10 favorite stocks of value-fund managers

With that in mind, here are the 10 stocks that are most commonly held in value-oriented mutual funds, according to Morningstar. They’re weighted by market value exposure:

Those stocks are familiar to almost any investor. You might even think of them as boring names, and for the most part, their average long-term total returns haven’t been exciting:

The index has outperformed six of those stocks over the past five years and has beaten six over the past 10 years. Most notable are Citigroup Inc. C, +0.98% whose shares were brutally diluted in the wake of the credit crisis and government bailout, and Exxon Mobil Corp. XOM, +3.59% in light of the pummeling of shares over the past year and a half as oil prices have sunk.

But Citigroup is loved by value managers because of its operating improvement, as it disposes of noncore assets. And it is the only stock among the big four trading below tangible book value (89% of tangible book, according to FactSet) among the “big four” U.S. banks.

Exxon Mobil is among the major integrated oil companies that have been able to maintain dividend payouts despite the major whack to profits from the oil-price decline. Considering the history of profit and stock-price recoveries as downtrodden oil markets have recovered across the decades, this period of low prices may eventually be only a blip to Exxon Mobil’s long-term shareholders. Investors with medium-term horizons may even be staring at a bargain stock.

If we look back even further, we see that the S&P 500 has outperformed seven of 10 of these value stocks. That’s a major feather in the cap of anyone who believes index funds are their best bet for decent investment returns over the long run.:

Where’s the value?

Here’s how forward price-to-earnings ratios for the 10 stocks compare to the index: