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5 Undervalued Stocks in the S&P 500 ETF to Buy for 2024
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After several twists and turns, the S&P 500 has hit a series of new 2023 highs lately, driven by the optimism that the Fed is done with interest rate hikes. The benchmark has registered the longest streak of weekly gains since November 2019, closing at the highest level since March 2022. The solid trend is likely to continue in 2024, with many analysts turning bullish on the benchmark.
The S&P 500 has gained more than 20% so far this year but is shy of 4% from its record high in late 2021. SPDR S&P 500 ETF Trust (SPY - Free Report) , the proxy version of the S&P 500 Index, has risen about 21% this year. Though most of the stocks in the ETF have returned handsomely, many are undervalued, as reflected in their lower P/E ratio than industry peers. The fund has good potential for the next year. The constituent stocks have a strong Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of B or better, suggesting their outperformance in the months to come.
According to Bloomberg’s latest Markets Live Pulse survey, a median of 518 respondents expects the S&P 500 to climb to 4,808 points next year, outpacing its previous closing peak of 4,797 hit in January 2022.
Fundstrat Tom Lee, who has been one of the most persistently bullish forecasters on Wall Street this year, expects that stocks will surge to a new all-time high in 2024 as the Fed shifts to a less restrictive monetary policy. He anticipates that the S&P 500 could soar to 5,200 by the end of 2024, marking a 13% increase from its current level. This optimism is partly based on the expectation that the Federal Reserve will cut interest rates next year as inflation eases. Rates, which have risen to a range of 5.25%-5.5%, could potentially drop to 3.2%-3.5% (read: What Lies Ahead of S&P 500 ETFs in 2024?).
Tom Lee said that narrowing credit spreads and a rally in high-yield bond prices suggest an ongoing liquidity rally. Despite significant withdrawals from stocks this year, cyclical stocks, bank stocks and small-cap stocks have shown an upward trend, indicating that the market is in a state of expansion, supporting the uptrend in equities.
Other Wall Street forecasters are also optimistic, with the U.S. avoiding a recession and inflation cooling. Major financial institutions like Bank of America, Deutsche Bank and Société Générale predict that the S&P 500 could hit new highs in 2024.
After the astounding surge of the “Magnificent Seven” stocks, the rally has been broadening out in recent weeks. As more underperforming members of the S&P 500 catch up, the index should continue to climb, even if the rise in the Magnificent Seven stalls out. Per a strategist at Bank of America, only about 24% of the stocks in the S&P 500 are trading within 10% of their all-time highs. This is notably lower than the historical average of 28%. This suggests that many stocks in the index may be undervalued and have the potential to rise toward their peak values.
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.3% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, healthcare and consumer discretionary accounting for a double-digit allocation each. SPDR S&P 500 ETF Trust has an AUM of $442 billion and charges 9 bps in fees per year. It trades in 73 million shares per day on average and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below we have highlighted the abovementioned five best-performing stocks in the ETF.
Best-Performing Stocks of SPY
Everest Group is a property and casualty insurer and reinsurer in all states, the District of Columbia, Puerto Rico and Guam. It underwrites property and casualty reinsurance for insurance and reinsurance companies in the United States and international markets. Everest Group saw solid earnings estimate revision of $2.54 over the past 30 days for the next year with an estimated growth rate of 11%.
Comcast is a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. It saw positive earnings estimates of a couple of cents for the next year over the past 30 days. It has an estimated earnings growth rate of 9.98%.
Comcast has a P/E ratio of 10.71 versus the industry average of 12.55. It has a Zacks Rank #2 and a VGM Score of A.
3M Company provides diversified technology services in the United States and internationally. The stock saw a solid earnings estimate revision of 7 cents over the past 30 days for the next year, with an estimated growth rate of 8.76%.
Molson Coors, previously known as Molson Coors Brewing Company, was formed by the merger of Molson Inc. and Adolph Coors Co. in February 2005. The global manufacturer and seller of beer and other beverage products has an impressive diverse portfolio of owned and partner brands. Molson Coors saw a positive earnings estimate revision of a penny over the past 30 days for the next year and has an estimated earnings growth rate of 2.59%.
Molson Coors has a P/E ratio of 11.81 versus the industry average of 17.84. It has a Zacks Rank #1 and a VGM Score of B.
DaVita is a leading provider of dialysis services to patients suffering from chronic kidney failure, also known as end-stage renal disease, in the United States. The company operates kidney dialysis centers and provides related medical services, primarily in dialysis centers and in contracted hospitals across the United States. DaVita saw a solid earnings estimate revision of 30 cents over the past 30 days for the next year and has an estimated earnings growth rate of 4.43%.
DaVita has a P/E ratio of 13.33 versus the industry average of 19.84. It sports a Zacks Rank #1 and has a VGM Score of B.
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5 Undervalued Stocks in the S&P 500 ETF to Buy for 2024
After several twists and turns, the S&P 500 has hit a series of new 2023 highs lately, driven by the optimism that the Fed is done with interest rate hikes. The benchmark has registered the longest streak of weekly gains since November 2019, closing at the highest level since March 2022. The solid trend is likely to continue in 2024, with many analysts turning bullish on the benchmark.
