Several of the major U.S. stock indexes are at or near their all-time highs. The stock market is soaring right now as investors look forward to possible interest rate cuts later this year. With inflation coming back down, the Federal Reserve is set to loosen monetary policy and that has caused euphoria on Wall Street.
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So is it too late to get in on the rally? While many stocks have run up to lofty levels already, there are still a fair number of value stocks worth owning at today’s prices. Here are 10 bargain-bin value stocks to buy for 2024:
— PayPal Holdings Inc. (ticker: PYPL)
— Global Payments Inc. (GPN)
— Hormel Foods Corp. (HRL)
— Aflac Inc. (AFL)
— International Business Machines Corp. (IBM)
— FedEx Corp. (FDX)
— Kroger Co. (KR)
— Discover Financial Services (DFS)
— JD.com Inc. (JD)
— Toyota Motor Corp. (TM)
PayPal Holdings Inc. (PYPL)
Online payments platform PayPal has gone from boom to bust. Shares skyrocketed during the early days of the pandemic as customers used the internet and shopping apps in record numbers. As the economy reopened, however, e-commerce growth slowed down. Additionally, there are a lot of firms competing in the online space, so competition remains intense even as the market has decelerated.
Combining these factors, payments stocks including PayPal have been in freefall over the past two years. PYPL stock specifically has fallen from a peak of $300 to just $61 today. Yet the underlying business is in fine shape. Revenues are slated to grow about 8% in 2024, and analysts are expecting earnings to jump nearly 12%. That will put PayPal’s price-to-earnings ratio at just 11. PayPal and the payments industry face some structural challenges, but the market has discounted these names too heavily.
Global Payments Inc. (GPN)
Global Payments is a financial firm that provides merchant acquiring services. Broadly speaking, merchant acquirers provide the hardware and software tools that retailers need to make their businesses work. Global Payments offers payment terminals to merchants and associated functions such as accounting and tax services, fraud detection, point-of-sale software, and chargeback management.
Like PayPal, Global Payments has slumped over the past two years. But that’s probably unwarranted. Global Payments has more of a competitive advantage for its business than many of its peers. It is deeply integrated into its clients’ workflows and is much more than just another payment button on a website. Shares are trading at just 11 times forward earnings and analysts expect double-digit earnings growth this year. To add to that, both Citi and Goldman analysts highlighted Global Payments as a leading payments pick heading into 2024.
Hormel Foods Corp. (HRL)
Hormel Foods is a packaged foods company focused on protein-rich products. The firm is well known for Spam, its canned pork product that rose to prominence during World War II. However, Hormel nowadays is far more than just canned meats. In fact, management has proactively focused on adding brands that appeal to younger and more health-conscious consumers. Today, Hormel’s lineup includes organic and naturally raised meats, barbecue, Mexican salsas, ready-to-eat-guacamole, and nuts and nut butters.
The past couple of years have been hard for meat companies, including Hormel. Input costs rose dramatically, compressing profit margins. Hormel shares are down 30% over the past 12 months given the downturn in its profitability. But with inflation receding, Hormel should be set for an improvement in earnings in 2024. Meanwhile, the company is a dividend king that has raised its payout 57 years in a row and is currently yielding 3.6%.
Aflac Inc. (AFL)
Aflac is a leading insurance company that primarily offers life and supplemental health insurance. In addition to its U.S. division, Aflac has a large market share within the Japanese life insurance market. After an initial plunge during the pandemic, Aflac shares have now soared, with the stock rising from below $40 to around $83 now.
Like other life insurers, Aflac should see an improving earnings outlook thanks to interest rates. For many years, interest rates in the U.S. and other developed markets were around zero, which meant that Aflac couldn’t earn much money from its fixed income portfolio. That has dramatically changed for the better now that interest rates are at significantly higher levels. In addition, the GLP-1 class of drugs for managing obesity and diabetes could lengthen peoples’ lifespans and thus generate incremental profitability for life insurers. Aflac sells for less than 13 times forward earnings.
International Business Machines Corp. (IBM)
Many investors have written off IBM. The firm missed out on many of the big innovations in the technology sector over the past 20 years. IBM was at one time the world’s largest company by market capitalization; today it has fallen far behind the newer crop of tech titans. Still, sometimes an old dog can learn new tricks.
IBM is, at its core, a highly efficient and profitable consulting shop. It offers dependable solutions to many of the world’s largest companies. While consulting may not be the most glamorous part of the tech sector, it tends to deliver stable cash flows and allows IBM to pay large dividends to shareholders. And IBM has been able to use its profitability to expand into other areas. The firm’s cloud computing offerings appear to be gaining traction. Plus, IBM’s long-running investment in artificial intelligence should start to bear lots of fruit for the company given investors’ newfound fascination with the field.
