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Value investing - 3 US share ideas for value investors

We look across the pond for three ‘value investing’ share ideas in the US.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Since looking for 3 UK share ideas we think are ready to bounce back, there are signs that sentiment towards value investing has risen. This time we look across the pond at companies whose prospects may be going underappreciated by the market.

This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments and any income from them will rise and fall in value, so you could get back less than you invest. Past performance is not a guide to the future. Ratios shouldn’t be looked at on their own.

Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.

Remember, before you can trade US shares, you’ll need to complete a W-8BEN form.

Verizon – Banking on 5G to turn the ship around

Verizon is one of the world's largest telecommunications groups. Providing an essential service allows it to command high levels of recurring revenues.

Financial performance has been disappointing of late, and the traditional landline side of the business has seen fierce price competition put pressure on profits. That’s reflected in a valuation that’s close to a ten-year low.

But the 5G roll-out could act as a catalyst for turning things around. It's early doors, which means there's time to grab a market share. The potential to provide the infrastructure and services behind a new age of connectivity is attractive.

Verizon's putting a lot of eggs in this basket and has thrown billions at the task. We think it’s the right move, but with the spending program coming to an end, investors will want to see that part of the business grow quickly.

The high level of investment needed to fund this has caused a spike in the Company’s debt. But because revenue is usually reliable, and the group’s currently generating cash, we’re not overly concerned by the financial position for now.

Some investors may also be attracted by the prospective dividend yield of nearly 8%. Analyst forecasts suggest this is reasonably well supported by free cash flows, but as ever there are no guarantees, yields are variable and not a reliable guide to future income.



Pfizer – Spending the COVID windfall

Pharmaceutical giant Pfizer was first to bring the COVID-19 vaccine to developed countries. Called Comirnaty, it co-developed it with BioNTech. This has helped generate bumper profits and cash flows over the last couple of years.

Pfizer's largely been using the windfall for future investing, driving a step change in research & development (R&D) spending. That's just as well because 2023 sales of COVID-19 medicines are expected to fall by around 60%, after making up over half of 2022 revenues.

There’s also further pressure on sales as patents on other key medicines expire. But does Pfizer have the firepower to buy in new capabilities and products through mergers and acquisitions?

The proposed £43bn merger with cancer specialist Seagen would be one of the biggest deals the sector has seen lately, but the deal still has regulatory hurdles to clear. Pfizer thinks Seagen can more than quadruple revenues to over $10bn by 2030, but this comes with all the usual risks of drug development.

We think that Pfizer's strong record of commercialising blockbuster therapies makes it worthy of consideration as part of a diversified portfolio. At 10.7 times forward earnings, it's trading at the lower end of its peer group. This reflects the sizeable chunk of revenues that need to be filled.

Pfizer's R&D hit rate is higher than most. Still, only about one in five make it from pre-clinical research all the way through to regulatory approval so there’s some significant execution risk investors need to be comfortable with.



General Motors – Can it take electric vehicles to the masses?

The name General Motors (GM) evokes Motor City’s heyday. GM still sells around six million vehicles a year under iconic brands such as Chevrolet and Cadillac.

It might not be the first name springing to mind when considering the shift from gas-guzzling muscle cars to battery power, but GM’s taking the challenge head-on. With a goal of exclusively offering electric vehicles (EV) by 2035, it’s already second in the US EV market and pushing the boundaries on autonomous vehicles too.

But a shift of this scale comes with challenges.

The Ultium battery platform is a staple of GM’s EV strategy, and a springboard into other products such as the home energy market. But battery production capacity is constrained and there are also safety concerns to address so look out for any changes to short-term production targets.

GM is carrying around more debt than we’d ideally like to see, but it’s not out of kilter with the peer group. With over $5.4bn of free cash flow forecast for the current financial year, we don’t see any immediate danger.

The industry tends to struggle in recessionary times so that’s also something to keep an eye on. But for now, demand seems strong, underpinning recently raised guidance.


Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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