FANG - The 3 Most Undervalued Large-Cap Stocks to Buy in June 2024

2024-06-06 06:00:00 ET

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Going for sizable returns always carries a not-insignificant magnitude for risk, which means that undervalued large-cap stocks could be the ideal solution.

For one thing, companies that command robust capitalization metrics tend to be that way due to business predictability. However, predictability comes at the cost of limited upside potential. That’s when targeting undervalued ideas could be ideal. You’re focusing exclusively on established enterprises that are priced below what they should bring in.

This way, you have the confidence of the biggest firms in the world while enjoying higher upside potential. With that in mind, below are undervalued large-cap stocks to consider.

Delta Air Lines (DAL)

One of the biggest airliners in the world, Delta Air Lines (NYSE: DAL ) represents one of the more surprising ideas for undervalued large-cap stocks. Since the start of the year, DAL gained over 23% of equity value. In the past 52 weeks, it’s up more than 34%. With such robust momentum – especially for a big enterprise like Delta – one might think it’s at least fairly valued.

Nope, DAL is definitely undervalued. Per Gurufocus, shares trade hands at 6.41X trailing-year earnings and 7.28X forward earnings. In contrast, the sector median values stand at 14.91X and 13.28X, respectively. Also, it’s worth noting that DAL is priced at 0.55X trailing-year revenue. Here, the sector median clocks in at 1.05X.

Why is that significant? Because covering experts believe that earnings per share will land at $6.66, up 6.6% from the prior year’s result of $6.25. Also, the consensus target for revenue is $58.04 billion, up 6.2% from 2023’s tally of $54.67 billion.

Fundamentally, increased travel prioritization appears to be a huge factor in demand. Thus, DAL makes a great case for undervalued large-cap stocks to buy.

Diamondback Energy (FANG)

Engaged in hydrocarbon exploration, Diamondback Energy (NASDAQ: FANG ) focuses on petroleum, natural gas and natural gas liquids (or NGLs). As an upstream player in the energy value chain, Diamondback offers an intriguing case for undervalued large-cap stocks to buy. The complex geopolitical narrative may offer a long-term catalyst for FANG, making it a worthy idea to watch.

Due to Russia’s invasion of Ukraine, the U.S. and its allies imposed sanctions on the belligerent nation. Evidence indicates that because of the deleterious impact on the economy, Russia has been forced to sell its crude oil at deep discounts . At the same time, the government needs funds to import refined hydrocarbon products . So, the cycle of deeper discounts for crude starts up again.

Of course, with a war going on, it’s possible that this flow of oil could be curtailed. Also, geopolitical flashpoints in the Middle East could spark yet again, potentially hurting supply chains. Cynically, FANG is on viable ground.

That’s why FANG’s modest discount of 10.67X trailing-year earnings may be deeper than you realize.

JD.com (JD)

One of the powerhouse names in China’s massive consumer economy, JD.com (NASDAQ: JD ) has seen better days. Yes, on a year-to-date basis, JD gained roughly 11% of market value. However, in the trailing year, the security slipped more than 17%. Over the past five years, it only moved up a bit over 12%. That goes to show its severe decline since 2021.

Nevertheless, for contrarian investors, JD may present an opportunity. At face value, it certainly appears to be one of the undervalued large-cap stocks to buy. Right now, shares trade at 13.69X trailing-year earnings and 9.11X forward earnings. In contrast, the sector median values land at 18X and 15.2X, respectively. Also, the market prices JD at 0.31X trailing-year revenue. The median stat is 0.66X.

Now, investors of course need to be careful that they’re not falling for arithmetic tricks. Here’s the context. Analysts anticipate that EPS will reach $3.37 at the end of fiscal 2024. That’s up 8.4% from last year’s print of $3.11. Also, revenue may hit $163.56 billion, up 7.4% from 2023’s haul of $152.32 billion. With the experts forecasting business expansion, JD could be an ideal bargain.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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