The stock market has enjoyed an impressive rally so far in 2024. The S&P 500 index has risen 14.5%, and the even more technology-heavy Nasdaq Composite has risen 18% across the stretch. Thanks to encouraging earnings results and excitement surrounding artificial intelligence (AI) and other trends, high-profile stocks including Apple, Nvidia, and Amazon have rocketed to new valuation highs.
Some of the market’s hottest stocks could continue to march even higher, but it would be a mistake to overlook opportunities in companies that still trade far below their previous valuation peaks. If you’re on the hunt for investments that offer attractive valuations and strong long-term prospects, read on to see why two Fool.com contributors identified Altria Group (NYSE: MO) and Walt Disney (NYSE: DIS) as top stocks to buy right now.
Altria is a strong defensive stock with a great dividend profile
Keith Noonan: Altria stock has risen roughly 13% year to date, but the company’s share price is still down roughly 41% from its peak. Even though the tobacco giant continues to lead the U.S. market with its Marlboro brand, it’s facing some secular headwinds. Customers continue to move away from cigarettes, and this trend appears likely to continue.
The company’s revenue and non-GAAP (generally accepted accounting principles) adjusted earnings each fell roughly 2.5% due to declining unit sales in the smokable tobacco category. Total cigarettes sold in the period declined roughly 10% year over year. On the other hand, management reaffirmed its guidance for annual adjusted earnings per share to increase between 2% and 4.5%.
Thanks to pricing increases and stock buybacks, Altria has actually managed to increase its earnings per share by roughly 26% over the last five years. While the company faces long-term headwinds due to declining unit volumes, the stock is still attractively valued.
Altria trades at under 9 times this year’s expected profits and pays a dividend yielding 8.6% based on the company’s current share price. What’s more, there’s a very good chance that investors who buy the stock today won’t have to wait long to enjoy an even bigger yield.
Last August, Altria raised its dividend by roughly 4.3%. The payout hike marked the 58th dividend increase implemented by the company within the last 54 years.
The tobacco giant undoubtedly faces challenging trends in the cigarette market, but it’s continuing to invest and build in 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 appealing defensive stock that also offers compelling capital appreciation potential.
Investors are getting excited about Disney again
Jennifer Saibil: Disney is still the company to beat in entertainment, with a robust slate of films, unparalleled global theme parks, an unmatched content library, and plenty of other gold-star assets. It took in $89 billion in trailing-12-month revenue over the last three years, putting it at No. 47 in the Fortune rankings of largest companies in the U.S. That’s a 40% increase over the past three years. So why is its stock down 51% from its highs?
Mostly lots of volatility. Disney has made a stunning comeback from pandemic lows, but its different segments have been all over the place since then.
Parks were closed and sales were nonexistent, but that’s changed now, and parks are back to strong momentum. Parks revenue increased 10% year over year in the 2024 fiscal second quarter (ended March 30). That’s been the trend historically, and barring another global pandemic or other upheaval, it should continue.
Streaming has skyrocketed over the past few years and now makes up more than half of the entertainment segment revenue, as well as a quarter of total company revenue. That comes from a mix of subscription and ad revenue. Streaming profitability without ESPN+ became profitable for the first time in the second quarter, and management is guiding for full profits by the end of the fiscal year. That should bring a big boost to the stock.
The other parts of Disney’s content business, including linear networks and box office films, are still struggling. Viewers continue to cord-cut, or switch from cable TV to streaming, hurting cable revenue, and they’re also moving away from traditional broadcast TV, hurting its ad business.
Having Bob Iger back in the hot seat as CEO has relieved shareholders and brought the company some stability. Investors have a lot of confidence in Iger, who led the company for 15 years through an incredible growth phase before walking away from the CEO role in 2020. He returned for what’s meant to be an interim role as the company clarifies its direction, but his tenure has already been rendered through 2026. Disney has focused on generating profitability from Disney+, bringing magic back to the parks, and giving more freedom to the creatives that make the whole system work.
Disney stock is climbing this year, up 13% as investors are cautiously building enthusiasm. Long term, it should get back to beating a market-beating winner.
Should you invest $1,000 in Altria Group right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Jennifer Saibil has positions in 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 Right Now was originally published by The Motley Fool
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