In this article, we discuss the 10 best cheap stocks to buy right now.
With rising interest rates and fears of recession, the stock market has been volatile in 2022. Additionally, the geopolitical tensions in Europe have contributed to the decline in the stock market. The United States’ first two quarters of 2022 saw negative GDP growth, while inflation reached a 40-year high of 9.1%.
The second half of the year could remain challenging. The Federal Reserve could continue to raise interest rates to fight inflation and the continuation of the Russia-Ukraine war could further slow the economy’s growth given the potential for further volatility in energy markets. If the economy slows enough, the market and stock prices could decline.
Nevertheless, the decline in stock prices could offer opportunities for investors in the long term as some leading stocks trade for lower than normal valuations. If the global economy grows faster than expected, there’s potential upside.
If the market recovers, cheap blue chip stocks could also benefit. Blue chip stocks are generally well known stocks that are leaders in their industry and many blue chips are included in the The Dow Jones Industrial Average, which includes 30 prominent companies. Given the market decline in 2022, many stocks in The Dow Jones Industrial Average also trade for low forward P/E ratios. Although forward P/E ratios reflect analyst earnings estimates for the next year and are inherently uncertain given that economic conditions could always change, many investors regard them as one useful way to value stocks.
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Our Methodology:
In order to identify the best cheap stocks to buy right now, we used the collective wisdom of nearly 900 hedge funds tracked by Insider Monkey. For this list, we took the 30 Dow Jones stocks as listed by the SPDR Dow Jones Industrial Average ETF Trust and then filtered them by forward P/E ratio according to FINVIZ as of September 4. We took the 10 cheapest forward P/E stocks out of the 30 and then sorted them by the number of hedge fund holders in our database.
So, according to hedge funds, here are the 10 best cheap stocks to buy:
10 Best Cheap Stocks to Buy Now
10. The Travelers Companies, Inc. (NYSE:TRV)
Forward P/E Ratio: 11.01
Number of Hedge Fund Holders: 31
Based in New York, Travelers Companies, Inc. (NYSE:TRV) offers property and casualty insurance.
Given industry trends and good execution, the company has a growing business. According to macrotrends.net, revenue increased from $25.4 billion in 2011 to $34.8 billion in 2021. EPS also increased from $3.36 in 2011 to $14.49 in 2021. If the economy doesn’t slow as much as expected, Travelers Companies, Inc. (NYSE:TRV)’s business could continue to grow. The stock is also pretty cheap with a forward P/E of 11.01 as of September 4.
Among blue chips, Travelers Companies, Inc. (NYSE:TRV) is one of the few companies whose stock hasn’t declined year to date. Some analysts are also bullish. Recently, Travelers Companies, Inc. (NYSE:TRV) was upgraded by Raymond James analyst C. Gregory Peters to Strong Buy from Market Perform with a $185 price target.
As of the end of Q2 2022, 31 of the hedge funds tracked by Insider Monkey owned stakes in Travelers Companies, Inc. (NYSE:TRV). Those stakes held a collective value of over $433.82 million.
Much like The Goldman Sachs Group, Inc. (NYSE:GS), Merck & Co. Inc. (NYSE:MRK), and JPMorgan Chase & Co. (NYSE:JPM), The Travelers Companies, Inc. (NYSE:TRV) is a widely held stock among hedge funds.
9. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Forward P/E Ratio: 7.57
Number of Hedge Fund Holders: 40
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) a pharmacy-led health and cosmetics retailer, is considered a value stock by many investors given its forward P/E ratio of 7.57. Although rising interest rates could lower earnings valuations, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has pricing power that could increase earnings.
With the pandemic, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) also has a relatively new vaccine business where customers can get COVID-19 vaccines at Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stores. Recently, Walgreens has also offered appointments for updated COVID-19 boosters for those eligible. If it continues to grow, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) vaccine business could also help earnings.
At the end of the second quarter of 2022, 40 hedge funds were bullish on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) and held stakes worth $599.01 million.
8. Dow Inc. (NYSE:DOW)
Forward P/E Ratio: 7.37
Number of Hedge Fund Holders: 45
Dow Inc. (NYSE:DOW) is a chemical commodity business.
