Whether you are worried about a crash in the markets or just want to avoid stressing about your investments, adding value stocks to your portfolio can be a great way to minimize your overall risk. Value stocks trade at reasonable multiples to earnings, have solid underlying businesses, and are generally safe investments to hang on to over the long term.
Three stocks that are attractive value buys right now are Cigna (NYSE: CI), Kinross Gold (NYSE: KGC), and Goldman Sachs (NYSE: GS). Not only are they cheap, but their businesses are in great shape. Here's a closer look at them.
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Cigna provides health insurance products and services around the world, serving more than 185 million customers in over 30 countries. In 2020, the healthcare company reported sales of $160.4 billion, which was a 4.5% increase from the previous year's tally of $153.6 billion. Its adjusted income from operations (which factors out any gains or losses) was $6.8 billion, up around 4.9% from 2019. Those are solid, stable numbers you would expect to see from a value stock. But there's another angle that makes it an even better buy: telehealth.
The company recently acquired telehealth services provider MDLive, and the deal is expected to close in the second quarter of this year. Telehealth has taken off amid the pandemic: MDLive's virtual visits soared 95% last year. The business will be part of Cigna's Evernorth subsidiary, which offers health services. For investors, this could be an exciting opportunity -- analysts from ResearchAndMarkets project that the telehealth industry will sprout at an incredible 37.7% compound annual growth rate (CAGR) until 2025, when it will reach a value of $191.7 billion.
With a forward price-to-earnings (P/E) multiple of 10, Cigna is a cheap buy when you consider that UnitedHealth Group trades at more than 23 times its future earnings. The low valuation combined with the company focusing on the red-hot telehealth market makes Cigna's stock an attractive buy for the long term.
A good place to find both safety and value right now is in gold. Although gold prices have been falling in recent months, at more than $1,700 per ounce (oz) it is still considerably higher than the $1,300/oz it was a few years ago. That means a gold mining company like Kinross will continue to secure some great prices for its metals. Gold is also a place that investors favor if the markets turn south. If there's a crash, prices could take off like they did last year -- eventually reaching more than $2,000/oz. That's why buying Kinross stock can be a great way to hedge your portfolio's risk.
In 2020, the company reported sales of $4.2 billion, up 20.5% from the previous year. A big reason why is that Kinross' average realized gold price per ounce was 27.4% higher than it was a year ago. That also helped it win a bigger profit. Net earnings of $1.4 billion soared 89.5% year over year.
It will be a challenge to replicate those numbers in 2021, and there's certainly some uncertainty ahead for Kinross. However, if the markets tumble this year, it wouldn't be a surprise to see an uptick in the price of gold, and that can help the company deliver another great performance in 2021. With a forward P/E of less than 7, the stock isn't expensive -- industry giant Barrick Gold trades at a multiple of more than 10.
3. Goldman Sachs
Financial services company and investment bank Goldman Sachs is also coming off an impressive year. On Jan. 19, it reported that its revenue for 2020 totaled $44.6 billion -- 21.9% higher than last year's total. The only segment that didn't have a great year was asset management, which declined by 10.9%. But with its global markets segment and investment banking division generating 43.2% and 24% growth respectively, Goldman had a stellar year overall. The only downside is that the business may have set the bar too high, noting that the net revenue it generated this past year was the highest it has been in 11 years. Its net earnings of $9.5 billion also grew by 11.7% year over year.
It's possible that Goldman still does well in 2021, however. The markets have been volatile over the past year, and with the pandemic still not over and the markets regularly topping highs, clients will be looking to seasoned investment bankers to keep their money safe. While there are concerns about a possible market crash, it is by no means guaranteed in the short-term. And at the same time, investors don't want to miss out on what has already been an ultra-hot bull market -- the S&P 500 has climbed a staggering 63% over the past 12 months -- well above the roughly 10% it normally averages.
Despite the strong results, Goldman still trades at a very reasonable 10 times future earnings. Investors are paying more than 15 times future earnings for shares of Bank of America while JPMorgan Chase is trading at a multiple of 14. Investing in Goldman's stock is a great way to bet on an economic recovery, which could propel the business to new heights. And a low valuation only sweetens the deal.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
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