Best Value Stocks to Buy in 2024

Value investing is the art of uncovering hidden gems in the stock market. It involves finding stocks that trade for less than what they are really worth, but with plenty of potential.

Some of the world’s best-known investors, including Warren Buffett, Mohnish Pabrai, and Benjamin Graham, have become successful using a value-investing approach. Value investors apply market metrics to find stocks with a competitive edge that have every chance to outperform the market. It takes a little work, but everyday investors can use those same methods to find the best value stocks.

In this guide, we analyze the best value stocks available now to help you apply the concept. Our picks are varied by sector and geographic location, but they all have a long history of being profitable, and trade at a price-to-earnings (P/E) ratio of 13 or below. Discover our picks of 10 stocks you could consider adding to your value investing portfolio below:

In-Depth Analysis of the Top Value Stocks to Buy

Let’s explore the top value stocks that are worth considering October 2024 in more detail.

1. Toyota – Best Value Stock for the Future

The world’s largest carmaker is preparing for the era of electric vehicles (EV). First and foremost, it’s focusing on hybrid-electric models (HEVs) instead of pure EVs, with hybrids accounting for more than a third of its total sales. Its Toyota Camry, the top-selling car in the US, will only be sold as a hybrid car starting in 2025.

The strategy of focusing on hybrids is paying off. In the 2023 calendar year it saw a 30% increase in hybrid-electric car sales to 3.4 million, which prompted it to lift its full-year profit forecast. The carmaker targets 5 million hybrids a year by 2025.

In the fiscal year ended in March 2024, its total vehicle sales rose by 7% to 9.44 million units. Net revenue rose 21.4% to 45.1 trillion ($311 billion) and operating income surged 96% to JPY 5.35 trillion. According to local press reports, it was the first time for a Japanese corporation to cross the 5 billion yen operating profit threshold. Net income more than doubled to JPY 4.94 trillion.

Based on its guidance for the full fiscal year ending in March 2025, it expects to sell 9.50 million units and sees revenue of JPY 46 trillion. However, it estimated that full-year operating profit will fall to JPY 4.3 trillion, and net income will drop to JPY 3.57 trillion as it revealed plans to invest 1.7 trillion yen into artificial intelligence and software for future growth.

The shares have risen 46% in the past year and they are up 17% this year, and yet, the P/E ratio remains an attractive 11 times. The carmaker pays dividends twice a year and the yield is 1.63%, but with a payout ratio of only 20.81%, there’s a lot of room for more increases.

2. Bank of America – Solid Value Investment for a Drop in Interest Rates

Bank stocks have struggled last year because high interest rates softened the demand for mortgages and consumer lending, and made short-term bonds and other yield-bearing investments more attractive than savings accounts. However, a lot depends on the economic environment. If interest rate hikes have really peaked and there’s an easing cycle on the horizon, this could be an attractive time to get back in on a solid banking stock.

The second largest bank in the US posted adjusted net income of $7.2 billion, or $0.83 per diluted share, in its first quarter of 2024, down from $8.2 billion, or $0.94 per diluted share, in the same three months a year earlier. Adjusted revenue, net of interest expense, fell 2% over the same three months last year to $25.8 billion.

The company continues to see new business, with 245,000 new consumer checking accounts, the 21st consecutive quarter that number has grown.

The lender raised its quarterly dividend by 9.1% this year to $0.24, equaling a yield of around 2.79% and a conservative payout ratio of 29.37%. The company has raised its dividend for 10 consecutive years.

3. JPMorgan Chase – Best Value Stock for a Safe Dividends

JP Morgan Chase is the world’s No. 1 bank by assets, with separate divisions for Consumer and Community Banking, Corporate and Investment Banking, Commercial Banking, Asset and Wealth Management and Corporate. That size and diversity gives the stock stability.

The stock did well at a time when investors were concerned about deposit flight following the collapse of several US-based regional banks – Silicon Valley Bank, Signature Bank and First Republic Bank all collapsed.

The US banking giant posted first quarter revenue of $41.93 billion, up 9.3% from a year earlier, while net income totaled as $13.42 billion, or $4.44 per share, compared to $12.62 billion, or $4.10 per share a year earlier, helped by the acquisition of First Republic Bank.

