No Cheap Stocks Anymore? Yes There Are


No Cheap Stocks Anymore? Yes There Are

December 23, 2024 (Maple Hill Syndicate) The market is expensive, investors wail. There are no cheap stocks anymore.

That's not quite true. Yes, the stock market is expensive, with stocks selling at about 24 times earnings. A normal multiple, historically, is about 15. But there are still some cheap stocks around.

To find them, you have to avoid the Magnificent Seven investors' darlings, and look outside the technology sector. You have to poke into out-of-favor sectors and industries, notably energy, banks and homebuilders.

As of December 20, there were about seven dozen large-company stocks selling for less than 15 times earnings, five dozen of which had little or moderate debt. Among smaller companies, there are manymore, but for today let's talk about the big companies. Here are six worth considering.

ConocoPhillips

It's smaller than Exxon (NYSE:XOM) or Chevron (NYSE:CVX), but ConocoPhillips (NYSE:COP) is definitely a major in the oil patch. It produces oil and gas in 15 countries, notably the U.S., Australia and Norway. Founded in 1875 asContinental Oil in Utah, it now has headquarters in Houston.

Profits are solid, with a 20% return on stockholders' equity in the past four quarters. The dividend yield is above 3% and there's room to increase it. The stock sells for less than 12 times earnings.

Paccar

If that big truck looming behind you on the highway is a Kenworth or Peterbilt, it was manufactured by Paccar Inc. (NASDAQ:PCAR), which has about a 31% market share in the U.S. heavy truck market.

In assessing profitability, I consider a 15% return on equity good and 20% excellent. Paccar has exceeded 20% in seven of the past ten years. Its stock has roughly doubled in the past five years, but still sellsfor just under 12 times earnings.

Schlumberger

One of the big three in oilfield service (along with BakerHughes and Halliburton), Schlumberger Ltd. (NYSE:SLB) has seen its stock pounded this year down 29% through December 20.

In the past 16 years, the price of oil has sporadically spurted above $100 a barrel, but has mostly fluctuated between $50 and $100. It's about $70 at this writing.

I think it will be above today's level for much of the next five years, because of Middle East tensions and because a Republican Congress may slash subsidies for solar and wind.

D.R. Horton

The largest U.S. homebuilder, D.R. Horton Inc. (NYSE:DHI) sells homes at almost every price point. Homebuilding is a fragmented industry, and one that's heavily influenced by the prevailing level of interest rates.

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