In this article we will take a look at the 10 cheap stocks to buy now. You can skip our detailed analysis of the current market situation and go directly to 5 Cheap Stocks To Buy Now.
In the midst of soaring valuations and market raucous, it’s becoming harder to spot truly valuable and cheap stocks. Market analysts are consistently warning that we could be in a bubble as market euphoria continued to expand even after the coronavirus crisis hammered the global economy. So far, roughly 539,000 people have lost their lives to COVID-19 in the U.S. The U.S. economy contracted 3.5% last year as close to 22 million people lost their jobs during the first few months of the pandemic. And yet on March 17, the S&P 500 and Dow Jones Industrial Average touched record highs following the Fed’s upbeat outlook for economic recovery and reaffirmation of its policy to maintain interest rates close to zero. The S&P 500 index is up 62% over the last 12 months.
Soaring Valuations: How to Find Cheap Stocks?
Several valuation metrics are also telling the same story. For example, Shiller PE ratio, which incorporates the annual prices of S&P 500 companies over the last 10 years and divides them by their earnings and adjusts for inflation to gauge overall stock valuation, currently stands at 35.4, 38.5% higher than the recent 20-year average of 25.6. For context, the all-time high of the Shiller PE ratio was 41.9, while the metric hit its lowest point, 13.3, in 2009 following the start of the economic recovery after the housing crash.
Another example is the “Buffett Indicator,” the favorite metric of the Oracle of Omaha Warren Buffett to see whether the stocks are overpriced. This metric divides the total market cap of the stock market by the nation’s GDP. The Buffett Indicator currently reads 192.5%, meaning the market is significantly overvalued.
Talking about Warren Buffett, the legendary investor during an interview talked about his techniques to find the true, intrinsic value of a stock.
How Does Warren Buffett Calculate the Intrinsic Value of a Stock
"If we could see in it, looking at any business, what its future cash inflows or outflows from the business to the owners or outflows from the business, to the owners or from the owners, would be over the next hundred years or until the business is extinct and then could discount that back at the appropriate interest rate, that would give us a number for intrinsic value. In other words, it would be like looking at a bond that had a whole bunch of coupons on it that was doing a hundred years, and if you could see what those coupons are, you configure the value of that bond, compared to government bonds, or you can compare one government bond with 5% coupons to another government bond with 7% coupons. Each one of those bonds has a different value because they have different coupons printed on them. Businesses have coupons that are going to develop in future, the only problem is they aren't printed on the instrument, and it's up to the investor to try to estimate what those coupons are going to be over time. As we have said in high tech businesses or something like that, we don't have a faintest idea what the coupons are going to be when we get into businesses, where we thing we can understand them reasonably well. We are trying to print the coupons, we are trying to figure out what businesses are going to be worth in 10 or 20 years. When we bought See's Candies in 1972, we had to come to the judgment as to whether we could figure out the competitive forces that would operate the strengths and weaknesses of the company and how that would look over a 10 or 20 or 30 year period. And if you attempt to assess intrinsic value, it all relates to cash flows. The only reason for putting cash into any kind of an investment now is because you expect to take cash out not by selling it to somebody else because that's just a game of who beats who, but in a sense by what the asset itself produces... We have a high degree of confidence that we're in the ballpark with certain kinds of businesses. The filters are designed to make sure we're in those kind of businesses. We basically use long-term risk free, that's government bond type interest rates to think back in terms of what we should discount at.
That's what the game of investment is all about. Investment is all about putting out money to get more money back later on form the asset and not by selling it to somebody else, but by what the asset itself will produce."
Warren Buffett is an exception in the struggling hedge fund industry that is finding it difficult to maintain its charm. It is losing ground amid severe losses. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
It is extremely important to insulate yourself from the noise and gauge stocks based on their true, intrinsic value if you are serious about investing. That’s why we compiled a list of 10 cheap stocks to buy now for 2021 and beyond. Let’s start our list of 10 cheap tech stocks to buy now.
10. Capital Product Partners L.P. (NASDAQ: CPLP)
Capital Product Partners is a shipping company that operates seaborne transportation of containerized goods and dry cargo. The company’s shares are up 70% in the last 12 months. In January, the company announced a quarterly dividend of $0.10 per share. The company has a dividend yield of 3.73%.
As of the end of the fourth quarter, 2 hedge funds in Insider Monkey’s database of 887 funds held stakes in CPLP. Arrowstreet Capital is the biggest stakeholder in the company, with 76,849 shares, worth $624,000.
9. BBQ Holdings, Inc. (NASDAQ: BBQ)
BBQ Holdings ranks 9th on the list of best cheap stocks to buy now. The company operates restaurants under the brand name Famous Dave’s. The company has operations in Canada, U.S., UAE and Puerto Rico. In October 2020, the stock jumped after the company signed a 25-unit development agreement to expand its operations across the U.S. The company is partnering with Bluestone Hospitality Group to launch Famous Dave's ghost kitchens and dual restaurant concepts with the group's Italian brand, Johnny Carino's.
A total of 4 hedge funds tracked by Insider Monkey were bullish BBQ at the end of the fourth quarter.
8. Amneal Pharmaceuticals, Inc. (NYSE: AMRX)
Amneal is a New Jersey-based pharmaceutical company that has about 250 medicines in its portfolio. The company makes treatments for central nervous system diseases, parasitic infections and other therapeutic categories. In the fourth quarter, the company beat consensus estimates, helped by its acquisition of AvKARE and new products. Revenue in the quarter jumped 28%.
As of the end of the fourth quarter, there were 8 hedge funds in Insider Monkey’s database that held stakes in AMRX, compared to 11 funds in the third quarter. Citadel Investment Group, with 1.5 million shares of AMRX, is the biggest stakeholder in the company.
7. Genie Energy Ltd. (NYSE: GNE)
Genie Energy is an oil and gas company that was created as a result of a spinoff from IDT Corporation. In the fourth quarter, the company’s revenue jumped 26% to $102.9 million. The company announced that it was suspending its dividend to rebuild its cash position. The stock is up 4% over the last 12 months.
The company is also getting the attention of the smart money, as 9 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 8 funds a quarter earlier.
6. ASE Technology Holding Co., Ltd. (NYSE: ASX)
ASE Technology is a semiconductor packaging and industrial manufacturing company that makes flip chip ball grid array (BGA), flip chip scale package (CSP), advanced chip scale packages, quad flat packages, thin quad flat packages, bump chip carrier and quad flat no-lead (QFN) packages among other products. The company recently said revenue in February jumped 38% to $1.29 billion. In the fourth quarter, the company’s revenue jumped 36.2%.
Fisher Asset Management currently holds 26.9 million shares of ASE Technology Holdings that amounts $156.9 million. ASX occupies 0.11% of Ken Fisher’s total portfolio.
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Disclosure: None. 10 Cheap Stocks To Buy Now is originally published on Insider Monkey.