The stock market keeps hitting new record highs, with the tech-heavy Nasdaq 100 posting particularly impressive gains. Investors who are nervous about chasing the momentum-heavy growth stocks up at these prices might be wondering where to put their capital to work.
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Interestingly, outside of the leading tech companies, a large number of companies have gotten left behind with their shares trading flat or down in 2024. This phenomenon isn’t limited to any one sector or category of equities, either. Here are 10 leading diversified value stocks offering investors compelling opportunities from a broad cross-section of the market today:
— JD.com Inc. (ticker: JD)
— Cisco Systems Inc. (CSCO)
— Ambev SA (ABEV)
— Toyota Motor Corp. (TM)
— Bank of Nova Scotia (BNS)
— Essential Utilities Inc. (WTRG)
— Aflac Inc. (AFL)
— Comcast Corp. (CMCSA)
— Verizon Communications Inc. (VZ)
— Kraft Heinz Co. (KHC)
JD.com Inc. (JD)
Chinese e-commerce firm JD.com has fallen into heavy value territory. Shares skyrocketed from $30 to $100 between 2019 and 2021. But the stock has now fallen back to around its initial public offering price from back in 2014. That’s rather remarkable, given that JD is far larger and more profitable today than it was a decade ago.
JD’s revenues grew from $83 billion in 2019 to $153 billion for full-year 2023. The company continues to grow, with analysts projecting $164 billion in revenues for 2024. In May, JD reported a much stronger than expected earnings report, with the company’s retail revenues rising 7% and logistics revenues jumping by 15%. That’s a great result given China’s current economic slump. The company also announced a large new share repurchase program, allowing it to buy back its own stock at just nine times forward earnings.
Cisco Systems Inc. (CSCO)
Almost 25 years ago, Cisco Systems briefly became the world’s most valuable company. During the dot-com boom, it seemed like the internet would enjoy unending exponential growth and Cisco shares skyrocketed on this vision. Of course, the boom came to an end and Cisco shares collapsed in value.
Fast forward to today and certain artificial intelligence and semiconductor companies are skyrocketing in the same way Cisco did back in 1999. Meanwhile, Cisco shares are depressed. Trading at 52-week lows, Cisco sells for less than 13 times forward earnings and offers a 3.5% dividend yield. While Cisco is not a glamorous business nowadays, the world still needs plenty of networking equipment. And the company has layered higher-profit-margin software and cybersecurity offerings on top of its core networking gear. This makes Cisco a great tech industry cash cow value stock to buy today.
Ambev SA (ABEV)
Ambev is Anheuser-Busch InBev SA/NV’s (BUD) subsidiary covering Brazil and various other Latin American markets. It has dominant market share in Brazil and Argentina, among other South American countries. The company is very different from its corporate parent. For one, Ambev operates with a net cash position, whereas Anheuser-Busch InBev ran into trouble from its high debt load. Additionally, Ambev has largely avoided the sort of culture war issues that led to consumer boycotts against Budweiser in North America.
ABEV stock has fallen nearly 30% over the past year due to worries around a softening Brazilian economy. This has resulted in pushing this debt-free brewing company down to less than 12 times forward earnings. Ambev pays a chunky 7.3% dividend to boot. Morningstar’s Philip Gorham believes the stock is worth $3.60 per share, implying that the stock has more than 70% upside from today’s levels.
Toyota Motor Corp. (TM)
The tides have turned in the automobile market. For a few years, electric vehicle manufacturers such as Tesla Inc. (TSLA) were generating all the excitement in the space. Investors were skeptical that traditional automakers could keep pace with the flood of innovation coming from the EV market. However, some setbacks around profitability and customer adoption in EVs have caused analysts to refocus more carefully on the underlying economics in the business. Toyota’s measured approach, with a mix of traditional, hybrid, electric and hydrogen drivetrains, makes it competitive regardless of how customer demand shifts in coming years. While TM stock has rallied 25% over the past year, it’s still a value, with shares going for less than 10 times forward earnings.
