3 Value Stocks That Will Richly Reward Patient Investors

Josh Enomoto

Tue, Nov 14, 2023, 8:16 PM 4 min read

While attractive market subsegments like artificial intelligence dramatically bolstered sentiment for a select few enterprises, now may be the time to play the long game with value stocks for patient investors. Sure, the latest economic print for the third quarter encouraged the bulls. However, such a robust trajectory might not last.

Put another way, targeting value stocks symbolizes the beginning of the professional baseball season. Unlike football – when you’re only talking about a relative handful of games – baseball traditionally grinds from April through September. If you’re good enough, you might be invited to the big dance in October.

However, because of the long season, you can’t just ask your players to go 100% all the time. You’ve got to think about the longevity of the club during the season and also for its multi-season directive. That’s the key principle undergirding value stocks for patient investors: buy low and sell high but you might need to wait for a while.

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Taiwan Semiconductor (TSM)

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Easily one of the most relevant technology players, Taiwan Semiconductor (NYSE:TSM) is a multinational chip contract manufacturing and design company. Per its public profile, TSMC as it’s often abbreviated represents the world’s second most valuable semiconductor company. It’s also the world’s largest dedicated independent semiconductor foundry. Unsurprisingly, even with the wild ebb and flow of the chipmaking ecosystem, TSM gained over 30% of equity value.

Under the context of value stocks for patient investors, it’s difficult not to mention TSMC. Currently, the market prices shares at a forward earnings multiple of 14.27x. That’s much lower than the sector median stat of 20.77X. Also, its price/earnings-to-growth (PEG) ratio sits at 0.92x, beneath the 1.25x median value for the semiconductor industry.

It’s also financially viable, carrying zero debt on its books. Therefore, the company should benefit from increased flexibility during uncertain times. Lastly, analysts rate TSM a consensus strong buy with a $109.60 price target, implying almost 14% upside.

StoneCo (STNE)

Cellphone with logo of Brazilian fintech business Stone Company (StoneCo) on screen in front of website

Source: T. Schneider / Shutterstock.com

While perhaps not the most popular idea among value stocks for patient investors, StoneCo (NASDAQ:STNE) deserves consideration for its relevance and recent financial performances. Per its website, the company is a leading provider of financial technology (fintech) solutions that empower Brazil’s merchants and integrated partners to conduct e-commerce transactions seamlessly across multiple platforms. Since the January opener, STNE gained nearly 43% of equity value.

Even better, StoneCo delivered the goods for its Q3 earnings report. Specifically, revenue clocked in at $3.14 billion, up over 33% on a year-over-year basis, per Google Finance data. Also, net income landed at $411.3 million, up a staggering 103.26%.

Even with this mercurial print, STNE trades at a forward earnings multiple of 12.18x. That’s much lower than the underlying software industry, which features a median ratio of 21.63x. Notably, analysts peg STNE a consensus moderate buy with a $14.88 price target, projecting 23% growth potential.

ACM Research (ACMR)

a magnifying glass enlarges the ACM logo on a website

Source: Pavel Kapysh / Shutterstock.com

Arguably the riskiest idea on this list of value stocks for patient investors, ACM Research (NASDAQ:ACMR) develops next-generation wafer cleaning and wet processing equipment for the semiconductor industry. While it sounds like an obscure specialty, ACM offers critical services to the broader tech ecosystem. As well, the industry itself reached a valuation of $3.8 billion last year.

Experts project that during the forecast period of 2023 to 2030, the sector could expand at a compound annual growth rate (CAGR) of 5.8%. In the grand scheme of things, that might not sound like much. However, keep in mind that ACM features a market capitalization of just over $1 billion. Therefore, slow and steady growth should turn out just fine for the enterprise.

Additionally, the company recently smashed its Q3 earnings target. Unfortunately, management gave disappointing guidance, resulting in choppy price action. Still, ACMR could be a bargain, with shares trading at only 13.41x forward earnings. Finally, analysts rate shares a strong buy with a $24.24 target, implying almost 41% upside.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.