Value stocks are securities that look fairly or undervalued compared to their earnings, outlook and underlying fundamentals. Value stocks also tend to be of established blue-chip companies that are profitable, stable and pay their shareholders regular dividends.
These stocks are basically the opposite of high-flying growth stocks and start-up companies whose share prices rise at a fast rate even if the organization behind the stock is unprofitable, sending the stocks into overvalued territory.
Since the current bull market began in fall 2022, growth stocks have outpaced value stocks by a big margin. The market rally has been fueled by mega-cap technology stocks, semiconductor concerns and hype surrounding artificial intelligence.
However, signs are emerging that the rally is broadening out and value stocks are starting to catch up, driven higher by cost controls, strong earnings, dividend increases and other catalysts that appeal to long-term investors. Value stocks also tend to perform well in times of uncertainty and turbulence such as now.
If you can only buy one value stock in April, it better be one of these three names.
Costco Wholesale (COST)
Costco Wholesale (NASDAQ:COST) just raised its quarterly dividend by 14% as the company’s sales remain brisk. The warehouse club will now pay a dividend of $1.15 per share, up from $1.02 a share previously. The new dividend will be paid on May 10 to shareholders of record on April 26.
The dividend increase comes as Costco reported that its March sales rose nearly 10% year-over-year, fueled by growth in its e-commerce unit. In January of this year, Costco paid a special one-time dividend of $15 a share.
Costco’s net sales rose 9.4% in March from a year ago, reaching $23.5 billion. That was an improvement over February’s 6.9% sales increase. Same-store sales at Costco climbed 7.7% higher in March from the previous year, which was also better than 5% same-store sales growth in February.
Much of the growth in March came from the online business, with e-commerce sales increasing 28.3% from a year earlier. In February, Costco introduced a new home page for its mobile app and an option for members to pay for online orders using Apple Pay. COST stock has gained 48% over the last 12 months.
Delta Air Lines (DAL)
Delta Air Lines (NYSE:DAL) just issued its earnings report for this year’s first quarter and it was an impressive print. The carrier swung to a profit and announced record sales as global travel demand continues to strengthen. Delta reported earnings per share of 49 cents versus 36 cents that was expected among analysts.
Revenue for the January through March quarter totaled $12.56 billion, slightly below Wall Street forecasts of $12.59 billion but a record for the first quarter of any year at the airline.
Delta said that it is benefitting from a surge in bookings for both leisure and business travel. Looking ahead, the carrier forecast second-quarter 2024 earnings of $2.20 to $2.50 a share, which is ahead of analysts’ forecast of $2.23 per share.
For all of this year, Delta reiterated its full year forecast for $6 to $7 a share in earnings and free cash flow of $3 billion to $4 billion.
DAL stock rose 5% on news of the latest earnings. Over the last 12 months, the company’s share price has increased 35%. However, the stock is still trading approximately 20% lower than where it was pre-pandemic.
Federal Express (FDX)
The stock of FedEx (NYSE:FDX) is recovering after the shipping and logistics giant delivered financial results that impressed Wall Street. FDX stock jumped 12% higher after the company reported earnings of $3.86 a share and revenue of $21.70 billion for what was its fiscal third quarter.
In contrast, analysts were looking for earnings of $3.43 and sales of $22 billion. The results were mostly due to cost controls as demand for FedEx’s shipping services remains tepid after the Covid-19 pandemic.
Still, investors seem pleased with the overall results at FedEx. The company reported an operating profit margin of 6%, up one percentage point year-over-year. Wall Street was anticipating a profit margin of 5.5%. The company also reported that its e-commerce activity normalized in the most recent quarter and is growing again for the first time since the pandemic effectively ended in late 2022. FDX stock is now out of the red and up 6% on the year, bringing its 12-month increase to 17%.
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.