7 Cheap S&P 500 Stocks to Buy Now: May 2024
The S&P 500 is the most recognizable index in the stock market. Many investors use this index as a benchmark to determine if their portfolios are outperforming the stock market. The S&P 500 consists of profitable large-cap companies.
While investing in an S&P 500 ETF can simplify your portfolio, these ETFs have a major downside. While you get plenty of good companies, you will also end up with a bunch of duds. Some corporations in the S&P 500 continue to drag the index lower, and it’s only a handful of stocks that keep the index charging higher.
Investors looking for some of the top S&P 500 stocks may want to consider these choices.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) combines affordability with high growth. The stock trades at a 27 P/E ratio and reported 27% year-over-year revenue growth in Q1 2024. Net income more than doubled year-over-year which will make the P/E ratio more enticing in future quarters.
Advertising continues to generate the lion’s share of total revenue. More users are flocking to Meta Platforms’ family of apps, leading to a 37% year-to-date gain for the stock. Shares are up by 157% over the past five years.
While those gains are impressive, Wall Street analysts believe there is more upside for this member of the magnificent seven. The average price target suggests a 10% upside is in the cards. Furthermore, it’s rated as a “Strong Buy” among 41 analysts.
Meta Platforms plays a big role in the S&P 500’s long-term gains. It’s one of the top holdings in the entire fund and has been rewarding long-term investors for many years.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is another tech giant that is worth investors’ attention. It’s certainly won a lot of analysts over, as it has a projected 16% upside. Microsoft is rated as a “Strong Buy” among 33 analysts. The highest price target of $600 per share suggests that the stock can gain an additional 43%.
The stock is up by 14% year-to-date and has gained 229% over the past five years. The company’s Q3 FY24 results suggest that more gains are on the way. Microsoft reported 17% year-over-year revenue growth and 20% year-over-year net income growth in the quarter. Cloud revenue led the way with a 23% year-over-year increase.
Microsoft also exhibited impressive revenue growth for its other business segments, such as Productivity and Business Processes, Personal Computing, and other segments. Microsoft returned $8.4 billion to shareholders in the quarter through stock buybacks and dividends. The corporation is also expanding its lead in the artificial intelligence race which can create additional opportunities.
Visa (V)
Visa (NYSE:V) has been steadily rising over several years. The stock is up by 9% year-to-date and have soared by 71% over the past five years. Credit and debit cards are the preferred payment choice for many consumers due to their convenience, security, and rewards. Visa makes a small percentage of every credit card transaction.
The business model has worked well for Visa. The firm regularly reports net profit margins north of 50%, along with solid revenue and earnings growth. Q2 FY24 revenue and net income both increased by 10% year-over-year. GAAP earnings per share rallied up by 12% year-over-year.
Visa can march higher due to strong financials and an impressive stock buyback program. The fintech firm put $3.8 billion into share repurchases and dividends in the quarter. The stock is currently rated as a “Strong Buy” with a projected 12% upside. The highest price target of $340 per share suggests that the stock can rally by an additional 21%.
Walmart (WMT)
Walmart (NYSE:WMT) trades at a 31 P/E ratio and offers a 1.39% yield. The stock is up by 12% year-to-date and has gained 78% over the past five years.
The retailer has been selling affordable products for more than 60 years. It’s one of the most recognizable brands in the United States and regularly brings in revenue. The firm reported 5.7% year-over-year revenue growth in the fourth quarter of fiscal 2024. E-commerce and advertising sales both exhibited higher growth rates which is a good sign for the company’s long-term revenue and net income growth.
Walmart recently raised its dividend by 9% which is the highest dividend hike in more than a decade. It’s a step in the right direction that suggests more gains are on the way. Walmart is currently rated as a “Strong Buy” among 27 analysts. The stock also has a projected 11% upside from its current level.
American Express (AXP)
American Express (NYSE:AXP) is another top credit and debit card issuer that offers an excellent value proposition. Shares trade at a 20 P/E ratio despite double-digit revenue and earnings growth. The fintech firm reported 11% year-over-year revenue growth and 39% year-over-year diluted EPS growth in Q1 2024.
Profit margins were in the double-digits and should continue to grow in the years ahead. Other credit card companies have much higher profit margins. However, if American Express can get its profit margins in the 20%-25% range within a few years, it can become a very compelling stock.
The price point already provides a good opportunity. It has a lower P/E ratio than its competitors despite posting better revenue and net income growth. American Express is also an impressive dividend growth stock. The company has maintained an annualized dividend growth rate of 10.51% over the past decade. Dividend growth has accelerated in recent years. The annualized dividend growth rate stands at 13.28% over the past three years.
United Parcel Service (UPS)
The United Parcel Service (NYSE:UPS) has been delivering packages for more than 100 years. E-commerce has increased the demand for its services, but the stock has endured some rocky years. Shares are down by 6% year-to-date and have lost 12% over the past year. However, the stock is up by 50% over the past five years and offers a 4.38% yield.
The stock trades at a 22 P/E ratio and can be a good pick for dividend income investors. While investors shouldn’t expect substantial growth, the company also has less downside. People will still order products online during economic downturns and need UPS to deliver them.
Revenue decreased slightly year-over-year in the first quarter of 2024. However, analysts are looking at the long-term picture and currently rate the stock as a “Moderate Buy.” The average price target suggests that UPS can gain an additional 8% from current levels.
Garmin (GRMN)
Garmin (NYSE:GRMN) offers products in five key segments: fitness, outdoor, aviation, marine, and automotive OEM. The company’s watches have become popular among many athletes who want to obtain more data for every workout, such as heart rate, mile pace, and other metrics.
The fitness and outdoor segments make up more than half of Garmin’s total revenue, and that distribution has worked out for the company. Q1 2024 revenue increased by 20% year-over-year as fitness sales let the way with a 40% year-over-year jump. Garmin also reported a 36% year-over-year increase in GAAP diluted EPS.
The stock trades at a 24 P/E ratio and offers a 1.76% yield. Dividend growth has been moderate at an annualized 5.07% over the past five years. While fitness and outdoor sales are the company’s key segments, investors should also monitor the company’s auto OEM sales. This segment grew by 58% year-over-year in Q1 2024.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