A high interest rate environment boosts banks’ profits from interest as they are able to charge more on the money they lend. Jamie Dimon, the bank’s chief executive said that the results were “strong,” however, he said the “normalization” of net interest income and credit will continue after “over-earning” in 2023. The bank issued a net interest income forecast of around $90 billion for the full year, unchanged from its previous forecast, disappointing some investors. Net interest income is the difference between what a bank earns on lending and pays out on deposits.

The company has increased its dividend for 14 consecutive years, including a 9.5% boost in May to $1.15 per quarterly share equaling a yield of around 2.28%. The payout ratio of about 27% leaves room for continued increases.

4. Toll Brothers – Building on a Potential Homebuilding Comeback

Toll Brothers, the fifth largest US homebuilder by revenue, focuses on the luxury housing market. At the end of its fiscal second quarter in April it had 386 selling communities, many of them in the South and in mountain states, compared to 350 in the same quarter a year earlier. The company’s lending arm reported that more than half of Toll Brothers home buyers used the company’s mortgage services.

With the need for homes rising, there is a dearth of home listings, particularly a lack of new homes available on the market, so that plays into the company’s strengths.

In the fiscal second quarter, Toll posted home sales revenue of $2.66 billion, up 6% year over year. It delivered 2,641 homes, 6% more than a year earlier. Toll also reported net income of $481.6 million, up from 320.2 million in the prior year period, and EPS of $4.55 versus $2.85 a year earlier. Net income and EPS was boosted by gains of $124.1 million and $1.17, respectively, related to the sale of a parcel of land to a commercial developer.

The company raised its dividend by 10% this year to $0.23 per quarterly share, the third consecutive year of increases. The yield is a below-average 0.72%, but with the payout ratio on the dividend only around 6.5%, a dividend cut would be unlikely.

5. CVS Health – A Healthcare Giant With Steady Revenue Growth 

The large-cap pharmaceutical and primary care company, founded in 1963 has bounced back strong from COVID-19 doldrums, with 12 consecutive quarters of increased revenue.

The healthcare company’s stock faltered after the company cut its profit guidance for 2024 a second time. It lowered its projected adjusted EPS to at least $7.00 from at least $8.30. In 2023, full-year adjusted EPS was $8.74.

In the first quarter, CVS saw revenue growth in all of its sectors as it reported overall revenue of $88.4 billion, up 3.7% year over year. Adjusted EPS was $1.31, compared to an adjusted EPS of $2.20 a year earlier.

CVS increased its quarterly dividend by $0.60 in December to $0.665, raising payouts for shareholders for a third consecutive year. Over the past decade, CVS has raised its dividend by more than 120%. The dividend yield is an above-average 3.6% and the payout ratio is about 36%.

6. Sekisui House – International Homebuilder With Consistent Growth

The Japanese homebuilder operates in four different segments, Overseas, Development, Supplied Housing and Built to Order. In 2023, Sekisui had its eighth consecutive year of increased revenue.

In the fiscal year ended January, the company posted revenue of  JPY 3.11 trillion ($ billion), up 6.1% year over year, and profit rose 9.6% from the same period a year earlier to JPY 202.3 billion ($945 million). Revenue was driven by 13.7% increase in the development business segment.

The homebuilder has raised its dividend for three consecutive years and this year it pays JPY 125 ($0.80), giving it a yield of around 3.43%.

7. Altria Group – Value Stock With an Ultra-High Dividend

Altria, formerly known as Philip Morris, faced with declining cigarette sales, has been branching out into smoke-free products as consumers seek healthier options. The company, hoping to improve its market share of smoke-free products, bought NJOY Holdings last year for $2.8 billion and said it plans to expand the distribution of the NJOY ACE, the only pod-based e-vapor product to get marketing authorization from the Food and Drug Administration.

The company, known for the Marlboro, Copenhagen, Black & Mild brands, posted first-quarter revenue of $5.58 billion, down 2.5% from a year earlier, citing lower domestic cigarette sales due to industry-wide declines and competition from illegal e-vapor products. Adjusted EPS fell to $1.15 from $1.18 in the same year earlier quarter.

