Best Value Stocks to Buy for Dec.23

Zacks highlights three buy-ranked, value-oriented stocks: Jackson Financial (JXN) carries a Zacks Rank #1 with its current-year earnings consensus rising 6.1% over the past 60 days, a trailing P/E of 4.90 versus 11.30 for the industry and a Value Score of A. Suncor Energy (SU) also has a Zacks Rank #1 with next-year earnings consensus up 8.6% in 60 days, a P/E of 13.09 versus the S&P's 25.09 and a Value Score of A. Valero Energy (VLO) is Zacks Rank #1 with current-year earnings consensus up 18.2% in 60 days, a P/E of 16.16 versus the S&P's 25.09 and a Value Score of A, positioning all three as low-P/E, analyst-upgraded value candidates from Zacks Research.

Analysis

Market structure: Short-term winners are refiners (Valero VLO) and rate-sensitive insurers (Jackson Financial JXN) as compressed P/Es and upward earnings revisions signal catch-up potential; Suncor (SU) benefits from Canadian price differentials and stronger upstream realization when WTI holds >$70/bbl. Losers include capital-intensive upstream players if refining margins remain elevated (value shifts to downstream) and issuers sensitive to a slower global growth scenario that would collapse crack spreads. Cross-asset: stronger energy earnings should push CAD up vs USD, steepen credit spreads for high‑beta exploration firms, and put modest upward pressure on yields if insurers redeploy capital into fixed income.

Risk assessment: Tail risks include a >20% drop in oil prices within 90 days (OPEC policy shock) that could erase 30–50% of near-term SU/VLO EBITDA, Canadian regulatory/legal actions that could cut SU NAV >15%, and a >100bp parallel move lower in long rates that would force JXN reserve revaluations. Immediate (days) volatility driven by inventory/OPEC headlines; short-term (1–3 months) driven by Fed policy and crack spreads; long-term (6–24 months) driven by energy capex cycles and annuity liability assumptions. Hidden dependencies: FX exposure for SU, renewable diesel margin competition for VLO, and lapse/reinsurance dynamics for JXN.

Trade implications: Implement concentrated, time-boxed exposure: favor VLO for 3–9 month upside capture via equity or 3–6 month call spreads; establish a selective 6–12 month value position in JXN to harvest re-rating if rates remain elevated. Use pair trades to isolate sector themes (long VLO vs short XOM to express refining outperformance) and buy asymmetric protection (3-month puts on SU or Brent if holding upstream). Rotate portfolio +3–5% into Energy and +1–2% into Financials funded from Growth; size positions with 1–3% of NAV each and set tactical stops at 10–15%.

Contrarian angles: Consensus underappreciates cash-return optionality at VLO and the operational leverage of refiners to sustained regional crack spreads; conversely SU’s Canadian-specific regulatory/tax risks are likely underpriced and could trigger >20% drawdowns if adverse rulings occur. The market may be under-reacting to JXN’s very low P/E (4.9) — a 20–30% re-rating is plausible if reserve assumptions hold — but that is contingent on a stable yield curve; historical parallels (refiner outperformance in 2014–16 during crude disruption) suggest this is a tactical opportunity, not a permanent regime shift.

Key Decisions for Investors

• Establish a 2–3% long position in Valero (VLO) over the next 10 trading days for a 3–9 month horizon; prefer buying shares or a 3–6 month call spread (10–15% OTM) to capture expected crack‑spread upside; set a protective stop at 12% and target a 25–40% upside.
• Initiate a 1.5–2% position in Jackson Financial (JXN) for 6–12 months to play rates-driven earnings upside; add on any pullback >10% and trim half of the position if the stock rallies >30%; monitor 10‑yr Treasury moves — reduce position if yields fall >100bps from current levels.
• Run a pair trade: long VLO (2%) and short Exxon Mobil (XOM) (1.5%) to isolate refining vs integrated producer performance over 3–6 months; close trade if the spread between VLO and XOM returns to historical mean or if Brent moves >20%.
• If holding Suncor (SU), buy 3‑month Brent or SU puts sized to cap downside at 8–10% NAV risk, or keep exposure below 1.5% NAV until regulatory clarity — sell into any rally >20% as regulatory/legal risk remains a tail event.