3 Top Value Stocks to Buy in March

MarketsMotley Fool

Even after the short-lived correction in February, the market continues to reach dizzying new heights. That makes it particularly tough to find any real bargains, especially for value investors. Using a variety of metrics, the market looks expensive, and that will likely continue. But while it may be difficult, it isn't impossible to find compelling buys for those willing to search high and low for the right opportunities.

To lend a hand, we asked three Motley Fool investors to choose top companies they believe provide great values today. They offered convincing arguments for Apple Inc. (NASDAQ: AAPL), Ford Motor Company (NYSE: F), and Oshkosh Corporation (NYSE: OSK).

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If it's good enough for Buffett...

Danny Vena (Apple): Apple may currently have the world's largest market cap, but the Cupertino tech giant gets very little love when it comes to valuation. Its P/E ratio of just 18 is significantly lower than the multiple of 25 enjoyed by the S&P 500.

If you have any doubts as to the company's worth, however, look no further than the Oracle of Omaha himself. Legendary investor Warren Buffett has been increasing Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) position in the iPhone maker, adding 31 million shares in the fourth quarter of 2017, bringing its total stake to 165.3 million shares. The recent buying spree made Apple Berkshire's second-largest holding as of Dec. 31 -- worth over $28 billion.

Buffett has provided recent insight into why he values Apple so highly. "Apple has an extraordinary consumer franchise," he said in an interview. "I see how strong that ecosystem is, to an extraordinary degree... You are very, very, very locked in, at least psychologically and mentally, to the product you are using. [The iPhone] is a very sticky product."

While investors are rightly concerned about the slowing growth of the iPhone, Apple is working to reduce its reliance on the flagship product. The company believes it can double its services business to $50 billion by 2020, while also touting the strength of its wearables business. The Apple Watch, AirPods, and Beat headphones combined to produce sales that grew by 70%, helping push revenue from Apple's "other products" segment to $5.5 billion in its most recent quarter.

Don't forget the dividend, which currently yields about 1.4%, has a lower-than-average 26% payout ratio. Apple has historically revealed increases to its capital return policy in conjunction with its fiscal second-quarter financial release in early May, and many believe the payout will increase again this year.

Investors looking for solid value and the potential for continued growth should take a bite of Apple.

Juicy dividend yield

Daniel Miller (Ford Motor Company): If you're looking for value stocks in March, look no further than Detroit's second-largest automaker, Ford. It's difficult to imagine more negativity could be priced into the stock as it trades at a paltry price-to-earnings ratio of 5.6 times, which has boosted its dividend yield to 5.77% -- and that doesn't even include the annual supplemental dividend.

Ford is currently reaping the benefits from an SUV and truck heavy lineup, its more profitable vehicle segments, and its vehicle portfolio is about to get updated. It will launch 25 vehicles and refresh 35% of its products between now and the end of 2019. The fresher lineup should help boost sales and pricing, but the company has work to do. CEO Jim Hackett must prove to investors that management can trim costs to better offset a slowing U.S. market, rising commodity costs, and expensive mobility and electrification investments.

Also, Ford is building its smart mobility strategy and recently acquired Autonomic and TransLoc to accelerate the process. This year alone, management plans to accelerate or launch businesses in ridesharing, vehicle management as a service, non-emergency medical transportation, and connectivity, among others. It'll be a while before those businesses move the needle for such a large automaker, but that's the long-term winning strategy for investors. And if Ford can deliver a tangible plan to cut costs and jolt sales back to life with an updated lineup, March is giving investors an opportunity to pick up shares on the cheap.

A hot performer cools down

John Bromels (Oshkosh Corporation): Shares of specialty truck maker Oshkosh Corporation handily outperformed the market in 2017, thanks to one great quarter after another. And with the trends that boosted Oshkosh in 2017 lingering into this year, my biggest concern was that, at 25 times trailing earnings, the stock had become overvalued.

But after February's market correction, Oshkosh stock is down about 14% for the year, to about 18.5 times trailing earnings, which means March may be a good time to pick up some shares at a discount.

As a defense contractor, Oshkosh derived 26.6% of its revenue from its defense division in its 2017 fiscal year. With increased defense spending at the federal level, that may well go up this year. In addition, the company actually saw increased earnings in the most recent quarter, even as many of its defense contractor peers' earnings took some hits due to tax reform.

And while we haven't seen a similar infrastructure spending push at the federal level yet, Oshkosh has been working hard on restructuring its access equipment segment, which serves the construction industry and accounted for almost half of Oshkosh's 2017 sales. Segment sales were up again in the most recent quarter, although earnings lagged after a big 38.1% increase in the prior quarter.

Military spending sure doesn't seem to be slowing down, although Oshkosh's stock price has. That spells a big opportunity for investors this March.

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Daniel Miller owns shares of Ford. Danny Vena owns shares of Apple. John Bromels owns shares of Apple, Berkshire Hathaway (B shares), Ford, and Oshkosh. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Ford. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.