As per its latest guidance, Altria expects 2024 full-year adjusted EPS in a range of $5.05 to $5.17, rising between 2% and 4.5% from $4.95 in 2023.

Altria continues to have strong cash flow, and in 2023, it repurchased $1 billion of its own shares and plans to spend the same amount on buying back stock this year. It also rewards investors with the highest-yielding dividend in the S&P 500 at around 8.42%. The company has raised its dividend for 14 consecutive years, including a 4% increase last year to $0.98 per quarterly share. The only concern for the dividend, though, is the payout ratio is high at more than 80%.

8. Rolls-Royce – Engine Maker Benefits From Airlines’ Rebound 

Rolls-Royce, whose engines power more than 35 types of commercial aircraft, made some big changes last year as it emerged from losses suffered during the pandemic. It cut jobs and hired a new CEO in Tufan Erginbilgic, and the moves are beginning to yield results.

Currently priced at 452 British pence ($5.77) the stock trades on the London Stock Exchange, and has gained 206% over the past year driven by Erginbilgic’s earnings forecasts. The UK’s benchmark FTSE 100 has risen 8% during the same period. In December, Rolls-Royce said it expects underlying operating profit increasing to between £2.5 billion and £2.8 billion by 2027 from £0.5 billion in 2022.

Its 2024 full-year target calls for underlying operating profit of between £1.7 billion and £2 billion and free cash flow of between £1.7 billion and £1.9 billion. Erginbilgic reiterated the forecasts in a May trading update. He said the company remains on track for annualized cost savings of around £200 million by the end of 2025.

Full-year underlying operating profit, its preferred profitability metric, more than doubled to £1.6 billion in 2023, from £652 million in 2022. Free cash flow was £1.29 billion. Profit has been driven by cost cuts and also at play is the increased flying hours by the airline industry that is boosting demand for Rolls Royce engines. The company is due to release half-year earnings on Aug. 1.

Rolls Royce was once a dividend darling, but it suspended its dividends in 2020 during the pandemic. This year, the company said it’s committed to returning the dividend, depending on how good business is. At its current valuation of P/E ratio of around 15, Rolls-Royce still appears to be among the best penny stocks to buy now.

9. Allianz – Insurance Giant Expects to Bounce Back From Rough Quarter

The world’s largest insurance company operates across five segments – Property-Casualty, Life/Health, Asset Management, and Corporate and Other. First-quarter operating profit, the company’s preferred profit measure, jumped 6.8% to 4 billion euros ($2.28 billion) driven by the performance of the Property-Casualty business segment.

Allianz’s reiterated its 2024 operating profit estimate of 14.8 billion euros, with a 1 billion euro margin of error on either side. First-quarter revenue climbed 5.3% to 48.4 billion euros and net income rose 2.5% to 2.5 billion euros.

Allianz has increased its annual dividend by an average of 10% over the past decade, not including a proposed 21% bump this year to €13.80 euros a share ($15), meaning a yield of around 5.5%. The company has recently raised its payout ratio limit to 60% from 50%, giving itself scope for larger dividend increases.

10. Shell – Consistent Earnings Growth Despite Revenue Drop

The Anglo-Dutch company is the world’s second most profitable oil and gas company based on its 2023 earnings of $34.93 billion, and its shares have risen 19% in the past year. The company trimmed its dividend in 2020 during the pandemic, Shell’s first dividend cut since World War II. However, the oil giant  recommitted to shareholder value, luring back the income-oriented investors that had shunned it.

In 2023, it returned $23 billion to shareholders in dividends and buybacks. It has recently raised its dividend by 20% to $0.344 and said it will buy back $3.5 billion of its shares in the second quarter of 2024, the same as in the previous two quarter. Its dividend yield stands at 3.86%.

First-quarter adjusted earnings slid 20% to $7.73 billion, but still beating Wall Street analysts’ forecasts, reflecting lower gas prices. Revenue in the quarter declined 16% to $74.7 billion.

Shell has shown itself to be capable of adapting to changing market conditions. To future-proof itself, it’s in the process of moving beyond being a traditional oil and gas company to a more diversified energy company with a focus on sustainability.