[2024’s 10 Best-Performing Stocks]
Bank of Nova Scotia (BNS)
Bank of Nova Scotia is one of the five big Canadian banks. Historically, Canadian financial firms have been more stable than most countries’ banks due to a strong regulatory environment. Canada’s robust housing market has also made it easy for Canada’s banks to deploy more capital at scale. In addition, Bank of Nova Scotia has considerable operations in Latin America and the Caribbean, giving it access to markets that should grow more quickly now that commodity prices have soared. BNS stock has sold off over the past quarter, pushing shares down to 10 times forward earnings. Shares yield 6.7%, and the stock trades just slightly over book value, which tends to be a very reasonable valuation for financial companies.
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.
The company’s stock price has been relatively depressed in recent years due to high interest rates. This makes its dividend less attractive compared to fixed-income alternatives, while also increasing the cost of the company’s debt load. However, it continues to grow through organic investments, utility rate increases, and mergers and acquisitions. It has already disclosed multiple deals this year which will, in aggregate, add approximately 215,000 customers to the firm’s water and wastewater business. That adds another lever of growth to this Dividend Aristocrat and 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. Aflac has been on a major winning streak recently, with shares having more than tripled from their pandemic lows.
Yet, with the stock at less than 14 times forward earnings, there should be more upside ahead. Investors may not fully appreciate how much the economic environment has shifted in favor of life insurers. Rising interest rates should lead to much higher profitability metrics for the insurers. 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. The company’s first-quarter earnings report was far ahead of expectations, indicating that Aflac’s momentum shows no signs of slowing down this year.
Comcast Corp. (CMCSA)
It’s been a rough time for the cable and media industries in recent years. Comcast is a perfect example, with its shares falling about 10% over the past five years. The company has struggled with cord-cutting as many people switch to streaming services. In addition, Comcast’s media properties, such as NBC, are seeing their profits slip as the media landscape shifts. While the headwinds are real, Comcast is larger and more diversified than most of its rivals. For example, the company’s Universal theme parks give it a nice cash flow source that most media companies don’t have. Comcast’s broad assortment of assets should give it sticking power as smaller players shut down or consolidate. CMCSA stock now trades around nine times forward earnings and offers a 3.2% dividend yield.
Verizon Communications Inc. (VZ)
While the cable industry has had a terrible year, things are starting to look up for the telecom providers. After a massive spending cycle to deploy new 5G communications networks, things are starting to come back into balance for the mobile phone players. Specifically, Verizon has seen its outlook improve significantly as it has trimmed capital expenditures. Meanwhile, its prior investments in 5G are paying off as the company’s improved network quality and capacity are paying off with an uptick in subscriber numbers.
While Verizon still faces some challenges, such as the current high interest rate environment, it is back on the right track. Including dividends, the stock has risen 20% over the past year and is near 52-week highs. But there is more upside left on this comeback story, as VZ stock is still selling for less than nine times forward earnings.
Kraft Heinz Co. (KHC)
Kraft Heinz has fallen deep into value stock territory in recent years. The multinational packaged foods giant struggled to obtain the expected synergies from 2015’s Kraft and Heinz mega-merger. Meanwhile, the heavy debt load taken on to fund that deal has left the company struggling to find a new direction. The company eventually slashed its dividend in 2019 and has turned to asset sales and other strategic moves to refocus its operations.
These efforts appear to be paying off. Kraft Heinz’s earnings per share have risen from $1.58 in 2019 to $2.31 in 2023. Analysts see that further jumping to $3.03 this year, putting the stock at just 11 times forward earnings. This earnings growth is particularly impressive given the struggles that many consumer staples companies have had since the pandemic. Additionally, Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) retains a large ownership position in KHC stock, which should instill at least some confidence in investors.
[SEE: 7 Dividend Stocks to Buy and Hold Forever]
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10 Best Value Stocks to Buy Now originally appeared on usnews.com
Update 06/13/24: This story was published at an earlier date and has been updated with new information.
