Macroeconomic volatility is rarely good news. However, I reckon it’s thrown up the opportunity for savvy investors to buy quality value stocks.
Two stocks I think investors should be seriously considering are SSE (LSE: SSE) and JD Sports Fashion (LSE: JD). Here’s why!
SSE
SSE is one of the largest gas and electricity providers in the UK. In my opinion, this offers it a certain amount of defensive ability, as everyone needs energy.
Over a 12-month period, the shares are up just under 1% from 1,718p at this time last year, to current levels of 1,732p. More tellingly, they’ve increased 14% from 1,508p in October to current levels. Positive sentiment and slowing economic turbulence has helped, in my eyes.
Along with SSE’s current defensive ability, I’m excited about its growth potential, especially related to green energy. As the world is working hard to move away from fossil fuels, SSE is very much invested in contributing to this through wind farms and other renewable energy projects. In fact, the business has promised to triple its green output by 2031.
Moving on, SSE shares look good value for money on a forward price-to-earnings ratio of 11 for 2024 and potentially even more attractive in 2025 with a ratio of 10. In addition to this, a dividend yield of 4.9% is enticing. However, it’s worth remembering that dividends are never guaranteed.
From a bearish view, SSE’s large debt levels could be an issue for performance, growth, and returns. Debt is much costlier to pay down when interest rates are high, like now.
JD Sports Fashion
The sports and street wear retailer has exploded to new heights in recent years. I reckon this rise is set to continue. Personally, I own shares in JD Sports.
As I write, JD Sports shares are trading for 107p. At this time last year, they were trading for 158p, which is a 32% drop over a 12-month period.
I’m not worried about the JD share price fluctuating in recent months. In fact, this is its biggest risk, if you ask me. The current volatility has caused a cost-of-living crisis, meaning consumers have less cash for luxuries. In turn, JD has had to downgrade forecasts, which rarely strikes a positive chord when it comes to investor sentiment. Continued volatility could hurt the firm but I view this as a short-term issue.
As I’m a longer-term investor, I’m more interested in the bigger picture. The sportswear and street wear market is set to continue growing, and JD’s enviable position and footprint should help the business grow and provide excellent investor returns, in my opinion. The business is investing heavily into e-commerce and digital channels as well as boosting its store presence.
JD shares look decent value for money on a price-to-earnings ratio of 10 and offer a dividend yield of close to 1%. I’d expect returns to increase in line with the business once economic turbulence subsides. Finally, although past performance is not a guarantee of the future, I reckon if JD can grow at similar rates to the past, there could be lucrative and exciting times ahead.
