Investors may look back on November as a crucial turning point for the stock market.
Bond prices soared after surprisingly tame inflation data, and the three major market indexes have performed well. In the span of a month, chatter has shifted from Federal Reserve rate hikes to the possibility that the institution may start cutting interest rates as early as March. Whether or not this sets the economy up for a so-called soft landing remains to be seen.
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Regardless, it’s set off a large market rally as folks clamor to get ahead of a potential reversal in interest rates. However, not all promising stocks jumped up on this news. Here are five stocks that slipped in November but are well positioned to benefit from the potential change in the interest rate regime and should deliver better results in 2024:
— Diageo PLC (ticker: DEO)
— Exxon Mobil Corp. (XOM)
— Cisco Systems Inc. (CSCO)
— Franco-Nevada Corp. (FNV)
— Walgreens Boots Alliance Inc. (WBA)
Diageo PLC (DEO)
Diageo is one of the world’s largest spirits companies. It sells storied brands such as Johnnie Walker, Smirnoff, Captain Morgan, Don Julio and Guinness, among others. The company has recovered nicely from the initial pandemic slowdown. In fact, Diageo hit record-high earnings per share this year. Despite that, the stock is down by about a third from its prior highs. This is largely due to higher interest rates, which have caused heavy selling across many defensive stocks such as Diageo as investors shift out of equities and into higher-yielding fixed-income options.
The popularity of weight loss drugs such as Ozempic has also stoked concerns about the demand for alcoholic beverages. As such, the sell-off in DEO stock is understandable. However, at this point, shares are near their lowest valuation ratio since the 2008 financial crisis, making DEO a fantastic value today.
Exxon Mobil Corp. (XOM)
Exxon Mobil is one of the world’s largest energy companies, with oil and gas operations spanning most corners of the globe. Increasingly, it has invested in alternatives such as carbon capture as well.
Exxon made a contrarian bet in the late 2010s, continuing to invest heavily in oil and gas even as many other firms pulled back amid low energy prices. This paid off in a huge way; Exxon’s new offshore Guyana field is one of the world’s largest recent oil finds and has greatly augmented Exxon’s profits and reserves. Exxon also recently announced a blockbuster merger with Pioneer Natural Resources Co. (PXD), which will greatly expand its presence in the Permian Basin.
All this to say that Exxon Mobil is making the right moves to continue to grow and dominate its field for many years to come. Shares are near their lows for the year, giving investors a chance to buy at just 10 times forward earnings.
Cisco Systems Inc. (CSCO)
Networking equipment giant Cisco is back on the downswing. Shares have declined about 10% since mid-November following a weaker-than-expected earnings report. Unsurprisingly, near-term demand has dipped. Cisco warned of a weaker customer backlog as buyers are concentrating on maintaining and optimizing their existing systems rather than ordering additional gear from Cisco at this time. After a boom in the early days of the pandemic, when companies had to build out a tremendous amount of data and networking capacity, this is a slower period for the industry.
That said, the long-term trend line is still toward far more data demand, even if 2024 might be a relatively slow year. Additionally, with Cisco’s heavy investments in software and security services, it has much more recurring revenue than it used to; Cisco isn’t just a boom-and-bust hardware firm anymore. With the recent share price decline, the stock is going for less than 13 times forward earnings.
[READ: 10 Best Tech Stocks to Buy for 2023]
Franco-Nevada Corp. (FNV)
Franco-Nevada is a leading royalty streaming company. Specifically, it acts as a sort of specialty finance company. It provides financing to mining and energy companies that need money to build their mines or energy projects. In return, Franco-Nevada gets a royalty stream off future production at those facilities.
This model has generated much better returns than the precious metals mining companies, in aggregate. Specifically, Franco-Nevada shares have rallied 218% over the past 10 years as of Nov. 29, compared with a 53% gain in the VanEck Gold Miners ETF (GDX) over the same time span.
And now gold is heating up again, with the price of the precious metal topping $2,050 per ounce for the first time since May. Despite that, FNV stock is currently selling near 52-week lows, making it an opportune time to invest in this company, which is heavily levered to the price of gold and other metals.
Walgreens Boots Alliance Inc. (WBA)
It’s been a rough couple of years for the pharmacy industry. After an initial boost in sales momentum driven by COVID-19 treatments and vaccines, those favorable trends have reversed. Walgreens has had management shake-ups and is attempting to reposition the business as it adapts to changing industry conditions. The company is admittedly at a crossroads. However, investors have dramatically overreacted.
Walgreens is still highly profitable — in fact, shares are going for just 6 times forward earnings. The company also grew its revenues by 4% in its fiscal year 2023, and analysts project another 2.8% growth in sales again next year. That’s not tremendous, by any means, but it’s not nearly as bad as the company’s 43% stock price decline this year would suggest.
At the end of the day, many people don’t want to order medication online, and the neighborhood pharmacy is likely to have a place for many years to come. Walgreens has its challenges, but that’s fully reflected in the current stock price.
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5 of the Best Stocks to Buy Now originally appeared on usnews.com
Update 11/30/23: This story was previously published at an earlier date and has been updated with new information.
