With the market looking very bullish to end the year, many investors may opt for growth over value. Artificial intelligence and potentially lower interest rates at some point in 2024 are certainly good reasons to consider growth stocks. But if you have a lower risk tolerance there’s still an argument to be made for value stocks.
Value stocks are predictably profitable companies. You’ll generally find these stocks in the large-cap sector. That’s why value stocks, particularly those paying dividends, were a safe place to hang out in 2023. However, despite investors feeling more bullish, there’s still room for many value stocks to run in 2024.
This is the time to look for stocks that can get your portfolio off to a strong start in 2024. I used a stock screener to identify large-cap stocks with a valuation and earnings growth that should be catalysts in 2024. Here are my picks to get your research started.
Delta Air Lines (DAL)
Inflation in some sectors continues to be sticky. But so does consumer demand for air travel. Despite going on a year of difficult comparisons, many airline stocks continue to see nothing but blue skies. One option for value investors to consider is Delta Air Lines (NYSE:DAL).
The tailwind for the industry comes, in part, from lower oil prices. When oil prices are down, the cost of jet fuel goes down and airline earnings go up. Oil prices will continue to be under pressure until the Federal Reserve makes a decisive pivot on interest rates.
Another catalyst comes from an International Air Transport Association survey showing demand for air travel will climb in 2024. Some 4.7 billion passengers are expected to travel by air. That’s above the 4.5 billion that flew in 2019. As Delta CEO Ed Bastian explained in an interview with CNBC, concerns about business travel may need to be rethought as the line between business and leisure remains blurred.
Delta wouldn’t have been considered a value stock early in 2023. However, the company has reinstated its dividend at 10 cents a share. DAL stock also offers investors good value trading at just 6.7x forward earnings. Analysts are forecasting 8% earnings growth and a 30% rise in the DAL stock price.
American Electric Power (AEP)
There have been a lot of trends that have not followed a predictable script in the last few years. That was the case with utility stocks in 2023. Usually, utilities like American Electric Power (NASDAQ:AEP) do well in a risk-off environment. But when a risk-off market collides with Treasury notes offering fixed-income investors a 5% yield, even high-yield dividend stocks can find it tough to compete.
American Electric Power is down 13% in 2023. However, it’s up about 7% in the 30 days ending December 19. Analysts are forecasting earnings growth of 6.1% in the next 12 months, with about a 6% gain in the AEP stock price.
That may not make AEP stock a home run, but with utility stocks, solid singles will do just fine. AEP stock comes with a dividend that has been growing for the last 14 years and currently has a 4.37% dividend yield.
Halliburton (HAL)
Oil and gas stocks are typically good value stocks. However, in 2023, the expected rise in oil prices stalled around $80 a barrel. But it looks like a new floor may be in. And with U.S. shale producers beginning to boost U.S. production to offset OPEC cuts, particularly in the Permian Basin, the time may be right to look at Halliburton (NYSE:HAL).
Halliburton provides equipment to oil and gas companies. The company has a long history of successful fracking in the Permian Basin. Since 2020, the company lowered its capex spending through digital and automation services.
Despite higher revenue and earnings year-over-year, HAL stock is down 2% in 2023. But analysts are forecasting a 12% increase in earnings over the next 12 months. That growth is likely to support a dividend increase in Q1, along with a 32% increase in the company’s stock price over the next 12 to 18 months.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
