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

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

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »

Investing Articles

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »