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 November!
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What it does: Aviva provides a range of insurance products, as well as savings and investment services.
By Alan Oscroft. One key measure of a value stock is a low price-to-earnings (P/E) ratio. But Aviva‘s (LSE:AV.) isn’t so low now, with forecasts putting it above 13 for 2023. If anything, I’d say that’s high for an insurer.
But those forecasts show strong earnings growth in the next two years. And that could mean the Aviva P/E falling to around 8.5 by 2025.
My other measure of value is a good dividend yield. The City expects Aviva to deliver 8% this year. And it’s down to continue growing too.
What could go wrong?
Financial uncertainty is huge now, and I could see it going on for a good while yet.
If inflation and interest rates stay high for too much longer, I fear those upbeat forecasts could prove to be a bit optimistic.
But, that combination of falling P/E, with a high and rising dividend yield makes, me see long-term value here.
Alan Oscroft has positions in Aviva shares
British American Tobacco
What it does: BAT is one of the world’s largest tobacco companies, with a growing range of alternative nicotine products.
By Charlie Carman. On the face of it, there are reasons to ignore British American Tobacco (LSE:BATS) shares. A new UK smoking ban and falling cigarette consumption worldwide point to a gloomy future for the tobacco industry.
Nonetheless, it remains a lucrative, high-margin sector for now. Moreover, with a price-to-earnings (P/E) ratio of just 6.5 and a dividend yield approaching 9.4%, there’s plenty to compensate potential investors for the risks that come with owning BAT stock.
Additional investment in the company’s ‘New Category’ vapour and oral nicotine products will be critical for future growth in the face of a shrinking combustibles market. Although it is yet to turn a profit, the division now accounts for 16% of the group’s revenue. This figure is expected to rise further.
Overall, the valuation looks attractive to me in light of the consensus City forecast for solid revenue and earnings per share growth over the coming years.
Charlie Carman owns shares in British American Tobacco.
JD Sports Fashion
What it does: JD Sports Fashion plc is a multichannel retailer of sports fashion and outdoor footwear and apparel
By Paul Summers: Rather than scour the market for the cheapest stocks at face value, my strategy is to look for strong companies that appear bargains relative to what price investors have been willing to pay for them in the past.
This is why my pick is retailer JD Sports Fashion (LSE: JD.). As things stand, I can snap up a stake for 10 times earnings – half its average valuation over the last five years.
After a stellar start to 2023, shares have fallen back sharply in recent months. That’s despite the company stating in September that it would not be altering its guidance on full-year profit due to robust demand. Considering the ongoing cost-of-living crisis, that’s no mean feat.
Should inflation resume its fall in the last quarter and fears of further rate hikes reduce, I think JD shares could bounce significantly.
Paul Summers does not own shares in JD Sports Fashion
NextEnergy Solar Fund Limited
What it does: NextEnergy Solar Fund Limited owns around 100 solar and battery storage assets across the globe.
By Royston Wild. Shares in NextEnergy Solar Fund Limited (LSE:NESF) have sunk by more than a quarter during the past 12 months. They have plummeted as rising interest rates have pulled net asset values (NAVs) lower.
I think this represents an attractive dip buying opportunity. At 78p per share, the renewable energy stock trades on a forward price-to-earnings (P/E) ratio of 8.6 times. Its dividend yield for the current financial year (to March 2024) meanwhile sits at an enormous 10.6%.
I’m also expecting NextEnergy’s upcoming quarterly update in November to show that the firm still changes hands at a considerable discount to the value of its assets. Its NAV per share stood at 109.3p as of June.
I believe the company’s share price could surge from current levels as demand for greener forms of electricity steadily increase. I also like the value stock because its wide geographic footprint spanning Europe, North America and Asia helps to reduce risk.
Royston Wild does not own shares in NextEnergy Solar Fund Limited.