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Many investors are kicking value stocks in hopes of capping a new bull market. This isn’t surprising, given that some large-cap growth stocks have generated impressive returns.
However, over the long term, value stocks typically outperform growth stocks. And some value stocks will be bigger winners than others. I predict these could be the best-performing value stocks through 2030.
1. Alibaba Group
Most investors probably think this way. alibaba group (New York Stock Exchange: Baba) As a growth stock. After all, the company is a technology giant focused on exciting areas such as e-commerce, cloud services, and artificial intelligence (AI). But there’s a strong case that Alibaba is also a value stock.
Alibaba stock is nearly 60% below its highs reached in late 2020. The tattered stock currently trades at just 8.3 times forward earnings. In my opinion, it is an area of undisputed value.
What is the main reason for Alibaba’s dismal performance and extremely low valuation? China’s sluggish economy. The once fast-growing company saw sales in the fourth quarter of 2023 increase only 5% year-on-year, while adjusted profit fell 2%.
But don’t count out Alibaba. The company is investing in initiatives that will drive growth. AI should be a big tailwind for the company’s cloud platform.
I’m not alone in being bullish on Alibaba. Of the 48 analysts surveyed, LSEG All but one person who covered the stock in March recommended a buy or strong buy.
2. Enterprise Product Partner
enterprise product partners (New York Stock Exchange: EPD) The forward earnings multiple is below 10.6x.It’s a bargain compared to the valuation of S&P500 and the entire energy sector.
We think Enterprise Products Partners has key advantages that could make it a big winner over the next six years. The midstream energy provider’s distribution yield is over 7.1%. Enterprise does not require significant unit price increases to deliver exceptional total returns (limited partnerships like Enterprise have units rather than shares).
However, Enterprise has the potential for solid price growth. Demand for the company’s pipelines and other midstream assets is likely to increase in the coming years, especially if oil supply shortages arrive in late 2025. occidental CEO Vicki Holub predicts:
Even if the oil and gas industry finds itself in a tough spot, Enterprise Products Partners should be in good shape. The company has a long history of generating high returns on invested capital, regardless of fluctuations in commodity prices.
3. Pfizer
pfizer (New York Stock Exchange: PFE) In some ways, we are in the same position as Enterprise Products Partners. Thanks to his over 5.9% dividend yield, this pharmaceutical company doesn’t need to deliver significant stock price appreciation to generate a market-beating total return.
This Big Pharma stock isn’t as cheap as Alibaba or Enterprise based on forward earnings multiples. But Pfizer is outperforming some of its peers. I also think the current negative sentiment towards the stock price is overdone.
To be sure, Pfizer faces some challenges. Sales continue to decline significantly due to the impact of the new coronavirus infection. Several of the company’s best-selling products, including the blood thinner Eliquis, the breast cancer drug Ibrance, and the rare disease drug Vindaquel, will lose patent exclusivity in the coming years.
However, that doesn’t tell the whole story. With multiple new drugs and new indications for existing drugs, Pfizer expects to generate annual revenues that will more than offset losses from patent expirations by 2030. The company also expects business development deals to generate an additional $25 billion in new annual revenue by 2030.
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Keith Speights holds positions at Enterprise Products Partners and Pfizer. The Motley Fool has a position in and recommends Pfizer. The Motley Fool recommends Alibaba Group, Enterprise Products Partners, and Occidental Petroleum. The Motley Fool has a disclosure policy.
“Prediction: These could be the best-performing value stocks through 2030” was originally published by The Motley Fool.
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