2015's Best Stocks for Value Investors

You're probably familiar with the adage "buy low, sell high." However, blindly buying a stock because it seems cheap can come back to bite you. That's because, when it comes to value investing, the trick is to find companies with strong fundamentals that also happen to be trading below their intrinsic value. To help you get started, three Motley Fool contributors share their best stocks for value investors in 2015.

: Investors seeking value should look no further than PepsiCo . The company is a leader in a very stable industry, food and beverage, and its profits are rock-solid. PepsiCo's diversified business model is nearly evenly split in terms of revenue between its beverage brands, including Pepsi and Gatorade, and its food products, including the Frito-Lay and Quaker brands. PepsiCo's revenue is also impressively diverse among geographic regions -- it derives 49% of its revenue outside the United States. These factors combined result in steady business with solid growth year after year.

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A glance at PepsiCo's income statement reveals increasing value. From 2009 to 2013, PepsiCo's revenue grew 8% compounded annually. PepsiCo earned $4.37 per share in 2013, and management expects 9% growth this year. Assuming earnings per share clock in at roughly $4.76 per share, investors are paying 19 times its 2014 earnings. (Over the past decade, PepsiCo's normalized trailing P/E ratio has swung between 15-27. And it's worth noting that PepsiCo only dipped to a 15 earnings multiple during the financial crisis.) So while it doesn't exactly scream bargain, investors should view PepsiCo's valuation as attractive and take comfort in the high quality of its profits.

Andrs Cardenal(Las Vegas Sands): Value investors know that buying solid businesses while they are going through temporary weakness can be a remarkably profitable strategy, so let's consider the negativity surrounding Macau casinos lately and its impact onLas Vegas Sands .

Chinese authorities are imposing a series of restrictions and regulations on high-net-worth gamblers in Macau to combat corruption and illegal money laundering, which is hurting tourism and gaming revenues in the region. Las Vegas Sandsstock is down by almost 35% from its highs of the last year, and the company reported a marginal increase in sales of only 0.8% during the third quarter.

Despite these hits, Las Vegas Sands is a value stock because of its enormously profitable business model. The company generates an adjusted EBITDA margin of more than 35% of revenue, and management is generously distributing cash flows to investors via both growing dividends and share buybacks. The company announced a big 30% dividend increase during the third quarter, and management has obtained authorization for a new $2 billion stock buyback program. Including both dividends and buybacks, Las Vegas Sands distributed $2.6 billion to investors during the first three quarters of 2014. At current prices, Las Vegas Sands pays an attractive dividend yield of 4.4%.

Even if it's hard to tell how long it may take for growth in Macau to accelerate again, the slowdown should be transitory by nature. Being the main player in Macau, Las Vegas Sands is in a privileged position to benefit from the rise of the Chinese middle class and booming spending in entertainment over decades to come.

Tamara Walsh(Potbelly): Shares of Potbelly declined more than 45% last year, making it one of the worst performing restaurant stocks of 2014. Potbelly's stock is now trading around $14 a pop, significantly below the stock's post IPO high of nearly $32 per share. Nevertheless, the market seems to have overlooked the fact that Potbelly is still in the early stages of what could become a massive growth story.

As of Sept. 28, Potbelly had just 319 company-operated shops in the United States. That's a tiny footprint compared with rivals in the space such as Chipotle Mexican Grill , which counts more than 1,572 Chipotle restaurants in the U.S. today. Therefore, not only does Potbelly have ample runway for growth in the years ahead, but it also operates in the fastest growing segment of the restaurant industry, known as fast-casual.

Additionally, Potbelly is well positioned to grow its business overseas. The sandwich chain currently has 12 franchise locations in the Middle East and plans to further expand internationally going forward. The company's overseas franchise agreement with Alshaya, Potbelly's Middle Eastern partner, gives it the option to open new locations in Egypt, Jordan, Lebanon, Oman, Qatar, and Saudi Arabia. The fast-casual chain's profitability will probably remain crimped in the near term as Potbelly executes its expansion plans. However, these investments should pay off over the long haul.

Shares of Potbelly are now hovering around $14 a share with a price-to-sales ratio of 1.2, which is in line with the industry median. Given Potbelly's growth prospects, I think this creates an attractive entry point for long-term value investors.

The article 2015's Best Stocks for Value Investors originally appeared on Fool.com.

Andrs Cardenal and Tamara Rutter have no position in any stocks mentioned. Bob Ciura owns shares of PepsiCo. The Motley Fool recommends and owns shares of Chipotle Mexican Grill and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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