3 Value Stocks to Consider for Your Diversified Portfolio

Core Viewpoint - The article discusses the contrasting views on portfolio diversification, highlighting Warren Buffett's skepticism towards it while suggesting value stocks for investors seeking diversification opportunities. Group 1: Portfolio Diversification - Warren Buffett believes that diversification indicates a lack of knowledge in investing, stating that "Diversification is a protection against ignorance" [1] - For average investors, diversification remains a useful strategy, with a recommendation to hold around two dozen stocks across various industries to mitigate risk without overcomplicating the portfolio [2] Group 2: Value Stocks for Diversification - The article identifies three value stocks that present opportunities for diversification: Polaris Industries, British American Tobacco, and Campbell Soup [3] Polaris Industries (PII) - Polaris Industries has seen its stock decline by 38% over the last three years due to high inflation and interest rates affecting consumer purchases of powersports vehicles [4] - The company's second-quarter results showed a 12% drop in sales to just under $2 billion and a 43$1.38 per share, with full-year revenue now estimated to be between $7.2 billion and$7.4 billion, reflecting a 17% to 20% decline from previous forecasts [5] - Despite these challenges, Polaris stock has rebounded 12% from its lows, and the company remains an industry leader with a 3.3% annual dividend yield, having raised dividends for 29 consecutive years [6][7] British American Tobacco (BTI) - British American Tobacco is a leader in reduced-risk tobacco products, with its Vuse brand holding a 40% market share in the electronic cigarette sector [8] - Cigarettes still account for over 80% of BTI's revenue, and the company maintains profitability due to price inelasticity, allowing it to raise prices without losing customers [10] - BTI stock has increased by 22% in 2024 and trades at a low valuation of 7 times next year's earnings, making it an attractive value stock for diversification [10] Campbell Soup (CPB) - Campbell Soup, while in a mature industry, has transformed by acquiring Snyder-Lance, now holding a 20% market share in the snacks sector, with pretzels alone accounting for a 41% market share [11][12][13] - The snacks division now contributes 43% of Campbell's sales, indicating potential for future growth, while the stock has risen 14% year-to-date and trades at 15 times next year's earnings estimates [14]