The stock market is looking increasingly expensive. The major U.S. equity indexes have rallied far faster than corporate earnings have grown over the past year. As a result, the price-to-earnings multiples have gone up for many of America’s largest companies. That could end up being a mistake. With inflation coming in hotter than expected for March and economists starting to doubt whether the Federal Reserve will cut interest rates this year, risks are mounting for expensive momentum stocks.
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Some investors are heading for the sidelines and saving cash. But there are still places to put money to work prudently today. These stocks can make a portfolio more resilient and capable of withstanding a potential recession or stagflation scenario. For investors looking for a bargain, here are 10 of the top value stocks for 2024:
— Cisco Systems Inc. (ticker: CSCO)
— Comcast Corp. (CMCSA)
— Telus Corp. (TU)
— Unilever PLC (UL)
— Sony Group Corp. (SONY)
— Toronto-Dominion Bank (TD)
— Solventum Corp. (SOLV)
— Essential Utilities Inc. (WTRG)
— Aflac Inc. (AFL)
— JD.com Inc. (JD)
Cisco Systems Inc. (CSCO)
It’s funny how market cycles play out. Back in 2000, Cisco was briefly the world’s most valuable company. Traders bid CSCO stock up to a stratospheric valuation thanks to seemingly unlimited demand for networking equipment. That ended painfully during the subsequent dot-com bust.
Today, semiconductor and AI companies may be seeing the sort of hype cycle that Cisco shares enjoyed in 2000. Cisco, by contrast, is now a beaten-down value stock trading at less than 15 times forward earnings. Cisco remains the dominant networking gear provider. It has also added increasingly profitable software and cybersecurity solutions to its broader product mix. Cisco is no longer a rapid growth company like it was in 2000. But it runs a cash cow hardware business, and demand for networking equipment and cybersecurity isn’t going anywhere. This makes Cisco a solid value pick in the tech sector.
Comcast Corp. (CMCSA)
Comcast has faced a perfect storm over the past few years. It is struggling with the cord-cutting phenomenon as many people move from traditional cable to streaming options. The company also operates media properties of its own, such as NBC, which have lost value in the shifting media landscape. Shares of firms like Comcast and Walt Disney Co. (DIS) have underperformed the market in recent years due to these concerns. For Comcast, enough is enough. The stock has already dropped 8.5% this year through April 11 and is merely flat over the past five years. With the decline, Comcast shares are down to about nine times forward earnings. That makes Comcast ripe for a recovery on any improvement in sentiment.
Telus Corp. (TU)
Telus is a major Canadian telecom company. It is one of the three primary mobile carriers in the market, with more than 10 million subscribers and about 30% market share. Historically, Canada has been an attractive market with strong revenue per user and consistent growth thanks to Canada’s rapidly increasing population and high levels of immigration. Telus, and the Canadian telecom sector as a whole, has seen shares tumble as the Canadian government is currently running an inquiry about pricing in the telecom market. Perhaps that will lead to pressure on mobile phone charges, though it could also blow over once legislators move on to other topics. In any case, with the stock price decline, Telus shares offer a 6.9% dividend yield.
Unilever PLC (UL)
Unilever is a multinational consumer staples company that sells food, personal care, hygiene and beauty products. In recent years, the company has struggled to grow top-line revenues. Some analysts have suggested that the company was too large and didn’t have a strong focus on growing its core brands and best assets.
Changes are coming, however. The company divested its tea business in 2022. And now, after a consumer boycott, Unilever is unloading its Ben & Jerry’s ice cream business as well. The thinking is that these moves will center Unilever’s portfolio around higher-growth assets and also relieve the downward pressure on the share price. With the stock down about 10% over the past year, shares are now going for about 15 times forward earnings as well as offering a 4% dividend yield.