Given the industry’s headwinds, shares of Dow Inc. (NYSE:DOW) have fallen substantially from the beginning of June. Although the stock could continue to decrease if sentiment worsens, Dow Inc. (NYSE:DOW) nevertheless has the potential to rebound given its long term earnings potential. Analysts have an average price target of $58.43 and Dow Inc. (NYSE:DOW) also trades for a low forward P/E ratio of 7.37.
Many hedge funds in our database owned Dow Inc. (NYSE:DOW). According to Insider Monkey’s Q2 data, 45 hedge funds had stakes in Dow Inc. (NYSE:DOW). The total value of the holdings is $871.52 million.
Pzena Investment Management is the largest shareholder in Dow Inc. (NYSE:DOW) with shares worth $323.94 million.
7. 3M Company (NYSE:MMM)
Forward P/E Ratio: 11.20
Number of Hedge Fund Holders: 54
3M Company (NYSE:MMM) is a global diversified technology company with a strong dividend history. Given its durable business, the company has increased its dividend for 65 years and shares of the company have increased substantially. As a result of the increases, 3M Company (NYSE:MMM) has a quarterly dividend of $1.49 per share.
For its fiscal 2022 second-quarter results, the company reported revenue of $8.70 billion, beating estimates by $5.14 million. The company’s $2.48 adjusted earnings per share also beat the forecasts by $0.04.
At the end of the second quarter of 2022, 54 hedge funds were bullish on 3M Company (NYSE:MMM) and held stakes worth $1.38 billion.
Mayar Capital mentioned 3M Company (NYSE:MMM) in its recently-published Q2 2022 investor letter. Here is what the firm has to say:
“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.
6. Verizon Communications Inc. (NYSE:VZ)
Forward P/E Ratio: 7.85
Number of Hedge Fund Holders: 58
Verizon Communications Inc. (NYSE:VZ) offers its customers data and video service solutions.
Even though the stock is trading near multi-year lows, Verizon Communications Inc. (NYSE:VZ) represents a good value investment if the economy stays out of recession and the business is able to increase profitability.
Shares of the telecom giant traded at a forward P/E ratio of 7.85 as of September 4 as compared to the company’s over 10 P/E ratio during many periods over the last 10 years.
If economic conditions are better than expected and the company earnings continue to increase, the market could potentially give Verizon Communications Inc. (NYSE:VZ) a higher valuation in the future, which could offer investors upside.
At the end of the second quarter of 2022, 58 hedge funds were bullish on Verizon Communications Inc. (NYSE:VZ) and held stakes worth $2.29 billion.
Like Verizon Communications Inc. (NYSE:VZ), The Goldman Sachs Group, Inc. (NYSE:GS), Merck & Co. Inc. (NYSE:MRK), and JPMorgan Chase & Co. (NYSE:JPM) are cheap stocks widely held by hedge funds.
5. Chevron Corporation (NYSE:CVX)
Forward P/E Ratio: 9.48
Number of Hedge Fund Holders: 59
Chevron Corporation (NYSE:CVX) operates in the integrated energy and chemical business sector globally.
Although lower oil prices could send the stock lower, Chevron Corporation (NYSE:CVX) could be a cheap stock given its forward P/E ratio of 9.48 if it successfully transitions to renewable energy or if oil prices remain high.
As it stands, Chevron Corporation (NYSE:CVX) is a blue chip given its economies of scale and its balance sheet. The company also has a strong dividend history with Chevron Corporation (NYSE:CVX) having continuously increased its annual dividend for the past 34 years.
Many hedge funds like the stock. At the end of the second quarter of 2022, 59 hedge funds in the database of Insider Monkey held stakes worth $26 billion in Chevron Corporation (NYSE:CVX). When looking at the institutional investors followed by Insider Monkey, Warren Buffett’s Berkshire Hathaway is the largest stakeholder in Chevron Corporation (NYSE:CVX) with shares valued at $23.37 billion comprising 7.78% of its 13F portfolio.
4. Intel Corporation (NASDAQ:INTC)
Forward P/E Ratio: 11.67
Number of Hedge Fund Holders: 65
Intel Corporation (NASDAQ:INTC) is a leading semiconductor company that has seen its stock decline substantially this year.
