3 value stocks I’d consider buying before markets jump in 2024

An abundance of bearishness means now could be a great time to go hunting for value stocks. Here are three that catch our writer’s eye.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

No one truly knows where markets are going in the near term. However, I’m increasingly hopeful that we’ll see a stellar recovery in 2024 as interest rates potentially moderate and economic sentiment improves. That’s why I’m on the hunt for value stocks to buy in the last quarter of 2023.

Beaten, not broken

One example that catches my eye is FTSE 100 medical tech company Smith & Nephew (LSE: SN).

Now, it’s fair to say that investors have been avoiding this stock for a while and I can see why. Huge backlogs on elective surgery thanks to the pandemic have seriously impacted earnings.

More recently, the market seems to be concerned by the arrival of new weight loss drugs and how these might reduce the need for its products. This helps to explain why the share price has now resumed its downward trajectory despite a brief rally in the first half of 2023.

However, a price-to-earnings (P/E) ratio of 12 just feels a bit low considering many countries have ageing populations. Moreover, Smith & Nephew’s portfolio encompasses orthopaedics, sports medicine, ENT and advanced wound management. This is no one-trick pony.

So, while it may take a while longer for the bulls to return, I do think a strong recovery is on the cards.

While never guaranteed, the 3.5% forecast dividend yield is decent compensation in the meantime.

Cheap income steam

As I type, shares in the FTSE 250 member Investec (LSE: INVP) are down 12% in 2023. That feels a bit harsh considering its most recent trading statement.

For the six months ending 30 September 2023, the dual-listed bank expects adjusted operating profit of between £428.7m and £449.6m. That would be a decent rise on the £405m generated in the same period in 2022 and “driven by continued client acquisition, positive effects from higher global interest rates and year-on-year growth in average lending books“.

I think this makes the valuation — at a little less than seven times forecast earnings — look pretty compelling. The case is further boosted by a monster 7% yield that’s set to be safely covered by profit.

Naturally, it pays to remain cautious. South Africa — where the company was founded — isn’t the most politically stable of countries and corruption is rife.

Accordingly, I’d make sure I was already sufficiently diversified away from the financial sector if I were to buy Investec shares today.

Solid foundations

A final value stock I like is one I’ve actually been accumulating throughout 2023: housebuilder Persimmon (LSE: PSN).

Since precise timing in investing is impossible, I’m not surprised that my position is currently underwater. However, I’m staying put for several reasons.

First, we already know that higher interest rates have reduced demand and house prices have fallen. I reckon at least some of this is factored into Persimmon’s price-to-book value of just over one.

Second, the sector is in far better financial shape than it was during the property crash of 2007. This gives me confidence most members will ride out the storm without issue.

Third, the company continues to pay dividends (albeit reduced). A forecast 5.5% yield is more than I’d get from a FTSE 100 tracker.

The question of whether to add to ‘losing’ positions will always divide investors but I’d be willing to top up my holding here.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in Persimmon Plc. The Motley Fool UK has recommended Smith & Nephew Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

UK stocks are 52% discounted, says Goldman Sachs

With UK stocks staggeringly cheap right now, this Fool took the chance to add one unloved FTSE 100 share to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 107% in 2024, can this FTSE 250 star keep soaring?

Christopher Ruane looks at a FTSE 250 share that has more than doubled in price so far in 2024 and…

Read more »

Investing Articles

Could 2025 be a great year for the stock market?

2024 has been a record-breaking year in the stock market on both sides of the pond. Our writer explains the…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

An investor buying £10,000 of IAG shares at the start of 2024 would now have this much!

Anyone who had the courage to buy IAG shares at the beginning of the year will be sitting pretty right…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Might Netflix snap up this household name from the FTSE 250?

The ITV share price has been rising over the past few weeks due to takeover speculation. Should I buy this…

Read more »

Growth Shares

2 value shares with notably low P/B ratios

Jon Smith points out some potential value shares that have price-to-book (P/B) ratios below one at the moment.

Read more »

Investing Articles

Top FTSE 100 shares poised to benefit from artificial intelligence in 2025

While US investors are tripping over themselves to grab the latest AI stocks, our writer looks for opportunities closer to…

Read more »

US Stock

This S&P 500 stock could rise 57% in 2025, according to Goldman Sachs

Shares in this well-known S&P 500 tech company can currently be snapped up for $61. Analysts at Goldman Sachs reckon…

Read more »