Stocks to buy

Top 7 Value Stocks to Outperform Growth in 2024

2024 could easily turn into the year that value stocks come out on top. Though “official” numbers say differently, there’s a clear sense of unease as tech-heavy indices soar to all-time highs despite wide-ranging layoffs pointing to troubled economic conditions. To be fair, the best growth companies adapted to higher interest rates and right-sized operations to enter 2024 stronger than before.

But value stocks remain overlooked despite being the perfect asset for a questionable recovery.

Broadly speaking, value stocks are mature companies with demonstrated markets, quality products, consistent profitability, and quality cash flow. They usually offer a dividend, as well. Over the past few years, those companies had their spotlight stolen by high-flying growth stocks, leaving many materially undervalued, including:

AT&T (T)

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AT&T (NYSE:T) is among the top growth-oriented value stocks as it expands its vision for an interconnected world. Critically, the company is a major backer of AST SpaceMobile’s (NASDAQ:ASTS) satellite-based cell service venture that should see a commercial launch in 2024. But that isn’t the only tailwind supporting AT&T’s ascent in 2024.

Today, the company posted its Q4 earnings report. While earnings fell below expectations, the report did shed light on solid growth. For example, wireless service revenue climbed nearly 4% year over year, indicating the company successfully navigated tight economic conditions to keep subscriber counts high while accounting for necessary price improvements. That’s evident from AT&T’s higher-than-expected postpaid phone net adds, which describes how many “new” customers signed up for an AT&T plan. The quarterly stat hit 526,000 compared to 487,500 as anticipated. This figure is especially notable since the market is (thus far) fairly well saturated.

Home Depot (HD)

Source: shutterstock.com/Roman Bodnarchuk

Renewed real estate optimism is setting Home Depot (NYSE:HD) up for a strong 2024.

Moving forward, Home Depot plans to construct 80 new stores over the next five years. This expansion reflects management’s expectation of increasing demand throughout the 2020s and positions the company to capitalize on the anticipated surge in renovations and new constructions.

Home Depot’s commitment to dividend growth is evident, with a consistent increase in its annual dividend over the past decade and a 50% higher distribution rate than five years ago. A payout ratio of 0.52 shows a balanced approach: rewarding shareholders while maintaining enough cash for business growth. A tad undervalued, Home Depot is one of the most stable value stocks available today.

Nintendo (NTDOY, NTDOF)

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A global gaming stock might not seem like a contender for top value stock status, but Nintendo (OTCMKTS:NTDOY, OTCMKTS:NTDOF) is truly unique. 2023 saw a slew of bullish Nintendo news that, if the trend continues, could create conditions for the stock’s stratospheric rise in 2024.

Nintendo’s big news came on the heels of the Super Mario Bros Movie success, which grossed $1.36 billion and highlighted what some of us have been saying is Nintendo’s biggest strength – its largely untapped intellectual property catalog. That forecast bore fruit as the company announced an imminent Zelda movie on the heels of its prior success, creating an effective flywheel to monetize existing properties and drive new interests toward old products.

Further adding to Nintendo’s appeal are leaked emails from a Microsoft (NASDAQ:MSFT) court case, revealing Microsoft’s substantial interest in either partnering with or acquiring Nintendo. These emails, dating back to 2020, may not have led to any tangible developments, but they underscore the significant corporate interest in Nintendo. This interest places Nintendo in a strong position to leverage its brand and assets for significant growth in 2024.

Nintendo also exhibits exceptional financial management, critical for any value stock consideration. Commended in the Microsoft emails for its sound management, the company boasts a significant cash reserve, ensuring its ability to weather economic uncertainties and seize emerging opportunities. With a current total yield of 2.57%, Nintendo is particularly attractive to value investors, offering a stable return while they await the stock’s imminent repricing.

Medtronic (MDT)

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Medtronic (NYSE:MDT), a leading medical device manufacturer and blue-chip healthcare stock, stands out as an excellent choice for value investors interested in healthcare. Despite a relatively flat performance for most of 2023, the stock popped in 2024 and returned 2.75% since the year began. Looking forward, the company’s prospects far surpass its current modest performance, presenting an attractive entry point for investors.

The latest earnings report from Medtronic reveals a solid growth trajectory post-pandemic, a contrast to many healthcare stocks, with a staggering 112%% increase in GAAP earnings year-over-year. The company’s commitment to innovation, coupled with its deep value characteristics, indicates significant potential for upside.

A key aspect of Medtronic’s future growth lies in its foray into artificial intelligence in healthcare. The early 2023 collaboration with Nvidia (NASDAQ:NVDA) to develop AI-driven platform solutions should see widespread market adoption by 2024. This development is promising for investors who have remained patient through the stock’s recent period of stagnation.

Additionally, Medtronic’s current dividend yield of 3.2% further cements its position as an attractive value stock. It offers a blend of stability and potential for growth, making it a compelling investment for 2024.

Sturm Ruger (RGR)

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Gun sales tend to surge in election years. Sturm Ruger (NYSE:RGR) is a value stock ready to capitalize on the trend. Trading at a meager 13x earnings, 2x book value, and 1.4x sales, this small-cap value stock is set for a solid run in 2024.

The company struggled in 2023 because, in the words of CEO Christopher Kilroy, “Our third quarter sales and profitability decreased from last year, as overall firearms demand declined, creating a challenging, promotion-rich marketplace.”

But gun sales hit an all-time high in 2020 amid the election, more than doubling the rate in 2012 during President Obama’s second run. Good, bad, or indifferent – political motivations shouldn’t sway investor opinion. However, when it comes to making money, RGR is poised to pop as we enter yet another contentious election season.

H&R Block (HRB)

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As tax season approaches, H&R Block (NYSE:HRB) emerges as another value stock poised for growth. Last year, the company faced uncertainties due to rumors about the IRS potentially launching a free national tax filing service. However, HRB has since made a remarkable recovery and is now strategically positioned to dominate the tax return sector and explore additional revenue streams.

HRB launched a mobile banking service at the year’s start to counteract the seasonal nature of its tax-related revenue. By April 2023, this initiative had garnered substantial customer interest, with 291,000 users and over $280 million in deposits. Additionally, HRB’s small-business accounting service saw a 10% increase in year-over-year revenue. These strategic diversifications indicate a strong commitment to stabilizing cash flow, a typical challenge for tax-centric companies aiming for a more consistent revenue stream year-round.

General Motors (GM)

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General Motors (NYSE:GM) skillfully navigated 2023’s labor disputes while maintaining profitability, making it among the best value stocks when it comes to car companies. Though the labor deal will likely exceed $9 billion, GM also announced a $10 billion stock buyback and a 33% increase in its dividend in its end-of-year earnings announcement. This strategy elevates GM’s total yield to $5.34, an impressive figure, especially considering that its shares have fallen nearly 10% in the past six months. This decline positions GM as an underpriced value stock with unlimited upside.

The long-term outlook for GM is optimistic, particularly in the electric vehicle (EV) sector. The company has reported a 33% YoY increase in EV sales. With six EV models currently available and more in development, GM is steadily establishing itself as a significant contender in the EV market, despite still lagging behind Tesla (NASDAQ:TSLA).

The broad automotive sector does seem a bit rocky, still, and EV popularity is on a downswing. Despite these uncertainties, this undervalued car company emerges as a top choice among 2024’s value stocks and one of the best within the EV sector (besides, of course, Musk’s crown jewel).

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.

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