Sony Group Corp. (SONY)
Sony is a broadly diversified Japanese technology conglomerate. It sells a variety of tech hardware, electronic equipment and consumer products. Products include gaming consoles and LCD televisions, among others, and the company also has media, music, and mobile phone and internet services among its businesses. Unfortunately, several of these businesses are struggling at the same time. Media profits are under pressure with the move to streaming distribution. The video gaming industry is in a significant downturn since the 2022 peak as people have enjoyed more leisure activities outside of their homes. Similarly, TV sales fell significantly in 2023. Sony is facing near-term headwinds, and investors have sold the stock off accordingly. However, Sony retains a great brand and wonderful intellectual property, and shares are now down to 16 times forward earnings.
[READ: 10 Best Tech Stocks to Buy for 2024]
Toronto-Dominion Bank (TD)
Toronto-Dominion Bank is one of Canada’s largest banks. The country has only five major banks; this consolidation has allowed the industry to enjoy high profits and not face excessive levels of competition. Toronto-Dominion has a powerful investment bank, and the firm is also increasing operations in the U.S. market. In addition, it owns a substantial stake in discount brokerage Charles Schwab Corp. (SCHW), putting it in position to enjoy significant upside as Charles Schwab recovers from last year’s interest rate shock.
TD shares have slumped recently. Investors are worried about the Canadian economy and housing market. However, the Canadian government’s mortgage insurance program protects banks from most of the potential downside in that space. It seems fears are overblown, with TD stock now selling for about 10 times forward earnings.
Solventum Corp. (SOLV)
Solventum is a new publicly traded company focused on health care supplies. It came from a spin-off of industrial giant 3M Co. (MMM), which sought to unlock shareholder value by putting the health care business into a completely different operating company. Solventum has four primary operating divisions: surgical products, dental solutions, health information systems, and purification and filtration solutions.
The company just debuted as an independent firm, so there’s not a long track record of its financial performance yet. However, analysts expect the company to be strongly profitable; shares are currently going for about 11 times forward estimated earnings. There could be some volatility as Solventum starts to report its standalone earnings. Regardless, SOLV stock spun off at around $80 a share and has quickly traded down about 20% from that price. This offers investors an opportunity to buy this promising spin-off at a significant discount.
Essential Utilities Inc. (WTRG)
Essential Utilities is a Pennsylvania-based utility company primarily focused on water, with a smaller natural gas business as well. Investors typically pay high multiples for water businesses, as water consumption is exceptionally predictable. There’s minimal technological or disruption risk. Water utilities also don’t have to worry about carbon emissions in the same way as electricity utilities, which are moving away from fossil fuels.
Regardless, Essential Utilities is currently out of favor due to the rise in interest rates. The stock price has retreated to 2019 levels and has underperformed over the past year as well. WTRG trades at about 17 times forward earnings. This is historically a highly attractive entry point for this Dividend Aristocrat growth-and-income value stock.
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 since doubled. Even so, they remain cheap thanks to an improving macroeconomic outlook.
Like with other life insurers, rising interest rates should lift Aflac’s profitability. For many years, interest rates in the U.S. and other developed markets were around zero, which greatly curtailed earnings from fixed-income holdings. That has dramatically changed for the better with the rise in interest rates. 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 about 12 times forward earnings.
JD.com Inc. (JD)
Chinese e-commerce firm JD.com has fallen into deep value territory. Shares skyrocketed from $30 to $100 between 2019 and 2021. Shares have given back all those gains now, however, and recently traded back to near the firm’s IPO price from 2014. Despite the collapse in the share price, though, the business is humming.
JD’s revenues grew from $83 billion in 2019 to $153 billion for full-year 2023. The company continues to grow, with analysts projecting $160 billion in revenues for 2024. And JD’s profitability has improved as well; in fact, shares go for a shockingly low 8.5 times forward earnings. The Chinese economy is in a slump, and there are major geopolitical concerns as well. But for investors who can stomach those risks, JD is a leading e-commerce giant with shares selling at an absolute rock-bottom price.
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10 Best Value Stocks to Buy Now originally appeared on usnews.com
Update 04/12/24: This story was published at an earlier date and has been updated with new information.