Where to Buy Value Stocks

In order to buy value stocks, you’ll need an online stock broker that offers a wide selection of shares and the data you need to make informed investing decisions.

One of the best brokers for value investors is eToro. eToro offers thousands of stocks from exchanges around the world, all with 0% commission. That means you’ll pay no broker fee at eToro to buy value stock shares making the platform extremely competitive.

eToro offers trading on nearly all of the value investments we highlighted above. For each stock, you can see detailed financial data including its price-to-earnings ratio, dividend yield, earnings per share, and more. You can even dive into detailed cash flow, balance sheet, and income statement data.

On top of that, eToro tracks Wall Street analysts’ price targets for a wide variety of stocks. These can be a helpful guide for any intelligent investor wondering how much upside potential a value stock could offer.

eToro also supports copy trading, which allows you to automatically mimic the portfolio of another user. There are many experienced investors on eToro whose portfolios you can potentially copy. You only need to invest a minimum of $200 to copy trade on eToro and there are no fees for copying.

eToro is available in more than 100 countries worldwide and is regulated by major bodies in the UK, US and Europe. You can open a new account with as little as $100, depending on the country you are in.

What Are Value Stocks?

A stock considered for value investing is one that appears to be trading for less than the company’s intrinsic value. This can happen for a number of reasons, but usually it is because investors are placing a greater stress on short-term headwinds, or expected negative developments, than a company’s long-term financial strengths.

Most value stocks are mature companies that have a long history of being profitable and can afford to pay a dividend, which is another reason to buy them as they can provide a dependable stream of income. These stocks have steady, rather than spectacular growth rates.

How to Identify the Best Value Stocks to Invest in

There’s no one-size-fits-all approach to identifying the best value stocks. Investors need to combine long-term analysis while determining if a stock is a true bargain. According to Warren Buffett, the chairman and CEO of Berkshire Hathaway the the lower the market price of a share relative to what it’s really worth, the better.

There are several ways to help finding a share trading below its intrinsic value:

Use Key Financial Ratios

A company’s price-to-earnings ratio (P/E) and price-to-book (P/B) can help determine if it is underpriced. For any investor, though it’s important to compare a stock within its sector, as that will help show if a stock is inexpensive for a short-term reason or a long-term reason.

Track the Company’s Performance

Sometimes, there’s a good reason why a share might appear to be inexpensive when it really isn’t. If a company’s long-term revenue trends downward, that’s more likely a value trap than a solid value stock. To try and replicate the success of Buffett and Berkshire Hathaway, look for companies that, despite short-term bad news, continue to show revenue growth and long-term earnings growth.That’s a good way of finding the best value stocks right now.

Analyze Catalysts that Could Affect the Share Price

There are plenty of less obvious factors that value investors can use to help explain a company’s true value. Companies under new management could signal a turnaround effort, but it could also mean there’s a big need for a turnaround. Trends in a sector, such as supply-chain issues, inflation or a shift in demographics could mean growth or a cliff ahead.

Where to Get Value Stock Tips and Insights

To learn more about picking stocks, we recommend checking out AltIndex, a subscription service that uses artificial intelligence (AI) and alternative data. A value investing strategy is laborious and requires a lot of research.

This means that it analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data regarding a company.

The data AltIndex gathers over time is then compared to other companies while using machine learning to come up with investment insights. Stocks are given a score from of 1 to 100, simplifying the analytical process.

With more than 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive investment ideas directly to your email, as well many other useful features.

Conclusion

Value stocks come in all industries. There’s no shortcut to finding a stock that has good value, as it requires thorough research, both to understand a company’s fundamentals, but also to see which way industry trends are going.

Thorough research can help you find potential value stocks, but you also need to see if a company is on the right track and has competitive advantages that extend into the future. Also, the stocks in this category offer dividends that are safe.

Auto stocks, banking stocks and housing stocks both provide good potential for value right now because investors are still reluctant to buy their stocks due to short-term headwinds that could change rapidly.

References

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https://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/investors/rr-plc-holdings-2023-half-year-results-press-release.pdf

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https://www.allianz.com/en/investor_relations/share/dividend.html#history

https://www.cnbc.com/2023/07/27/shell-q2-earnings-2023.html

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