3 higher value stocks to buy right now

Over the past decade, expensive growth stocks have made traditional investments in stocks look ridiculous. Value stocks, often defined as characterized by a low price-to-book or price-to-earnings ratio, have declined in relation to highly valued growth stocks. The art of evaluation has been rejected. instead, unprofitable businesses with sometimes questionable business models have been valued in billions of dollars. Growth has been the main concern of the market.

Warren Buffett, a famous securities investor, said: "It's only when the tide goes up that you discover who was swimming naked." Although it is too early to be sure, the stock market seems to be moving strongly towards value. Shares of some high-growth growth stocks have been hammered recently for no apparent reason, and shares of many valuable stocks have jumped. If the wind really turns, investors willing to pay an ever higher price for growth are in shock.

Source of the image: Getty Images.

In the long run, value stocks tend to outperform growth stocks. Being a value investor means that you will look stupid while growth stocks are in vogue, but it's a small price to pay for higher returns than the market. And you will avoid the monstrous disadvantage of growth actions and their assessment of nosebleed.

What value values ​​should you buy? There are many options, but International Business Machines (NYSE: IBM), Hanesbrands (NYSE: HBI), and Tangier Factory Outlet Centers (NYSE: SKT) are my best choices. Here's why.

Do not underestimate IBM

The actions of technology giant IBM, known for its mainframes and extensive IT services, have not done much in recent years. The stock weakened as the company embarked on a multi-year transformation by investing in cloud computing, artificial intelligence and other growth areas, while giving in to some traditional activities.

The result was a drop in revenue and a cloud of pessimism hovering over the stock. Since their peak in 2013, the shares of the century-old technology company have lost about a third of their value.

But underestimating IBM would be a mistake. The company is betting its large customers to embrace hybrid and multi-layered computing, spreading workloads across a combination of on-premise hardware and various public clouds. With the acquisition of Red Hat, IBM is well positioned to realize this vision and has a multi-billion dollar opportunity to sell its existing customers with Red Hat software.

The deal with Red Hat will hurt IBM's profits this year due to various non-point and non-monetary charges. The company expects to generate adjusted earnings per share of $ 12.80 as well as free cash flow of approximately $ 12 billion. IBM's price / earnings ratio thus slightly exceeds 11 and the price / free cash flow ratio of approximately 10.5.

It is not difficult to see how this can work for long-term investors. A combination of earnings growth in the coming years and a more optimistic valuation as the company's strategy materializes can potentially generate huge gains on the stock. While many other cloud stocks have a perfect price, IBM is a price in case of failure. This is an opportunity for valuable investors.

A good business of clothes

The trade war between the United States and China, as well as fears of an imminent recession, have given investors many reasons to avoid clothing stocks like the plague. But it would be a mistake to crush Hanesbrands. The company's largely geographically diverse manufacturing base, which is largely owned by the company, makes Hanesbrands a unique stock of clothing in an uncertain economic climate.

More than 70% of Hanesbrands' clothing units are manufactured in the company's factories or in specialized subcontractor factories. This gives Hanesbrands a cost advantage over its competitors who outsource manufacturing entirely. The Company's 48 manufacturing facilities are located primarily in Asia, Central America and the Caribbean Basin, and the Company believes that other sources of materials and services are readily available.

The underwear business is not immune to the recession and sales of Hanesbrands are expected to decline in the next downturn. But Hanesbrands is not just an underwear business. The Champion sportswear brand is growing rapidly, which should help offset the weaknesses in its core business.

The brand Hanesbrands Champion is growing. Source of the image: Hanesbrands.

Hanesbrands expects to generate between $ 1.72 and $ 1.80 in adjusted earnings per share in 2019, a slight increase from 2018. The bankruptcy of Sears hurt the net result a little this year, and there is always the risk that other retailers will disappear. Hanesbrands shares are trading around $ 15 a share, the price / earnings ratio is only 8.5.

This seems terribly cheap, especially as Hanesbrands has recorded eight consecutive quarters of organic sales growth. Hanesbrands is not an exciting title, so nobody really pays attention to it, despite its disappointing valuation. In other words, it's the stock of value par excellence.

A shopping center worth buying

Many shopping centers are struggling as traffic slows and department stores struggle to survive. But that does not mean that there are no good deals among the real estate investment companies specializing in shopping centers. Tangier Factor brand centers look like thefts, even though they are going through a difficult year.

Tangier operates 39 brand centers in 20 US states and Canada. The company has existed since 1981 and survived the financial crisis a decade ago without much emotion. Today, Tangier is facing an upheaval in the retail sector as well as a potential recession in the near future. Its performance has suffered from retail bankruptcies, and this unfavorable wind is expected to persist for some time.

Adjusted operating funds from Tangier will decline this year, along with average occupancy and other indicators. The Company forecasts AFFO per share at $ 2.25 to $ 2.31, which is less than seven times the midpoint of this range. As the share price is very depressed, Tangier's dividend yield is currently above 9%.

There is no doubt that Tangier is suffering from the current retail situation and that this suffering could intensify in the event of an economic slowdown. But there is little reason to believe that society will not survive, given its history. It is time to buy Tangier.