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Stocks that generate strong cash flow, trade at modest multiples, and have sound financial positions tend to have significant room for upside even if the next couple quarterly earnings reports don't deliver the type of blockbuster results that short-term investors might be seeking. A value-focused approach to investing that prizes steady performers at reasonable valuations can be a winning long-term portfolio strategy or a way to help balance out other higher-risk investments in your portfolio.
With that in mind, we asked three of our Motley Fool contributors to identify a top value stock that's worth buying this month and owning for the long haul. Read on to see why they identified JPMorgan Chase (NYSE: JPM), Kroger (NYSE: KR), and AT&T (NYSE: T) as some of March's top value plays.
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Buffett's buying banks. Shouldn't you?
Rich Smith (JPMorgan Chase): By now you've heard the latest investing news out of uber-investor Warren Buffett and his Berkshire Hathaway investment vehicle: Buffett is buying banks.
And not just any banks in particular, but the cream of the crop, including too-big-to-fail names like JPMorgan Chase and Bank of America. That fact alone might be enough to convince you to take a clue from the Oracle of Omaha and buy a bank stock yourself. But which one?
For my money, JPMorgan beats Bank of America hands down.
JPMorgan's 1.26% return on assets edges out Bank of America's 1.21%, but JP's 12.68% return on equity stands head and shoulders above BofA's 10.57%. (That may not sound like much, but it works out to JPMorgan being about 20% better at turning a profit than its rival.)
For value investors who like the certainty of a strong dividend yield, JPMorgan pays 3%, which beats the average 2.2% yield of S&P 500 stocks, and is half again more generous than BofA's 2% dividend yield. And as for these bankers' ability to grow profits and raise dividends over time, well, analysts polled by S&P Global Market Intelligence forecast a 10.5% long-term growth rate for JPMorgan versus only a 6.25% growth rate for Bank of America.
Mind you, both companies look like decent investments to me, and likely to outperform as interest rates rise off of historical lows. But if I had to pick just one for "best value," that one would be JPMorgan.
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Demitri Kalogeropoulos (Kroger): Expectations for Kroger's business have fallen to lows that shareholders haven't seen for years, and value investors might want to take advantage of that sour outlook. Yes, the grocery store chain isn't enjoying anything like the retailing rebound rivals like Target and Walmart have seen. Sales inched higher by less than 2% in the most recent quarter, compared to Walmart's 4%. The retailing titan, along with Target and Costco, is celebrating a near-10-year high in customer traffic growth. Kroger, meanwhile, is growing at a fraction of the 5% gains investors saw in 2017.