Value stocks as a portfolio hedge? An expert advises on these stocks

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• Expert sees value titles as safe custody
• Health care and consumer staples favoured
• TipRanks targets CVS Health and Philip Morris

High inflation, increases in key interest rates, geopolitical conflicts: the year 2022 has had a difficult mix in store for investors so far. In addition, there are concerns about a slump in the global economy and a recession – achieving an optimal portfolio composition in this environment is a major challenge.

Investment expert anticipates a strong end to the year

Anthony Saglimbene, chief market strategist at asset manager Ameriprise, gives investors the all-clear for the short term: “Typically October, November and December are the best three months of the year for the market. This is a typically strong period, and after such a big one market decline this year, I wouldn’t be surprised if the markets simply rallied for the rest of the year,” he was quoted as saying by the analyst database TipRanks.

But even if the end of the year should be conciliatory, in his opinion the crisis is not over yet. In the coming year, companies would feel the effects of the high inflation rate and rising money market interest rates in the form of slumps in growth and profits. For investors, this means that they have to realign their portfolio. Value stocks are a tried and tested investment.

Advice: value stocks

However, Saglimbene does not consider all stocks that are traded as value stocks to be suitable investment options – specifically he advises companies that operate in defensive sectors, i.e. in the healthcare or consumer staples segment. Based on the investment expert’s recommendations, TipRanks has identified two stocks that investors should consider adding to their portfolios.

CVS Health

CVS Health Corporation (CVS) is named as a representative of a value stock from the healthcare segment. The US giant offers various services in the medical field and also operates pharmacies, specialty shops and e-commerce, telemedicine treatment and health insurance products are also part of the company’s portfolio.

On the stock exchange, CVS Health shares have resisted market pressure significantly over the course of the year and only lost 6.85 percent (closing price on November 16, 2022). A robust business development also contributed to this: In the third quarter, profits increased more than analysts had expected, and sales of USD 81.16 billion were not only around ten percent higher than the comparable value for the previous year, but also significantly higher the analyst estimates.

The strong business development is likely to continue in the future: “We stand by the company’s integrated healthcare model […] CVS is well-positioned “to benefit from changing market dynamics over the longer term.” of 125 US dollars – from the current share price it could still go up around 30 percent.

Phillip Morris

Meanwhile, in the consumer staples segment, TipRanks experts have identified tobacco giant Philip Morris as a suitable value investment. As a representative of the tobacco industry, the company is one of the so-called “sin stocks”, but is considered a good strategic defensive investment by TipRanks.

Anyone who has held Philip Morris shares in their portfolio since the start of the year has only had to cope with a loss of 0.25 percent (based on the closing price on November 16, 2022). Compared to the broader market, the tobacco company has fared much better. This can also be attributed to solid business development: In the last quarter, earnings per share were $1.53, while Philip Morris earned $8.03 billion at the same time. The company thus showed itself to be strong in a difficult business environment: Analysts had expected significantly lower figures for both sales and earnings.

A realignment of the company also contributed to this. Philip Morris is increasingly focusing on alternative products such as vapes. In this context, the Americans recently announced the acquisition of Swedish Match: the manufacturer of smokeless tobacco products fits perfectly into Philip Morris’ new, more socially appropriate portfolio.

Most analysts at TipRanks also see the Philip Morris share as a gain for an investor’s portfolio. Four out of six analysts give a buy recommendation and two a hold recommendation.

Editorial office finanzen.net

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