3 Dirt-Cheap Stocks to Buy Before They Take Off in 2024

Stocks to buy

After the rollercoaster ride which was 2023, many investors are looking for opportunities in the new year. While the broader market recovered strongly, the rally left some high-quality companies behind. With beaten-down valuations but improving fundamentals, these dirt-cheap stocks could be primed for a rebound in 2024.

As we enter the year, I’m optimistic about the economic outlook for 2024. Growth is expected to continue, the job market remains robust, and the Fed is likely to start cutting rates. Barring any shocks, we seem set for steadier sailing after last year’s volatility.

I think taking a selective approach to stocks is wise in this climate. It can pay to root around in the bargain bin for hidden gems. So, let’s take a look!

JD.com (JD)

Source: Sergei Elagin / Shutterstock.com

As a leading Chinese e-commerce company, JD.com (NASDAQ:JD) has seen its stock plunge over the last few years amidst broader economic and demographic concerns. Shares now trade at bargain basement valuations of just 8-times forward earnings and 0.25-times forward sales. With slowing birth rates and recent consumer weakness, it’s understandable why JD has fallen out of favor. However, current prices bake in an overly pessimistic outlook.

China’s economy clearly faces challenges, but a total collapse seems unlikely. In fact, GDP growth, though slower, remains positive. Moreover, an aging population doesn’t preclude certain sectors from thriving. As automation and AI advance, worker shortages may prove less impactful. E-commerce, in particular, continues to expand briskly, and China boasts the world’s largest online retail market.

As a prime industry player, JD should capitalize on e-tailing’s resilient growth. Consensus estimates call for 7%+ sales and earnings growth in 2024-2025. Though revenue has stagnated recently, profits have climbed steadily. JD’s three-year free cash flow growth of 27.6% also tops roughly 80% of industry peers.

With strong cash generation and leadership in a massive, secular growth market, JD looks poised to rebound. Current valuations seem to discount even a mild return to form. If macro conditions show signs of improvement, this left-behind stock could take off in a hurry.

Dominion Energy (D)

Source: ying / Shutterstock.com

Dominion Energy (NYSE:D), a diversified power and gas utility operating across 16 U.S. states, offers intriguing recovery potential after its 50%+ share price plunge. The stock came under intense pressure as natural gas prices cratered. Additionally, Dominion is loaded with debt – over $42 billion worth.

However, I believe the market has overlooked Dominion’s staying power. Although its leverage ratios are certainly elevated, Dominion’s $2.7 billion-plus annual operating cash flow provides a buffer. The company seems capable of servicing obligations while maintaining its growth investments.

And with gas prices appearing to bottom out, Dominion stands to benefit as winter demand picks up. The stock currently trades at just 16-times forward earnings. That’s a level that leaves ample room for multiple expansion if fundamentals improve.

No doubt risks exist around the company’s debt, the regulatory environment, and commodity price volatility. But at current levels, much of this potential weakness looks priced in. For investors with a reasonable risk tolerance, I view Dominion Energy as an intriguing recovery play over the next 12 months.

Dollar General (DG)

Source: Jonathan Weiss / Shutterstock.com

Dollar General (NYSE:DG) is down more than 45% from its peak, dragged lower by margin pressures as consumers tightened their belts. However, lower-income shoppers may retain spending power in 2024, with inflation reaching its target. This bodes well for Dollar General’s outlook.

Analysts expect renewed growth next year – 4.4% sales growth and earnings per share rebounding after a projected 30% fiscal 2023 dip. Long-term projections seem even rosier, with the company’s earnings per share numbers potentially doubling by 2030. If shoppers loosen their purse strings faster than expected, I believe Dollar General could hit that milestone earlier.

Despite the challenging operating environment, Dollar General continues expanding its national store footprint at a 5% annual rate. The company is also leveraging its rock-solid value proposition to build what I view as an enduring competitive edge.

Trading at just 0.8-times sales with a 1.8% dividend yield, I believe Mr. Market has discarded Dollar General stock a bit too hastily. I expect an earnings reversion. And with so much bad news priced in already, further downside looks limited. This out-of-favor stock has “turnaround” written all over it.

On the date of publication, Omor Ibne Ehsan did not hold (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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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