9 Stocks to Buy for February 2025: A Value Investing Perspective
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Value Investing Risk & Reward Quadrant (check all the stock analyses)
As we kick off the month, it’s time to evaluate potential investment opportunities for February 2025. Using our Value Investing Quadrant, which plots reward on the x-axis (low to high) and risk on the y-axis (low to high), we aim to identify stocks that offer low risk and high reward. These are the investments that align with our intrinsic value framework, ensuring long-term returns. Let’s dive into the key companies that meet our criteria, starting with a surprising pick from Warren Buffett himself.
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1. US 3-Month Treasury: The No-Risk, Some-Reward Play
Warren Buffett’s top buy over the past year has been the US 3-Month Treasury, currently yielding around 4.3%. While the yield has dipped from its peak of 5%, it remains a safe haven for investors seeking certainty and stability. With inflation at 4.3%, this offers a 1% real return. For those prioritizing safety over high returns, this is a no-brainer. Buffett’s $220 billion allocation to short-term US Treasuries underscores its appeal as a low-risk, value-driven investment.
2. Berkshire Hathaway: A Financial Fortress
Berkshire Hathaway, Buffett’s own conglomerate, is another solid pick. While its price-to-book ratio is on the higher side (currently at 25), its strong cash position, compounding ability, and long-term growth prospects make it a low-risk investment. Expected returns are modest—5% to 7% annually—but it’s likely to outperform the S&P 500 over the next decade. For investors seeking stability with moderate returns, Berkshire remains a reliable choice.
3. Nike: Innovation vs. Valuation
Nike presents a mixed picture. While the brand’s innovation and global presence are undeniable, its current valuation isn’t as attractive as it could be. The dividend yield stands at 2%, and growth prospects depend heavily on market sentiment. If the market demands a higher yield (e.g., 3%), Nike’s intrinsic value could drop significantly. For now, we rate it as medium risk with a potential 5% return, placing it just below our buy threshold.
4. Kraft Heinz: High Yield, High Competition
Kraft Heinz offers a 5.5% dividend yield, significantly higher than the S&P 500’s 1.3%. However, the company faces stiff competition and has struggled to replicate its past success. With a 3-4% growth rate, it could deliver a 10% annual return, but the risks are evident. For income-focused investors, Kraft Heinz remains a viable option, albeit with some caution.
5. Schwab Dividend ETF: A Reliable Income Stream
The Schwab Dividend ETF has been adjusted to reflect a more conservative 7% return, down from our previous 10% estimate. With a 3.5% dividend yield and 3-4% growth, it offers a balanced risk-reward profile. While not the most exciting pick, it’s a solid choice for those seeking steady income with minimal volatility.
6. DHL: Buybacks and Dividends
DHL stands out for its strong dividend yield and aggressive share buyback program. With a 4% growth rate and a terminal multiple of 20, the intrinsic value aligns closely with the current stock price. This positions DHL as a medium-risk, medium-reward investment, offering a potential 9% return if market conditions remain favorable.
7. ExxonMobil: Cyclical Risks in Energy
Exxon’s current 3.67% dividend yield is lower than its historical average, making it less attractive in a low oil price environment. If the yield reverts to 5%, the intrinsic value drops to $72, suggesting limited upside. While Exxon remains a powerhouse, its cyclical nature makes it a higher-risk play with modest returns.
8. Samsung Electronics: A Global Opportunity
Samsung is trading at a price-to-book ratio below 1, with a dividend yield of 10% in US dollar terms. Despite risks like memory chip price volatility and smartphone margin pressures, Samsung offers significant upside if global markets rebound. For investors willing to bet on a turnaround, this is a high-reward opportunity.
9. Petrobras: High Risk, High Reward
Petrobras is the riskiest stock on our list but also offers the highest potential reward. With a 13% dividend yield, it’s a tempting play for income investors. However, lower oil prices could pressure the stock, making it a speculative bet. For those with a high-risk tolerance, Petrobras could deliver outsized returns.
Final Thoughts: Aligning Investments with Your Goals
While these nine stocks offer a range of risk-reward profiles, the key is to align them with your financial goals and risk tolerance. For example, if you’re managing a $10 million portfolio, consider how a market crash might impact your holdings. Are you comfortable with short-term volatility for long-term gains? Or do you prioritize safety and steady returns?
Intrinsic Value Calculation Template by Sven Carlin (free download on Value investing course)