[Best Tech Stocks to Buy for 2024]
FedEx Corp. (FDX)
FedEx has had a bumpy ride over the past few years. Shares were in a slump prior to COVID-19 as investors fretted about rising costs and potential competition from Amazon.com Inc. (AMZN). Then, FedEx stock more than doubled in the early days of the pandemic as online shopping soared, leading to record demand for delivery and logistics services. Since then, FedEx stock has largely treaded water.
That appears to be due to a slowdown in e-commerce demand. Meanwhile, costs have risen in the current operating environment. Labor costs are a particular point of concern. These worries weighed on shares, with FedEx selling off more than 10% following the company’s most recent earnings report. That drop looks like an opportunity, as it pushed FDX stock down to 14 times forward earnings. As an established blue-chip stock in an industry with high barriers to entry, that’s a good entry price for investors.
Kroger Co. (KR)
Like FedEx, Kroger has had a complicated couple of years. In the early days of the pandemic, Kroger seemed like a clear winner. The company had invested heavily in logistics, e-commerce and next-generation warehouses, giving it a strong competitive advantage during the stay-at-home grocery shopping era. And home cooking soared with many restaurants being closed down.
However, the momentum for grocery stores has faded. In particular, a surge in food price inflation has made consumers more careful about their grocery budgets. In addition, widespread labor shortages and supply chain issues hampered Kroger’s profitability in recent years. Despite the soaring overall equity market, KR stock has merely traded flat over the past 12 months. It could be set to catch up in 2024. Kroger sells for less than 11 times forward earnings. As a cheap recession-resistant value stock, Kroger is ideally situated to ride out a slowing economy.
Discover Financial Services (DFS)
Discover is the operator of its namesake credit card network. Unlike Visa Inc. (V) and Mastercard Inc. (MA), Discover is also a personal lender as it extends credit directly to Discover customers. To fund its loan book, Discover runs a large bank with about $75 billion in direct-to-consumer deposits. As credit cards tend to charge high interest rates, lenders such as Discover are incredibly profitable during good economic periods. And even in downturns, losses have been limited; Discover even remained profitable during the 2008 financial crisis.
DFS stock has underperformed the market over the past year. That’s probably not too surprising, as investors are worried about a potential recession. The former CEO also left in the summer of 2023. Those are valid bearish concerns, but they’re already baked into the current price. That’s especially true as Discover buys back prodigious amounts of stock; it has retired fully half its outstanding share count since 2010. With shares currently at just nine times forward earnings, that paves the way for Discover to return tons of capital to its shareholders on favorable terms going forward.
JD.com Inc. (JD)
Chinese e-commerce firm JD.com has been on an incredible losing streak over the past two years. Shares skyrocketed from $30 to $100 between 2019 and 2021. Now, though, JD has given back all those gains with the stock falling to just $25 per share. Usually, this sort of share price implosion would be associated with a major deterioration in a company’s fundamentals.
For JD.com, though, that doesn’t apply. In fact, JD’s revenues grew from $83 billion in 2019 to an estimated $151 billion for full-year 2023. The company continues to grow, with analysts projecting $162 billion in revenues for 2024. And JD’s profitability has improved as well; in fact, shares go for a shockingly low 7.6 times forward earnings. Yes, there are huge political risks around China right now and the Chinese consumer is facing serious economic headwinds. At this price, however, JD is a deep value stock that is hard to ignore even in the face of these risk factors.
Toyota Motor Corp. (TM)
Toyota is the world’s second-largest automaker by revenues, trailing only Volkswagen AG (OTC: VWAGY). While electric vehicle companies have generated a tremendous amount of media attention, Toyota’s sales remain far higher than those of Tesla Inc. (TSLA) and other pure-play EV companies. And with the EV industry facing some bumps in the road lately, Toyota could be set to shine. Toyota has taken a reasoned approach to the energy transition; it has long been a leader in hybrid vehicles, and it is rolling out additional electric options at a measured clip.
This approach has allowed Toyota to continue to generate tremendous profits from its core existing product lines while working out the kinks in the newer EV and hybrid models. Investors are nervous that the auto market will slow down after a tremendous couple of years. That may well happen, but with Toyota shares trading at 10 times forward earnings, investors can own this leading automaker at a value price.
[SEE: 9 Best Cheap Stocks to Buy Under $5.]
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10 Best Value Stocks to Buy for 2024 originally appeared on usnews.com
Update 01/12/24: This story was published at an earlier date and has been updated with new information.
