When it comes to large savings and funds needed for the long term, investors shouldn’t be afraid to pay a premium for a quality stock. If you can buy quality stock at a relatively low price, all the better.
Here are three high-quality, low-cost value stocks meeting that description that you could buy significant stakes in now and hold for years.
While American Bank (NYSE:USB) is one of the 10 largest financial institutions in the country, it is smaller than institutions like JPMorgan Chase Or Bank of America, and doesn’t do as much business in some areas that the banking giants are best known for. For example, corporate fundraising, institutional trading, and wealth management are not major profit centers for U.S. banks. This limits its prospects for revenue and profit growth, especially when the economy is firing on all cylinders.
Yet in many ways, a simpler range of product and service offerings is beneficial to US Bancorp investors. Chief among them: the bank can better concentrate on what it does (such as consumer loan) GOOD. And its results are more predictable because they are less cyclical.
This is what the graph below shows us. Although the subprime mortgage collapse and the COVID-19 pandemic clearly undermined its financial results, it is also clear that US Bancorp quickly recovered from both situations and resumed its long-standing growth trajectory . Not all big banks can say the same.
Boring? A little. But that’s the point: If you’re going to hold a stock for many years, you want to be able to count on the underlying company’s progress. US Bancorp records them reliably, although never at lightning speed. And shareholders receive decent dividends during this time. Its yield of 4.4% at the current share price is above average.
The new entrants will enter US Bank shares at 13.1 times earnings and just 10.4 times its forward earnings.
Actions of Pfizer (NYSE:PFE) may not be as cheap as US Bancorp’s – the drugmaker’s price-to-earnings ratio stands at 15.5, while its forward price-to-earnings ratio is a little lower at 12. Still, these valuations are cheap, and certainly below the pharmaceutical average. stock market valuations at the moment.
It makes no sense to ignore the 800-pound gorilla here: governments are effectively winding down their intense efforts to combat COVID-19. Although new variants continue to emerge and a seasonal increase in new cases is underway, demand for vaccines and treatments is decreasing. Pfizer’s third-quarter revenue fell 42% year over year, with lower sales of the company’s COVID products accounting for the entire decline. Don’t be surprised to see this weakness persist at least a little longer.
Don’t delay too long if you’re considering potentially opening a new position in Pfizer stock. The current quarter is expected to be the last to see a significant year-over-year drop in sales due to people’s waning concerns about the virus. From early 2024, Pfizer’s business results will largely reflect ask for everything else in its portfolio and pipeline.
And it’s exciting, of course.
Among other things, Pfizer owns the blood thinner Eliquis, the cardiomyopathy treatment Vyndaqel, the pneumonia vaccine Prevnar and the cancer treatment Ibrance, to name a few. These are all blockbuster drugs, but they have yet to realize their full potential due to the pandemic. Not to mention its pipeline, where you’ll find sickle cell treatment Oxbryta, multiple myeloma treatment Elranatamab, and hemophilia drug Marstacimab. In total, Pfizer estimates that its current pipeline could generate annual revenue worth $20 billion by 2030, contributing to annual revenue of up to $84 billion at scale. of the company that year thanks to its recent acquisition of Seagen. From there, the company will once again focus on these longer-term opportunities.
The best part: There are credible plans to simultaneously begin eliminating at least $4 billion in annual costs.
There’s not much to dislike here if you really look ahead a few years down the road.
Taiwan semiconductor manufacturing company
Last but not least, add Taiwan semiconductor manufacturing company (NYSE:TSM) to your list of value stocks to buy now and hold for years.
It’s not exactly a household name. In fact, there’s a good chance you’ve never heard of the company, which is also called TSMC. However, there is also a good chance that you are currently using technology made by Taiwan Semiconductor without even realizing it.
Even though tech giants like Intel And Nvidia are starting to handle more of their own manufacturing, most of that work is still outsourced to third parties capable of producing silicon designed by more familiar players. Taiwan Semiconductor Manufacturing Company is not just one of these contract manufacturers. It is the largest in the world, with more than half the market in third-party semiconductor manufacturing.
The company was hit as hard as any by the COVID-19 pandemic, which not only dampened demand but also disrupted supply chains (in and out). The turbulence also continues to disrupt activities. Analysts estimate that Taiwan Semiconductor is poised to fall nearly 9% for the full year.
Pandemic-related supply issues have also prompted several big tech names to become more self-sufficient. Intel is investing billions of dollars to build two different chip foundries in the United States, for example, while Micron has budgeted up to $100 billion to build what it calls a “megafab” in central New York.
Yet despite these initiatives, the world still needs third-party chip foundries. This will remain the case for a long time, if not forever. In fact, Taiwan Semiconductor is so certain that its advanced capabilities and services will remain in demand for the foreseeable future that it is building its own production facility in Arizona. And given the 19.5% revenue growth expected for the coming year, it’s arguably the right move. This is a sign that the chip industry is recovering and Taiwan Semiconductor is joining us.
Trading at a forward price-to-earnings ratio of 16.6, TSMC isn’t exactly a screaming stock. However, it is lower than this ticker’s recent average earnings ratio and the current valuations of many of its peers.
Should you invest $1,000 in semiconductor manufacturing in Taiwan right now?
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Bank of America, JPMorgan Chase, Nvidia, Pfizer, Taiwan Semiconductor Manufacturing and US Bancorp. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Mad Motley has a disclosure policy.
Do you have $5,000? Buy and Hold These 3 Value Stocks for Years was originally published by The Motley Fool