The stock market has enjoyed an impressive rally so far in 2024. S&P 500 Index The index is up 14.5% and the more technology-heavy index is up 14.5%. Nasdaq Composite Index is up 18% in the stretch. Thanks to encouraging earnings results and enthusiasm around artificial intelligence (AI) and other trends, high-profile stocks including Apple, Nvidiaand Amazon have soared to new valuation highs.
Some of the market’s most attractive stocks could continue to rise, but it would be a mistake to overlook opportunities in companies that are still trading well below their previous valuation peaks. If you’re looking for investments that offer attractive valuations and solid long-term prospects, read on to see why two Fool.com contributors identified Altria Group (NYSE: MO) and Walt Disney (NYSE: DIS) as the best stocks to buy right now.
Altria is a strong defensive stock with an excellent dividend profile.
By Keith Noonan: Altria shares are up about 13% so far this year, but the company’s share price is still about 41% below its peak. While the tobacco giant continues to lead the U.S. market with its Marlboro brand, it faces some secular headwinds. Consumers continue to move away from cigarettes, and this trend seems likely to continue.
The company’s revenue and non-GAAP adjusted earnings each fell approximately 2.5% due to lower unit sales in the smoking tobacco category. Total cigarettes sold in the period decreased approximately 10% year over year. On the other hand, management reaffirmed its guidance for annual adjusted earnings per share of an increase between 2% and 4.5%.
Thanks to price increases and share buybacks, Altria has managed to increase its earnings per share by about 26% over the past five years. While the company faces long-term headwinds due to declining unit volumes, the stock is still attractively valued.
Altria trades at less than 9 times this year’s expected earnings and pays a dividend that yields 8.6% based on the company’s current share price. Plus, there’s a good chance that investors who buy the stock today won’t have to wait long to enjoy an even higher return.
Last August, Altria raised its dividend by approximately 4.3%. This dividend increase marked the 58th dividend increase implemented by the company in the past 54 years.
The tobacco giant is certainly facing challenging trends in the cigarette market, but it continues to invest in and develop smokeless product categories, and its dividend payout should remain safely covered for the foreseeable future. With a strong earnings base despite demand headwinds and a large, sustainable dividend, Altria is an attractive defensive stock that also offers attractive capital appreciation potential.
Investors are once again excited about Disney
Jennifer Saibil: Disney remains the company to beat in the entertainment sector, with a robust slate of films, unrivaled global theme parks, an unmatched content library and many other top-notch assets. Over the past three years, it earned $89 billion in revenue over the past 12 months, putting it at #47 in the rankings. Fortune Ranking of the largest US companies That’s a 40% increase over the past three years. So why has its stock fallen 51% from its highs?
Overall, a lot of volatility. Disney has managed a surprising recovery after the pandemic lows, but its various segments have been all over the place since then.
The parks were closed and sales were non-existent, but that has now changed and the parks have regained strong momentum. Park revenues were up 10% year-over-year in the second fiscal quarter of 2024 (ending March 30). That has been the trend historically, and barring another global pandemic or other disruption, it should continue.
Streaming has exploded in recent years and now accounts for more than half of the entertainment segment’s revenue, as well as a quarter of the company’s total revenue. This comes from a combination of subscription and advertising revenue. Streaming without ESPN+ turned profitable for the first time in the second quarter, and management is forecasting full profit by the end of the fiscal year. That should give the stock a big boost.
Disney’s other content business areas, including linear networks and blockbuster movies, remain struggling. Viewers continue to abandon cable TV or move from cable to streaming, hurting cable revenue, and they are also turning away from traditional broadcast TV, hurting its advertising business.
Bob Iger’s return as CEO has relieved shareholders and brought some stability to the company. Investors have a lot of faith in Iger, who led the company for 15 years through an incredible growth phase before stepping down as CEO in 2020. He returned for what is supposed to be an interim role while the company sorts out its direction, but his tenure has already been extended through 2026. Disney has been focused on generating profitability from Disney+, bringing magic back to the parks and giving more freedom to the creatives who make the whole system work.
Disney stock is up this year, up 13%, as investors are cautiously building enthusiasm. Over the long term, it should once again be a market-beating winner.
Should You Invest $1,000 in Altria Group Right Now?
Before buying Altria Group stock, please consider the following:
He Motley Fool Stock Advisor The team of analysts has just identified what they believe to be the Top 10 Stocks for investors to buy now…and Altria Group wasn’t one of them. The 10 stocks that made the cut could deliver massive returns in the years ahead.
Consider when Nvidia I made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, You would have $751,670!*
Stock market advisor offers investors an easy-to-follow blueprint for success, including guidance on how to build a portfolio, regular analyst updates, and two new stock picks each month. Stock market advisor The service has more than quadruple the return of the S&P 500 since 2002*.
See all 10 actions »
*Stock Advisor performance as of July 2, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions with Walt Disney. Keith Noonan has positions with Walt Disney. The Motley Fool has positions with and recommends Amazon, Apple, Nvidia, and Walt Disney. The Motley Fool has a disclosure policy.
The Bull Market Is Here: Two Shining Stocks Down 41% and 51% to Buy Right Now was originally published on The Motley Fool