These FTSE 100 shares could smash the market in 2024

In my endless search for undervalued shares, I often trawl through the FTSE 100 index searching for hidden value. Ideally, I’m looking to buy into solid companies with strong earnings and cash flows. For example, here are two Footsie stocks my family portfolio already owns that I’d like to buy more of in 2024.

#1: BP

My wife and I bought BP (LSE: BP) shares in mid-August last year for 484.1p per share.

At first, things went our way, as the stock peaked at 558p on 18 October. It has since dropped to 473.45p, valuing this oil & gas supermajor at £80.8bn. Thus, we have a paper loss of 2.2%.

Why would I like to own more of this stock? First, because big can be beautiful and BP is valued at £80.8bn, making it the FTSE 100’s fifth-biggest business.

Second, because the shares are trading on a modest multiple of 3.9 times earnings, delivering a bumper earnings yield of 25.4%. Third, because the market-beating dividend of 4.7% a year is covered a powerful 5.4 times by earnings, making it among the most well-covered high yields in the market.

That said, I fully expect group revenues, earnings and cash flow to have declined in the final quarter of 2023. That’s because the oil price has dropped nearly 17% from its 2023 high in late September (an ongoing risk). Still, I hope that this negative trend is already priced in.

As a bonus, if energy prices do rise, then BP acts as a hedge against my own household bills. However, my main reason for owning this stock is collecting cash for years while the company evolves into a low-carbon energy producer.

#2: L&G

My second FTSE 100-beating share is venerable life insurer and asset manager Legal & General Group (LSE: LGEN). Founded in 1837, this Footsie firm celebrates its 187th birthday this year.

While previously working in this sector for 15 years, I became a big admirer of L&G, its business model and its management. Today, it manages assets worth around £1.3trn for 10m customers, ranging from individual savers to large corporations.

At the current share price of 246.2p, this group is valued at £14.6bn, making it a FTSE 100 middleweight. We paid 246.7p a share for our stake in July 2022, so we have a tiny loss on this buy (but ignoring dividends).

Nevertheless, I’d like to buy more L&G stock this year as I think it stands a good chance of beating the wider index. And while I wait, I’ll keep collecting cash.

The big attraction for me is this stock’s market-thrashing dividend yield of over 8% a year — around twice the Footsie’s cash yield. Also, L&G has raised this payout every year since 2011, bar leaving it unchanged during Covid-ravaged 2020.

Of course, as one of Europe’s largest asset managers, L&G’s fate is closely tied to that of financial markets. When shares and bonds are booming, L&G’s results usually follow suit. But if asset prices crash, as they did in 2022, then the company’s profits and share price can suffer.

In summary, I see both of these FTSE 100 stocks as offering superior risk-reward ratios in 2024. Hence, when spare cash comes along, I’d like to buy more shares!