Every month, we ask our freelance writers to share their top ideas for value stocks to buy with investors — here’s what they said for February!
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AJ Bell
What it does: AJ Bell is one of the UK’s largest investment platforms offering administration, dealing and custody services.
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By Paul Summers. Purists might complain that investment platform AJ Bell (LSE: AJB) is anything but a value stock. After all, the shares change hands for nearly 19 times forecast earnings. That’s growth stock territory, surely?
Well, this valuation is actually far below the five-year average of 38 times earnings. That suggests to me that the Salford-based business could be a bargain, especially given its recent Q1 update.
In mid-January, the FTSE 250 member announced net inflows of £1.3bn in Q1 – up 63% year on year. Is this a sign that investors are preparing themselves for a new bull market? I think it might be.
This is not to say economic pessimism will be extinguished overnight. Interest rate cuts could arrive later than expected.
But with a strong long-term outlook thanks to our growing desire to save for retirement, I think this is a great stock to tuck away.
Paul Summers has no position in any of the shares mentioned.
Bank of Georgia Group
What it does: Bank of Georgia provides retail, corporate and investment banking services in the Eurasian country.
By Royston Wild. A combination of low product penetration and rapid economic growth in its faraway territory gives Bank of Georgia Group (LSE:BGEO) excellent growth potential. It’s an exciting blend that I don’t think is baked into the share’s current valuation.
For 2024 the emerging market bank trades on a price-to-earnings (P/E) ratio of 4.2 times. To reinforce its appeal as a top value stock, the FTSE 250 firm also carries a huge 9.1% forward dividend yield, too.
Bank of Georgia’s share price has rocketed almost 150% during the past 12 months. I think the release of full-year financials on 16 February could fuel fresh gains.
Between January and September, the bank’s operating income and adjusted pre-tax profit leapt 32% and 30% respectively. This was driven by further steady growth in its loan book.
While Georgia’s economic growth is tipped to cool in 2024 – the IMF predicts lower expansion of 4.7% this year – such a number is not to be sniffed at. And it should still allow Bank of Georgia to continue delivering impressive trading numbers.
Royston Wild does not own shares in Bank of Georgia Group.
International Consolidated Airlines Group
What it does: IAG is a major global airline group that owns British Airways, Iberia, Aer Lingus, Vueling, and LEVEL.
By Charlie Carman. The International Consolidated Airlines Group (LSE: IAG) share price remains grounded well below its pre-Covid highs, but it may only be a matter of time before the aviation stock takes off.
IAG’s trajectory looks promising. FY 2023 capacity is expected to be around 96% of pre-pandemic levels. Moreover, the company delivered record operating profit in the third quarter, rising 39% to nearly €1.75bn.
Encouragingly, demand could strengthen further in 2024. The International Air Transport Association (IATA) predicts 4.7bn passengers will take to the skies this year — a historic high.
However, key risks remain. The balance sheet remains a concern, despite a 28% net debt reduction over the past year. In addition, rising jet fuel costs could begin to erode the group’s margins.
Nonetheless, IAG shares look attractive to me from a value investment perspective. A forward P/E ratio under 4.5 compares favourably to industry competitors and the wider FTSE 100 index.
Charlie Carman does not own shares in International Consolidated Airlines Group.
Safestore
What it does: Safestore is the largest self-storage unit provider in the UK.
By Charlie Keough. My top value stock for February is Safestore (LSE: SAFE). With a price-to-earnings ratio of nine, I think the stock looks cheap. That puts it comfortably below the FTSE 250 average.
To add to that, what I most like about Safestore is its ambitions for the times ahead. The firm dominates the UK market. As such, it’s now turned its attention to international ventures. Last year it added 500,000 square feet of lettable area to its portfolio. This included in nations such as Spain and Germany. Since 2016, its added 4.8m square foot to its footprint.
That said, the stock took a hit following the release of its latest update. Profit before tax more than halved. That’s a slight concern. Higher interest rates don’t bode well for it paying off its debt, either.
However, as interest rates hopefully begin to fall this year, this will provide the Safestore share price with a boost. With a dividend yield of 3.6%, it also offers us income investors the opportunity to generate some extra cash.
Charlie Keough owns shares in Safestore.