Despite the slowdown in the PC industry and potentially some other industries, semiconductor companies are spending tens of billions in building new factories that could increase supply. If demand doesn’t increase as much as expected, oversupply could be another headwind for Intel Corporation (NASDAQ:INTC). Given that competitors have gained market share and Intel Corporation (NASDAQ:INTC) earnings results have come in worse than expected, the stock is near multi-year lows.
Nevertheless, the long term future could be considerably more attractive for Intel Corporation (NASDAQ:INTC) if demand grows as expected due to various secular trends.
As of the end of Q2 2022, 65 of the hedge funds tracked by Insider Monkey owned stakes in Intel Corporation (NASDAQ:INTC). Those stakes held a collective value of over $2.5 billion.
3. The Goldman Sachs Group, Inc. (NYSE:GS)
Forward P/E Ratio: 8.61
Number of Hedge Fund Holders: 69
The Goldman Sachs Group, Inc. (NYSE:GS) is a financial organization that provides a range of financial services to businesses, financial institutions, governments, and people worldwide.
Since financial organizations are susceptible to economic trends such as future recessions, The Goldman Sachs Group, Inc. (NYSE:GS) stock could decline if economic conditions continue to slow.
Given its strong position in the capital market, however, The Goldman Sachs Group, Inc. (NYSE:GS) stock could rebound if the economy doesn’t slow as much as expected.
In the longer term, The Goldman Sachs Group, Inc. (NYSE:GS) remains a blue chip stock that could continue to grow earnings and dividends.
With a forward P/E ratio of 8.61, The Goldman Sachs Group, Inc. (NYSE:GS) could be considered cheap for long term investors.
As of the end of Q2 2022, 69 of the hedge funds tracked by Insider Monkey owned stakes in The Goldman Sachs Group, Inc. (NYSE:GS). Those stakes held a collective value of over $4.61 billion.
2. Merck & Co. Inc. (NYSE:MRK)
Forward P/E Ratio: 11.57
Number of Hedge Fund Holders: 79
Merck & Co. Inc. (NYSE:MRK) is a healthcare giant with substantial earnings power.
For its fiscal 2022 second quarter results, Merck & Co. Inc. (NYSE:MRK) reported revenue of $14.59 billion, beating estimates by $731.76 million. The company also had adjusted earnings per share of $1.87, exceeding estimates by $0.16.
Longer term, analysts expect the company to grow earnings per share over the next 5 years by 11.07%.
If Merck & Co. Inc. (NYSE:MRK) can achieve those earnings growth estimates or even exceed them, the stock could be considered attractive given the forward P/E ratio of 11.57.
Many hedge funds are bullish on the stock. At the end of the second quarter of 2022, 79 hedge funds were bullish on Merck & Co. Inc. (NYSE:MRK) and held stakes worth $6.11 billion.
Here is what Sound Shore Management, an investment management firm, has to say about Merck & Co., Inc. (NYSE:MRK) in their Q2 2022 investor letter:
On the positive side, a number of our health care names outperformed, including drug maker Merck & Co. (NYSE:MRK). Benefitting from a best-in-class research and development team, Merck’s progress is being fueled by the impressive growth of its immune-oncology cancer drug, Keytruda. The stock remains attractive at less than 12 times 2023 earnings.
1. JPMorgan Chase & Co. (NYSE:JPM)
Forward P/E Ratio: 9.05
Number of Hedge Fund Holders: 104
JPMorgan Chase & Co. (NYSE:JPM) is an American investment bank and financial services holding corporation that operates globally.
With 104 hedge fund holders that we track that held shares in the bank as of Q2, JPMorgan Chase & Co. (NYSE:JPM) is the most widely held blue chip stock on our list with a low forward P/E ratio.
Although banks often have lower forward P/E ratios given the potential for an economic slowdown or recession, JPMorgan Chase & Co. (NYSE:JPM) offers potential upside in the long term given its strong earnings power, which management can use to buy back stock or to pay dividends.
Fisher Asset Management is the largest shareholder in JPMorgan Chase & Co. (NYSE:JPM) with shares worth $899.69 million.
You can also take a look at 10 Best Vanguard ETFs to Invest In and 10 Semiconductor Stocks that Pay Dividends.
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Disclosure. None. 10 Best Cheap Stocks to Buy Now is originally published on Insider Monkey.
