In this article, we discuss 5 best cheap stocks to buy now for long term. If you want to see more best cheap stocks to buy now for long term, the risk/reward, and methodology of this list, go directly to 10 Best Cheap Stocks to Buy Now for Long Term.
5. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 112
The Walt Disney Company (NYSE:DIS) shares have declined nearly 42% year to date to trade for a forward P/E ratio of 16.93 as of December 16. Although a recession next year could make it harder for The Walt Disney Company (NYSE:DIS) to exceed earnings estimates substantially, the company nevertheless has a quality entertainment business that will likely increase earnings meaningfully in the long term that could make shares cheap now.
Third Point commented on The Walt Disney Company (NYSE:DIS) in a Q3 2022 investor letter,
As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its Covid lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.
While the company has guided to Disney+ achieving breakeven sometime within the fiscal year ending September 2024, the valuation suggests the market remains skeptical. Disney only trades at ~14x the $7 in earnings generated prior to the Fox acquisition, which implies investors don’t expect earnings to meaningfully exceed this figure in the coming years. Hence, the first value driver we highlighted in our last letter is the opportunity for management to optimize Disney’s cost base to drive earnings growth. We believe Disney has ample means to rationalize costs across its operating platform and deliver targeted content for home viewing that does not entail the same cost structure of exclusive theatrical releases…
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) ranks #4 on our list of 10 Best Cheap Stocks to Buy Now for Long Term given 140 hedge funds in our database owned shares of the stock at the end of Q3. Although shares are down 24.25% year to date, Apple Inc. (NASDAQ:AAPL) still has a market capitalization of over $2 trillion, which gives it substantial resources to try to make the next big consumer technologies for the future. If it succeeds, Apple Inc. (NASDAQ:AAPL) could continue to perform well in the long term.
It should be noted that in the near term, however, Apple Inc. (NASDAQ:AAPL)’s services business might not have as much growth given the European Union has mandated that the company eventually allow for third party app stores in Apple devices.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. (NASDAQ:META) recently received an upgrade from Doug Anmuth of JPMorgan who raised his rating on the social media giant to ‘Overweight’ from ‘Neutral’ and increased his price target to $150 from $115.
Although Meta Platforms, Inc. (NASDAQ:META) has faced numerous headwinds such as TikTok competition and the uncertain build out of the metaverse, Anmuth thinks some of those headwinds will ease in 2023 as the company is showing signs of controlling costs better. Given the analyst estimates, he thinks Meta Platforms, Inc. (NASDAQ:META) shares are trading for 12 times 2024 estimates, which makes the company’s valuation pretty compelling.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 269
Although it is already a huge company, Amazon.com, Inc. (NASDAQ:AMZN) still has earnings growth potential given its leading position in cloud computing and the expected growth rate of the cloud industry in the future. If Amazon.com, Inc. (NASDAQ:AMZN) can maintain its market share in the giant market, the company’s current valuation could prove fairly cheap in the long term.
269 hedge funds in our database owned shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q3, ranking the company as one of the most popular stocks among elite institutions at the end of September.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) ranks #1 on our list of 10 Best Cheap Stocks to Buy Now for Long Term given 269 hedge funds in our database owned shares of the software giant the end of the third quarter. Recently, Microsoft Corporation (NASDAQ:MSFT) has been in the news given its $1 billion investment in OpenAI in 2019, which is the maker of the popular AI chat bot, ChatGPT.
Given ChatGPT’s successful launch, OpenAI’s valuation has likely increased and Microsoft Corporation (NASDAQ:MSFT) has the potential to ultimately make up to 100 times its initial investment if the company is really successful.
You can also take a look at 11 Biggest Malls in Europe and 11 Best Quality Stocks to Buy Now.
