Three Large Cap Value Stocks Set to Soar in 2024

Investors are keenly eyeing opportunities to bolster their portfolios with robust, high-performing stocks. Large cap value stocks, known for their stability and potential for growth, are particularly attractive in the current market climate.

1. Lower Valuations and Potential for Price Appreciation

Value stocks trade at lower valuations relative to their fundamentals like earnings, cash flows, and book value. This perceived undervaluation presents an opportunity for price appreciation if the market eventually recognizes the stock's intrinsic worth. Value investors aim to buy these stocks at a discount and profit when their prices rise to reflect their true value.

2. Defensive Characteristics

Value stocks are often seen as having lower volatility and more defensive characteristics than growth stocks. Their steady cash flows, lower debt levels, and reasonable valuations may help them weather economic downturns better. This can provide portfolio diversification benefits when combined with growth stocks.

3. Broadening Market Participation

As markets broaden beyond the narrow leadership of a few mega-cap growth stocks, value stocks across sectors like financials, energy, and industrials may benefit from increased investor interest and capital flows. This rotation into undervalued areas of the market can drive value stock performance.

These industry leaders are trading below their intrinsic value, offering a unique opportunity for investors to secure substantial returns as the market begins to recognize their true worth. In this article, we explore why these stocks are set to soar and why they deserve a spot in your investment strategy for 2024.

Berkshire Hathaway (BRK.B.NY)

Berkshire Hathaway is a conglomerate holding company led by legendary investor Warren Buffett. It is considered a large-cap value stock due to its diversified business model, strong financials, and relatively low valuation compared to growth stocks

Berkshire Hathaway's stock has consistently outperformed the broader market over the long run, driven by the company's ability to compound capital at high rates through disciplined acquisitions and investments. Despite its massive size, the company is still viewed by some as undervalued relative to its intrinsic value, given the quality of its businesses and investment portfolio.

• In recent years, the company has shown a steady increase in sales revenue, reaching $59,871 million in 2023, up from $58,473 million in 2022 and $48,907 million in 2021.

• Despite a significant dip in 2020, sales growth has recovered, with notable increases of 19.56% in 2022 and 17.74% in 2021. Gross income has also risen consistently, hitting $43,894 million in 2023.

• Meanwhile, spending on research and development (R&D) has surged, reaching $30,530 million in 2023, up from $11,818 million in 2022 and $10,207 million in 2021, indicating a strong focus on innovation.

• Overall, the company's financial performance reflects robust growth and strategic investments in R&D.

JPMorgan Chase & Co (JPM.NY)

JPMorgan Chase & Co. (JPM) is a leading global financial services firm and one of the largest banking institutions in the United States with operations spanning investment banking, consumer banking, commercial banking, asset management, and private equity.

The bank's outlook is influenced by factors like interest rate movements, economic growth, and regulatory changes. However, its diversified business model, strong capital position, and focus on risk management position it well for long-term growth and profitability in the financial services industry.

• Stock trades at a forward P/E ratio of around 11.9x as of May 2024, which is lower than some peers but higher than the overall banking industry average

• Tier 1 capital ratio of 16.6%, indicating strong capitalization

• Bank’s financial performance has shown significant fluctuations. Interest income rose sharply to $170,588 million in 2023 from $92,807 million in 2022, reflecting an 83.81% growth.

• Despite a substantial increase in total interest expense, which grew by 211.61% to $81,321 million in 2023, net interest income also increased.

• Loan loss provisions saw a notable rise of 45.88% in 2023. Non-interest income grew steadily, reaching $68,731 million in 2023.

• Operating income experienced robust growth, increasing by 33.56% in 2023, while pretax income grew by 33.46% in the same year. Consolidated net income was $49,261 million in 2023, with EPS (basic) growing by 34.30% to $16.23.

UnitedHealth Group Incorporated (UNH.NY)

UnitedHealth Group is a diversified healthcare company that provides health insurance plans and healthcare services. It is considered a top large-cap value pick due to its strong market position, consistent profitability, and reasonable valuation relative to its growth prospects.

UnitedHealth Group's massive scale and market share in the managed care industry give it a significant competitive advantage over rivals, their diversified revenue streams across commercial, government, and healthcare services businesses provide a competitive edge and stability.

UnitedHealth Group's ability to offer competitive pricing and supplemental benefits for its Medicare Advantage plans contributes to its competitive strength in this growing market segment

• Trading at a forward P/E ratio of around 22x, which is reasonable given its growth prospects and profitability

• For the fiscal year ending December 2023, the company recorded sales of $371,622 million, a 14.64% increase from 2022. Premiums earned were $290,827 million, and other operating income reached $80,795 million.

• Total losses, benefits, and adjustments were $241,894 million, maintaining a loss ratio of 83.17%.

• Operating income before interest expense was $32,358 million, with a net interest expense of $3,246 million

• The company reported a net income of $22,381 million, with basic EPS increasing by 12.32% to $23.86.

Hope you have found the above stocks useful 😃 

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Sources:
1. Wall Street is warming to value stocks. Here’s why investors should consider them. Available at: https://www.marketwatch.com/story/wall-street-is-warming-to-value-stocks-heres-why-investors-should-consider-them-da7c45e6
2. Value Stocks: How To Invest In Undervalued Companies. Available at: https://www.forbes.com/advisor/investing/what-are-value-stocks/
3. Why Now Is the Time for Value Investing. Available at: https://www.morningstar.com/stocks/why-now-is-time-value-investing-2
4. 16 Best Large-Cap Value Stocks To Invest In in 2024. Available at: https://finance.yahoo.com/news/16-best-large-cap-value-154246429.html
5. Berkshire – Past, Present and Future. Available at: https://www.berkshirehathaway.com/SpecialLetters/WEB%20past%20present%20future%202014.pdf
6. BRK.B Income statement. Available at: https://www.wsj.com/market-data/quotes/MRK/financials/annual/income-statement
7. Overview of JPMorgan Chase and Co, Available at: https://www.jpmorganchase.com/
8. JPMorgan Relative Valuation Available at:https://valueinvesting.io/JPM/valuation/pe-multiples
9. Overview of UnitedHealth Group: https://www.unitedhealthgroup.com/.