The benchmark S&P 500 index is at a record high, having just closed above the 5,600 level for the very first time. So far, in 2024, the index is up 18%, marking one of the best starts in its history and the best start ever to a presidential election year. While the run has been impressive, it has also been uneven, with the gains largely concentrated in a few mega-cap technology stocks.
Many components of the S&P 500 index have not participated in the current rally, and their share prices are in the red on the year. Well-known stocks have fallen a lot this year despite the rise in the index as a whole. That is particularly true of value and small-cap stocks. The situation has left a lot of good stocks looking undervalued at current levels and ripe for the picking.
Here are the three most undervalued S&P 500 stocks to buy in July 2024.
Constellation Brands (STZ)
The stock of Constellation Brands (NYSE:STZ) looks undervalued at current levels. The maker of alcoholic drinks has seen its stock stall over the last year. STZ stock has been flat over the past 12 months, having gained only 0.44%. The company and its shareholders have completely missed the current stock market rally. Constellation Brands trades at a fairly low price-earnings ratio of 19 and pays a quarterly dividend of $1.01 per share, giving it a yield of 1.60%.
Weighing on STZ stock has been mixed financial results. For this year’s first quarter, Constellation Brands, which makes beers such as Corona and Modelo Especial, reported EPS of $3.57, topping Wall Street forecasts of $3.46. However, the company’s revenue of $2.66 billion was slightly below consensus estimates of $2.67 billion. While Constellation’s beer sales increased 8% in Q1 from a year ago, sales of its wine and spirits decreased 6%.
Despite the mixed results, there’s reason to be bullish on Constellation Brands stock. Modelo is the top-selling beer in the U.S. and the company has been working to grow its wine and spirit segment through increased advertising and price promotions.
General Mills (GIS)
Consumer foods giant General Mills (NYSE:GIS) stock also looks undervalued currently, with its share price down 16% over the last 12 months and trading at 14 times future earnings estimates. The company behind Wheaties and Cheerios also pays a quarterly dividend of 60 cents per share to its stockholders, giving it a hefty yield of nearly 4%. GIS stock is down on mixed financial results and tepid forward guidance.
For its fiscal fourth quarter, General Mills reported EPS of $1.01, which beat Wall Street forecasts of 99 cents. However, revenue of $4.71 billion missed consensus targets that called for $4.86 billion. Management blamed the sales miss on financially stressed consumers struggling with high inflation and interest rates. The situation is likely to improve for General Mills as interest rates move lower in the coming months.
GIS stock is currently trading near a 52-week low.
Target (TGT)
Discount retailer Target’s (NYSE:TGT) stock hasn’t lit the world on fire lately. TGT is currently 19% below its 52-week high and up only 2.7% on the year. That compares to an 18% year-to-date gain in the benchmark S&P 500 index. Target has struggled as consumers have cut back spending on the discretionary items it sells. As a result, Target stock is currently trading at 16 times future earnings estimates, though it pays a dividend of $1.12 per share, giving it a healthy yield of 3.07%.
Management is trying to turn things around, relaunching the company’s loyalty rewards program and announcing it is cutting prices on thousands of items, including milk and diapers. More recently, Target announced a new partnership with e-commerce company Shopify (NYSE:SHOP) that will see the two companies join forces on a new third-party online marketplace. The deal gives Target new and diverse products and brands for its online market.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
