If there were a ‘beautiful seven’ of value stocks, these stocks would make the breakthrough

By | March 31, 2024

The ‘Magnificent Seven’ is a group of technology companies with high market capitalization that play an important role in the economy and have generated incredible profits for investors.

But investing isn’t just about growth or technology stocks. The most successful investors typically own a diversified portfolio with some technology, some growth, some value and some dividend stocks, with further diversification into other classes and categories.

Value stocks offer a lot for the smart investor. Investing legend Warren Buffett sticks almost exclusively to value stocks, and he is one of the few investors who has outperformed the market for decades. He also recommends that most retail investors buy price-tracking index funds S&P500as it is not easy to beat the market in the long run.

If you’re looking to add value stocks to your portfolio, consider Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), Visa (NYSE:V), Walmart (NYSE:WMT), JPMorgan Chase (NYSE:JPM), MasterCard (NYSE:MA), DIY store (NYSE:HD)And Costco Wholesale (NASDAQ: COST). These seven companies have some of the largest market capitalizations in the world and have created tremendous shareholder value over the years. But even better: there is much more to come.

1. Berkshire Hathaway

Berkshire Hathaway has the seventh highest market capitalization of all U.S. companies, just behind all but Tesla. But it has higher revenues than anyone but Amazonand more net income than anyone but Apple. It is Buffett’s conglomerate and, in addition to its enormous stock portfolio, it also owns dozens of companies. Buffett often talks about the idea that the best companies have a long-term role to play in the American economy. Owning Berkshire Hathaway gives investors exposure to many great stocks, including Amazon and Apple, and gives investors the benefits of Buffett’s wisdom and stock picks.

2. Visa

Visa ranks number 11 on the market capitalization list. It operates the largest credit card processing network in the world, with the most credit cards and the highest total payment volume. The company benefits from growth as the economy expands and charges a fee every time a customer swipes one of its cards. It has incredible profit margins of over 50%, and it has launched many new features to keep up with financial technology trends and strengthen its competitive position. This Buffett stock also pays a dividend, and while it doesn’t offer a high yield (just 0.7% at the current share price), management has increased the payout by 420% over the past decade.

3. JPMorgan Chase

JPMorgan Chase is the largest U.S. bank by assets, with nearly $3.4 trillion. The fortress balance sheet has largely shielded the country from the economic volatility that sank some regional banks last year, and it has crushed 2023 earnings expectations. These are the kinds of qualities that make it an excellent stock to own for years to come. long-term. It also pays a dividend that yields 2.4% at the current share price.

4.Walmart

Walmart is the largest US company by revenue, and although its fellow competitor Amazon is growing faster, the latter still has a way to go to catch up. Walmart continues to generate higher sales, comparable store sales and profits, and is still opening new stores around the world. The company is also figuring out how to make its current assets work better, such as expanding its store size, and finding new ways to grow, such as upgrading its advertising business to better compete with Amazon. Walmart’s dividend yields 1.4% at the current share price.

5. Mastercard

Mastercard is right behind Visa as a high-margin credit card network powering the global economy. It’s not as big as Visa, but its revenue and net income are growing faster, and so is its stock price. It has the same sustainable model and business, and it’s also a Buffett stock. The dividend yields just 0.6% at the current share price, but the management team has increased it even faster than Visa’s: by 500% in the last decade.

6. Home Depot

Home Depot is the largest home improvement chain in the world, with more than 2,300 stores in North America. The country has felt the pressure of inflation, but is reliable for long-term growth and profit generation. It embraced the omnichannel model before it became popular and was well prepared for the pandemic. The country is also well positioned to return to growth under more favorable economic conditions. Home Depot’s dividend yields 2.4% at the current share price.

7. Costco

Costco operates a discount store chain with a membership model that creates loyalty and high sales. It’s been reporting rising membership fee revenues and record renewal rates lately, as shoppers become even more likely to favor the lowest prices when pennies are involved. Sales growth is starting to accelerate again and Costco has a long growth trajectory as it continues to open new stores. Costco’s regular dividend yields just 0.6%, but the company also pays special dividends on an irregular basis, and its most recent dividend, which it paid in January, was $15 per share.

Value stocks offer steady growth with low risk

Let’s take a look at how these stocks are doing so far this year versus their tech counterparts.

V-chart

As a group, the Magnificent Seven have outperformed this cohort of value stocks so far this year, as the chart below suggests. But the former have also been more volatile.

All value stocks are in positive territory this year, while technology stocks are not. They’re also almost all outperforming the S&P 500, which is up 10.1% year to date.

AMZN chartAMZN chart

Value stocks create shareholder value with much less risk. Even if you don’t choose to invest in all of them, each can provide benefits for a diversified portfolio, and most of them have the added benefit of dividend income.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Home Depot, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Nvidia, Tesla, Visa, and Walmart. The Motley Fool recommends the following options: long January 2025 calls of $370 on Mastercard, long January 2026 calls of $395 on Microsoft, short January 2025 calls of $380 on Mastercard, and short January 2026 calls of $405 on Microsoft. The Motley Fool has a disclosure policy.

If There Were a ‘Magnificent Seven’ of Value Stocks, These Stocks Would Make It Originally published by The Motley Fool

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