The S&P 500 has gained more than 20% so far this year but is shy of 4% from its record high in late 2021. SPDR S&P 500 ETF Trust (SPY - Free Report) , the proxy version of the S&P 500 Index, has risen about 21% this year. Though most of the stocks in the ETF have returned handsomely, many are undervalued, as reflected in their lower P/E ratio than industry peers. The fund has good potential for the next year. The constituent stocks have a strong Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of B or better, suggesting their outperformance in the months to come.
These include Everest Group Ltd. (EG - Free Report) , Comcast Corporation (CMCSA - Free Report) , 3M Company (MMM - Free Report) , Molson Coors Beverage Company (TAP - Free Report) and DaVita Inc. (DVA - Free Report) .
According to Bloomberg’s latest Markets Live Pulse survey, a median of 518 respondents expects the S&P 500 to climb to 4,808 points next year, outpacing its previous closing peak of 4,797 hit in January 2022.
Fundstrat Tom Lee, who has been one of the most persistently bullish forecasters on Wall Street this year, expects that stocks will surge to a new all-time high in 2024 as the Fed shifts to a less restrictive monetary policy. He anticipates that the S&P 500 could soar to 5,200 by the end of 2024, marking a 13% increase from its current level. This optimism is partly based on the expectation that the Federal Reserve will cut interest rates next year as inflation eases. Rates, which have risen to a range of 5.25%-5.5%, could potentially drop to 3.2%-3.5% (read: What Lies Ahead of S&P 500 ETFs in 2024?).
Tom Lee said that narrowing credit spreads and a rally in high-yield bond prices suggest an ongoing liquidity rally. Despite significant withdrawals from stocks this year, cyclical stocks, bank stocks and small-cap stocks have shown an upward trend, indicating that the market is in a state of expansion, supporting the uptrend in equities.
Other Wall Street forecasters are also optimistic, with the U.S. avoiding a recession and inflation cooling. Major financial institutions like Bank of America, Deutsche Bank and Société Générale predict that the S&P 500 could hit new highs in 2024.
After the astounding surge of the “Magnificent Seven” stocks, the rally has been broadening out in recent weeks. As more underperforming members of the S&P 500 catch up, the index should continue to climb, even if the rise in the Magnificent Seven stalls out. Per a strategist at Bank of America, only about 24% of the stocks in the S&P 500 are trading within 10% of their all-time highs. This is notably lower than the historical average of 28%. This suggests that many stocks in the index may be undervalued and have the potential to rise toward their peak values.
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.3% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, healthcare and consumer discretionary accounting for a double-digit allocation each. SPDR S&P 500 ETF Trust has an AUM of $442 billion and charges 9 bps in fees per year. It trades in 73 million shares per day on average and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below we have highlighted the abovementioned five best-performing stocks in the ETF.
Best-Performing Stocks of SPY
Everest Group is a property and casualty insurer and reinsurer in all states, the District of Columbia, Puerto Rico and Guam. It underwrites property and casualty reinsurance for insurance and reinsurance companies in the United States and international markets. Everest Group saw solid earnings estimate revision of $2.54 over the past 30 days for the next year with an estimated growth rate of 11%.
Everest Group has a P/E ratio of 6.92 versus the industry average of 9.56. It sports a Zacks Rank #1 and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comcast is a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. It saw positive earnings estimates of a couple of cents for the next year over the past 30 days. It has an estimated earnings growth rate of 9.98%.
Comcast has a P/E ratio of 10.71 versus the industry average of 12.55. It has a Zacks Rank #2 and a VGM Score of A.
3M Company provides diversified technology services in the United States and internationally. The stock saw a solid earnings estimate revision of 7 cents over the past 30 days for the next year, with an estimated growth rate of 8.76%.
3M Company has a P/E ratio of 11.33, against the industry average of 17.10. It has a Zacks Rank #2 and a VGM Score of B (read: S&P 500 Equal Weight ETF Sees Record Inflows in 2023).
Molson Coors, previously known as Molson Coors Brewing Company, was formed by the merger of Molson Inc. and Adolph Coors Co. in February 2005. The global manufacturer and seller of beer and other beverage products has an impressive diverse portfolio of owned and partner brands. Molson Coors saw a positive earnings estimate revision of a penny over the past 30 days for the next year and has an estimated earnings growth rate of 2.59%.
Molson Coors has a P/E ratio of 11.81 versus the industry average of 17.84. It has a Zacks Rank #1 and a VGM Score of B.
DaVita is a leading provider of dialysis services to patients suffering from chronic kidney failure, also known as end-stage renal disease, in the United States. The company operates kidney dialysis centers and provides related medical services, primarily in dialysis centers and in contracted hospitals across the United States. DaVita saw a solid earnings estimate revision of 30 cents over the past 30 days for the next year and has an estimated earnings growth rate of 4.43%.
DaVita has a P/E ratio of 13.33 versus the industry average of 19.84. It sports a Zacks Rank #1 and has a VGM Score of B.