The stock market has seen an impressive run so far in 2024. S&P 500 The index rose 14.5%, with the index even more tech-focused Nasdaq Composite Index rose 18% over the period. Thanks to encouraging financial results and enthusiasm for artificial intelligence (AI) and other trends, leading stocks including Apple, NvidiaAnd Amazon have reached new valuation heights.
Some of the market’s hottest stocks may continue to climb, but it would be a mistake to overlook the opportunities presented by companies that are still trading well below their previous valuation peaks. If you’re looking for investments with attractive valuations and strong long-term prospects, read on to find out why two Fool.com contributors have identified Altria Group (NYSE: MO) And Walt Disney (NYSE: DIS) as the best stocks to buy right now.
Altria is a solid defensive stock with an excellent dividend profile
Keith Noonan: Altria shares are up about 13% year-to-date, but the company’s stock price is still down about 41% from its peak. While the tobacco giant continues to dominate the U.S. market with its Marlboro brand, it faces secular headwinds. Customers continue to turn away from cigarettes, and that trend appears set to continue.
The company’s turnover and non-GAAP (generally accepted accounting principles) adjusted earnings fell approximately 2.5% each due to lower unit sales in the smoking tobacco category. Total cigarettes sold during the period decreased approximately 10% from the prior year. On the other hand, management reaffirmed its guidance for annual adjusted earnings per share growth of between 2% and 4.5%.
Through price increases and share buybacks, Altria has managed to increase its earnings per share by about 26% over the past five years. Although the company faces long-term challenges due to declining unit volumes, the stock’s valuation remains attractive.
Altria trades at less than 9 times expected earnings this year and pays a dividend yield of 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 bigger yield.
Last August, Altria increased its dividend by approximately 4.3%. This dividend increase marked the 58th dividend increase implemented by the company in the last 54 years.
The tobacco giant is undoubtedly facing challenging trends in the cigarette market, but it continues to invest and grow in smoke-free categories, and its dividend payments should remain safely covered for the foreseeable future. With a solid earnings base despite demand headwinds and a large and sustainable dividend, Altria is an attractive defensive stock that also offers compelling capital appreciation potential.
Investors are taking a renewed interest in Disney
Jennifer Saibil: Disney remains the company to beat in entertainment, with a robust film slate, unrivaled global theme parks, an unmatched content library and many other top-tier assets. It has raked in $89 billion in trailing-year revenue over the past three years, ranking 47th. Fortune Ranking of the largest US companies That’s a 40% increase over the past three years. So why is its stock down 51% from its peak?
Volatility is typically high. Disney made a spectacular comeback from the pandemic lows, but its various segments have been in turmoil since then.
The parks were closed and sales were non-existent, but that has changed and the parks have regained strong momentum. Park revenues increased 10% year over year in the second quarter of fiscal 2024 (ended March 30). This is the historical trend and, barring another global pandemic or other disruption, it is expected to continue.
Streaming has seen strong growth in recent years and now accounts for more than half of the entertainment sector’s revenue, as well as a quarter of the company’s total revenue. This comes from a mix of subscription and advertising revenue. Streaming profitability without ESPN+ turned profitable for the first time in the second quarter, and management is forecasting full profits by the end of the fiscal year. This should give the stock a boost.
Other segments of Disney’s content business, including linear channels and blockbuster movies, are still struggling. Viewers continue to unsubscribe from cable or switch from cable TV to streaming, hurting cable revenue, and they’re also moving away from traditional TV, hurting Disney’s advertising business.
Bob Iger’s return as CEO has brought relief to shareholders and some stability to the company. Investors have a lot of faith in Bob Iger, who led the company for 15 years through an incredible growth phase before stepping down as CEO in 2020. He returned for what was supposed to be an interim role while the company clarifies its direction, but his term has already been extended to 2026. Disney has been focused on generating profitability from Disney+, bringing back the magic to the parks and giving more freedom to the creatives who make the whole system work.
Disney stock is up 13% this year as investors cautiously drum up excitement. Over the long term, it should once again beat a market champion.
Should You Invest $1,000 in Altria Group Right Now?
Before you buy Altria Group stock, consider the following:
THE Motley Fool, Securities Advisor The team of analysts has just identified what they believe to be the 10 best stocks Investors need to buy now…and Altria Group isn’t one of them. These 10 stocks could deliver monstrous returns in the years to come.
Consider when Nvidia I made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $751,670!*
Securities Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building advice, regular analyst updates and two new stock picks each month. Securities Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns 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 at Walt Disney. Keith Noonan has positions in Walt Disney. The Motley Fool has positions in and recommends Amazon, Apple, Nvidia, and Walt Disney. The Motley Fool has a disclosure policy.
A Bull Market Is Here: 2 Brilliant Stocks Down 41% and 51% to Buy Now was originally published by The Motley Fool
