THE S&P500 is near an all-time high, but not all stocks are performing as well. If you look closely, there are still some great bargains to be found in the stock market, especially if you look beyond the high-growth tech stocks that are grabbing headlines. With that in mind, here are three value investments you can make right now. I own all three in my own portfolio and believe they will perform very well for patient investors.
3 Value Stocks That Could Outperform the Market Through 2030
Without further ado, here are three value stocks that could outperform the market for the rest of the decade, and a few reasons why.
1. Starbucks
Coffee Giant Starbucks (NASDAQ:SBUX) Starbucks Corp. had a tough 2024. The company reported a surprising decline in same-store sales in the first quarter, along with a 6% drop in customer traffic, and the stock plunged. Even after a slight rebound, Starbucks is trading more than 25% below its 52-week high.
Despite the poor stock market performance, it is important to realize that the problems are due to temporary headwinds, such as pressure on discretionary consumer spending. Additionally, Starbucks has done an even better job than expected at making supply chains more efficient, expecting $4 billion in savings over the next four years.
2. Real estate income
Real estate income (NYSE:O) is one of the main real estate investment trustsor REIT. If you’re unfamiliar with its business, Realty Income owns more than 15,400 properties across the United States and Europe and is designed to produce predictable, growing rental income over time.
The stock is down about 35% from its all-time high (reached just before the COVID-19 pandemic), but it’s important to understand that the company is doing well. REITs are very sensitive to rising interest rates, and Realty Income—which has a solid track record of outperforming the market over the past three decades—could be a big winner as rates normalize. Realty Income is one of the largest investments in my own stock portfolio, and I plan to hold it for decades to come.
3. Vanguard Small Cap Value ETF
Two of the most undervalued groups of stocks right now are small caps and value stocks, and Vanguard Small Cap Value ETF (NYSE:VBR) allows you to invest in both, without too much exposure to any one company.
Small caps are trading at their lowest book price relative to the S&P 500 in over 25 years. And over the past decade, growth stocks as a group have outperformed value stocks by a staggering 168 percentage points.
There are strong arguments for these types of stocks right now. For one thing, the last time the valuation gap for small caps was this wide, they ended up outperforming the S&P 500 for more than a decade. And if interest rates start to fall, they could lower borrowing costs (value stocks are more likely to use debt than growth) and could also cause consumer spending to accelerate.
Remember the Purpose of Value Investing
Finally, keep in mind that value investing is a long-term practice. I have absolutely no idea how these stocks will perform over the next few months or for the remainder of 2024, and neither does anyone else. But these are three excellent investments that currently appear to offer excellent values ​​for long-term investors, and I have no doubt that investors with a time horizon of five years or more will be glad they bought at current levels.
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Matt Frankel has positions in Realty Income, Starbucks and Vanguard Small-Cap Value ETF. The Motley Fool posts and recommends Realty Income and Starbucks. The Mad Motley has a disclosure policy.
Prediction: These Stocks Could Be Top Performers Through 2030 was originally published by The Motley Fool
