The stock market has been like waves of the sea in recent months. No, I haven’t lost the plot. The moves higher and then the drops lower have characterised the price action of the FTSE 100. Given the economic outlook, I think the uncertainty could continue in 2024. So here are two rock solid value stocks that I think could help an investor out.
Banking on solid ground
Barclays (LSE:BARC) is a global bank that services the retail, corporate, and institutional areas of the market. Over the past year, the share price has risen by 7%. I refer to it as a value stock because it currently has a price-to-earnings ratio of 4.98. This is below my benchmark of 10 for what I would usually tag as a fair value.
Resilient is a word that I’d use to describe the bank. It might not have the same size as HSBC or the brand loyalty as Lloyds, but it has proven it’s worth over the decades. For example, during the pandemic crash in early 2020, the share price recovered all of the losses and posted new highs by the end of Q1 2021.
Over the past year, the gains have fallen short of the FTSE 100 performance (up 11.7% versus 7%). But in an uncertain environment where even some peers (Metro Bank) are really struggling, I think the performance has been solid.
Looking ahead, high interest rates should ensure that Barclays remains profitable in 2024. This is due to the large net interest income that it makes from deposits and loans. Of course, the risk is that consumers and businesses default on loans due to the cost-of-living crisis. However, I think this is a manageable risk for the bank.
Phone home
BT Group (LSE:BT.A) is a multinational telecommunications group. The stock has fallen modestly over the past year by 2.2%. When I consider that the price-to-earnings ratio is 6.18, I’d put it in the value stock category.
The business has endured problems in recent years, as well as tougher competition in the sector. These remain risks going forward. However, I think the strong position it has in the market means that the company will be able to ride out any uncertainty in the economy over the next year.
The latest trading update from July showed good progress (44%) with the Openreach full fibre build. Adjusted revenue for the quarter was up 4% versus the same period last year, with adjusted EBITDA also up 5%.
These figures aren’t going to blow my socks off. But I’m not looking for a high growth company here. Rather, I want a value stock that has the ability to generate sustainable revenue going forward. From that angle, BT Group ticks the box.
Both stocks look like good additions for a portfolio as we head towards the end of the year.
