As pharmaceutical companies began to announce positive vaccine results last fall, value stocks started to take center stage in anticipation of the economy opening back up. This resulted in…
the SPDR 500 Value ETF (SPYV) outperforming the SPDR 500 Growth ETF (SPYG) 28.8% to 13.4% from October 28th to March 19th.
However, since then value stocks have stopped outperforming growth stocks. Most investors think that the economic reopening is already priced in, which is certainly the case for many cyclical stocks. But I believe value stocks still have plenty of upside left. First of all, value stocks are still cheap. According to Yardeni Research, the S&P forward P/E for value stocks is only 18, compared with 28.6 for growth stocks.
Secondly, economic growth is expected to increase more as the economy continues to reopen, which suggests we are still in the middle of this business cycle. Historically, value stocks have outperformed growth during the middle of a business cycle. This is why I recommend investors consider value stocks such as Sanofi (SNY – Get Rating), Lockheed Martin Corporation (LMT – Get Rating), CVS Health Corporation (CVS – Get Rating), and Cigna Corporation (CI – Get Rating).
Sanofi (SNY – Get Rating)
SNY is a global pharmaceutical company headquartered in Paris, France. It operates through 4 divisions: Pharmaceuticals, Vaccines, Generics and Consumer Health. The company develops and markets drugs with a concentration in oncology, immunology, cardiovascular disease, diabetes, and vaccines. Though its decision in 2019 to pull back from the cardio-metabolic area will likely reduce its footprint in this therapeutic area.
The company’s portfolio of branded drugs and vaccines and its robust pipeline have created strong cash flows. SNY’s existing product line includes several top-tier drugs, including insulin treatment Lantus. Lantus works well for an entire day, which sets it apart from other insulins drugs.
The company also has a strong group of late-stage pipeline products, including immunology drug Dupixent, which holds strong pricing power and blockbuster potential across various indications.
SNY has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Value Grade of A, which isn’t surprising with a tiny trailing P/E of 8.76. The company also has a Stability Grade of A, which means its price performance and growth history have remained consistent.
We also provide the following grades for SNY: Growth, Momentum, Sentiment, and Quality. You can find those here. SNY is ranked #24 in the Medical – Pharmaceuticals industry. You can find other top-ranked stocks in this industry by clicking here.
Lockheed Martin Corporation (LMT – Get Rating)
LMT is the largest defense contractor globally and has dominated the Western market for high-end fighter aircraft since it was awarded the F-35 program in 2001. Its main focus areas are defense, space, intelligence, homeland security, and information technology, including cybersecurity. Its largest segment, though, is Aeronautics, which is dominated by the massive F-35 program.
The company’s F-35, the largest weapon program in history, should deliver consistent revenue for a long time. Since the U.S. National Defense Strategy prioritizes missile development and defense, something LMT excels in, the company is poised for strong future growth in the years ahead. LMT also enjoys…
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