, Breaking Bad, The Walking Dead, and Killing Eve. The company, which also owns IFC, Sundance, and BBC America, has a market cap of just $1.7 billion, making it an affordable asset to pick up in the streaming wars.

It's also profitable, trading at a P/E of just 7.

You should be aware that AMC doesn't need an acquisition to be successful. It's building out its own suite of streaming services, aiming for 20 million to 25 million subscribers by 2025, and revenue increased 9% last year, showing it continues to grow.

ALSO READ: Investing in Streaming Service Stocks

If you're bullish on going back to the office, SL Green Realty (NYSE: SLG) is the stock for you.

The real estate investment trust is Manhattan's biggest office landlord. While the company has taken a hit during the pandemic, it has held up better than you might think. Its same-store occupancy rate was 93% at the end of 2021, and though revenue fell last year due in part to concessions during the pandemic, it should start to recover this year as many corporations are eager to put the pandemic behind them.

Currently, SL Green trades at price-to-earnings ratio of 12 and offers a dividend yield of 5%. If the office real estate market turns around, SL Green should be a big winner. Even if it doesn't, its real estate would be valuable in a residential conversion.

Transportation companies have also gotten hit by the recent macroeconomic malaise with rising fuel prices and supply chain challenges adding to costs.

XPO Logistics (NYSE: XPO) is one of several transportation stocks to slide on the news as it's drifted lower since it spun off GXO Logistics last August. XPO is one of the largest providers of less-than-truckload (LTL) transportation, and it also offers freight brokerage through its XPO Connect app, which connects shippers and drivers much in the way that Uber does for riders.

The GXO spinoff has been such a success that XPO is now planning to split the freight brokerage and LTL businesses, but even without that, the stock looks well priced, trading at a P/E under 12 based on this year's expected earnings. For an industry leader and a proven winner, that looks like a great price.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Not all cheap stocks are good value stocks, and it's important to understand that finding a value stock takes more than just screening for a low P/E ratio. You want to find companies that are undervalued by the market. That could be because investors are overreacting to short-term news, whether that's from the company or in the broader economy, or because the business is misunderstood.

Often, the market takes a short-term view, selling off stocks on temporary conditions. As a long-term investor, these can create some of the best buying opportunities you can find, though it's not so easy to spot them in real time.

With volatility high and fears of a recession mounting, now's a great time to add some value stocks to your portfolio.

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns Meta Platforms, Inc., Perion Network, Resolute Forest Products, The Children’s Place, Walt Disney, Wells Fargo, and XPO Logistics. The Motley Fool owns and recommends Apple, Meta Platforms, Inc., Walt Disney, and Williams-Sonoma. The Motley Fool recommends Lennar Corporation, Uber Technologies, and XPO Logistics and recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.