top partner

for CFD

Value stocks are shares of companies trading for low prices relative to their earnings and growth potential. They can be an excellent way for investors to minimize risk in the stock market, while also being rewarded with perks like dividends and buybacks. Let’s discuss why Alphabet (NASDAQ: GOOGL) and Phillip Morris International (NYSE: PM) fit into this category and could make great bets for value-conscious investors.


Cutting-edge technology companies are not usually the first place investors look for value, but Alphabet is an exception. The search giant faces challenges from an undiversified business model and possible moat erosion by generative AI platforms like ChatGPT. But with a rock-bottom valuation and an exciting growth strategy, shares look like a good deal.

With a market share of 83% in desktop search, Alphabet’s Google dominates its industry. But in some ways, the company has become a victim of its own success. In the second quarter, Google advertising (including YouTube ads) was 81% of total revenue, while other businesses, such as cloud computing and hardware, represented the remainder. The lack of diversification may contribute to Google’s low valuation by making it vulnerable to threats like ChatGPT, which can conversationally answer user questions.

However, Google’s ubiquitous internet presence gives it a competitive moat. To take advantage of this, the company has added optional AI-powered search results to its regular platform, eliminating the need for current users to seek alternatives. AI could also boost Google’s cloud computing segment, where its machine learning and other tools can help enterprises create computationally complex applications.

With a forward price-to-earnings (P/E) of 20, Alphabet’s stock is significantly cheaper than the S&P 500 average of 25. And shares look like a steal compared to shares of AI-focused rivals like Nvidia or Amazon, which boast P/E multiples of 44 and 42, respectively.

Phillip Morris International

The tobacco industry is a favorite for value investors because its customers tend to stick around in good or bad economies. Phillip Morris International has the added advantage of a diversified and evolving business model. Its low valuation and big dividend are the icing on the cake.

Phillip Morris is leading the transition from traditional cigarettes to reduced-risk tobacco products such as heated tobacco units (HTUs), a system that releases nicotine by heating instead of burning, releasing less harmful chemicals. So far the strategy is working. HTU shipments jumped by a whopping 26.6% year over year to 31.4 million units in the second quarter, helping make up for flat traditional cigarette sales.

Smoke-free products (which include vaporizers and oral tobacco) are now 35% of Phillip Morris’s total revenue. The company plans to increase this number to 50% by mid-decade. While the new safer products may cannibalize Phillip Morris’s traditional cigarette sales, they can help future-proof the company’s revenue as consumers become increasingly health-conscious about the risks of smoking.

Image source: Getty Images.

With a price-to-earnings (P/E) of just 14, Phillip Morris’ valuation is well below the market average. And the company sweetens the deal with an annual dividend yield of 5.45%.

Which stock is better for you?

While Alphabet and Phillip Morris International are excellent value stocks, they serve different investment strategies. Alphabet is more expensive. But this makes sense considering its growth potential in the red-hot AI opportunity. Phillip Morris will likely experience slower growth in the mature tobacco industry. But its stock is ideal for investors prioritizing stable dividend payouts over top-line growth.

10 stocks we like better than Alphabet
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Alphabet wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 5, 2023

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

Read the full story: Read More“>

Blog powered by G6

Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.

For any inquiries, please contact [email protected]