The stock market is on fire these days. Although broad street will still take some time to recover, equity investors are having a great time. When it comes to electric vehicle stocks, the Reddit-induced frenzy, or the emergence of Robinhood as a potent tool in the investing world, retail traders are having a ball. However, that does not mean there are not cheap, solid stocks that you can sink your teeth into.
I know cheap stocks can be seen as an anomaly in today’s market. Generally speaking, if a company has an excellent business model and solid prospects, the markets will reward it handsomely. Nonetheless, in today’s market, there is a lot of speculation built into several equity stocks.
In a world where Tesla (NASDAQ:TSLA) has surpassed Toyota (NYSE:TM) to become the world’s most valuable carmaker, fundamentals have gone out the window in most cases. But when building a portfolio, you should always focus on stable, long-term investments since they will never give you sleepless nights. Plus, several of these cheap stocks are trading at a steep discount to the higher-priced stocks.
Keep reading and get to know why these cheap stocks deserve a place in your portfolio:
- Lincoln Educational Services (NASDAQ:LINC)
- JD.com (NASDAQ:JD)
- CTO Realty Growth (NYSE:CTO)
- Intuit (NASDAQ:INTU)
- Big 5 Sporting Goods (NASDAQ:BGFV)
- Equity Commonwealth (NYSE:EQC)
- GlaxoSmithKline (NYSE:GSK)
Cheap Stocks Offering Growth: Lincoln Educational Services (LINC)
My first pick on this list of cheap stocks may seem like a curveball. One of my favorite for-profit educational stocks, Lincoln Educational, does not get a lot of love, often bypassed for hyped-up names in the EV or tech space.
The company offers post-secondary education and is slightly different from other education companies since its target market is recent high school graduates and working adults.
The focus is on vocational training offered in several fields such as automotive technology, healthcare services, and information technology.
Compared to several other stocks that suffered during the pandemic, LINC did very well, outperforming the S&P 500 by 136.0% and its sector by 160.6% in the past year. It makes sense that the company did well during this time. The unemployment rate is falling as people move into new roles after a pretty dismal 2020. For these new roles, people need fresh skills, and LINC provides a great service in this regard.
Data from CNBC shows the career education and training provider surpassed expectations in the last three quarters. For the fourth quarter of 2020, revenues increased by 10.7%, and for the full year, sales jumped 7.2% from the year-ago period.
Looking ahead, prospects are great for the company. We will continue to see more people taking advantage of its services as we shake off the pandemic’s effects, making it one of the best cheap stocks out there.
JD.com is the main e-commerce rival of Alibaba Group (NYSE:BABA), perhaps the world’s most famous Chinese company. China’s second-largest e-commerce company, it has a similar business model to Alibaba. However, it’s a bit less diversified.
For the fourth quarter and full-year, it continued to deliver across all segments. Net revenues in Q4’20 increased 31.4% from the fourth quarter of 2019 and 29.3% for the full year. EPS increased 187.5% from the year-ago period to finish at 23 cents. It marked an excellent year for the e-commerce retailer, one where it delivered an earnings and revenue beat in each quarter.
The momentum should not stop soon. Although the pandemic is receding to the backdrop, the growth in e-commerce is a secular trend. And one should never forget that JD.com is an established business operating in the most populated country, one with a sizeable middle class. Shares are trading at 17.8x, trailing price-to-earnings.
CTO Realty Growth (CTO)
One of my favorite investment segments is REITs or real estate investment trusts. My affinity for them is due to the way they’re structured. If any entity wants to qualify as a REIT, it must have the bulk of its assets and income connected to real estate investment and, more importantly, distribute at least 90% of its taxable income to shareholders annually in the form of dividends.
So, income investors tend to look at REITs very favorably. However, last year, these investment vehicles, along with CTO, got hammered. The nature of the pandemic meant that real estate was always going to get hurt.
CTO “owns approximately 2.3 million square feet of gross leasable space” across several U.S. markets, giving it diversification among major REIT peers. In the last quarter, the company managed a quasi comeback.
Reported net income per diluted share came in at $16.60 and $16.69 for the quarter and fiscal 2020, respectively. That was a far cry from the 26.9 cent loss suffered in the third quarter and beat analyst expectations by a solid 149.2% per Refinitiv data. I expect the company to keep gaining financial strength as we move further along the road to recovery.
Another company that doesn’t get a lot of attention among cheap stocks, though it should, is Intuit. The name should sound familiar, considering the company provides business and financial management solutions to a range of accounting and finance professionals. It has built its operations around three segments.
The first deals with small business solutions, including the top-rated software solution QuickBooks. The Consumer Tax segment has several products, such as TurboTax, that will help individuals and businesses file their federal and state personal income tax returns. Finally, the ProConnect segment will help you connect with professional accountants across North America.
Considering the company runs an asset-light business, the stock is an excellent investment to have in your portfolio. The nature of its products is such that they are recession-resistant. After all, no matter what happens, you always have to pay your taxes.
The latest quarterly results were rare when the company did not do well, with EPS of $0.68 per share missing consensus estimates of $0.91.
A solid performer, sales and EPS have grown 12.2% and 27.5%, respectively, in the last five years. The company managed to increase sales by 8.3% in the last year, with its small-business accounting and DIY tax-filing software dominating the American market. Shares are trading at a substantial discount to their 52-week high is a major incentive to go all in.
For all these reasons and more, this makes it on my list of cheap stocks to buy.
Big 5 Sporting Goods (BGFV)
People have an immense amount of time on their hands since the start of the pandemic. Several people used that time to get fitter and look after their health. That’s why companies like Nike (NYSE:NKE) and Under Armour (NYSE:UAA) did very well during this time.
However, BGFV got lost in the shuffle a bit. That is a big error because the specialty retailer company has done an excellent job in recent times. In the last year alone, the top line increased 4.5%, and EPS rose 537.9%. The gross margin is also rock solid at 33.5%, pretty good for an apparel retailer.
Despite these outstanding fundamentals, the stock is trading at a trailing P/E of 6.1x, an 86% discount relative to the 5-year average. Although vaccines are rolling out, the pandemic is far from over. One of the best ways to fight the virus is to become healthier. So, I don’t expect BGFV stock to remain cheap for very long.
Equity Commonwealth (EQC)
The market selloff was one of the biggest pieces of news in the last month. Investors looked to traditional equities now that the impact of the pandemic is decreasing a bit. However, EQC did not get any of that love.
Much like CTO, EQC is also a REIT. But that is where the similarity ends. The Chicago-based, internally managed, and self-advised Equity Commonwealth invests primarily in commercial office properties. No prizes for guessing why the company has not done well recently.
But now that we see wide dissemination of vaccines, I believe we will see stocks like EQC grow. According to a recent survey conducted by global commercial real estate services firm JLL (NYSE:JLL), 3 in 4 workers are hoping to return to an office setting at some point in the future.
Hence, buying a small position in EQC makes sense despite it being one of my riskier picks in this list of cheap stocks.
Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), AstraZeneca (NYSE:AZN), and Johnson and Johnson (NYSE:JNJ) has stolen a lot of thunder in the Covid-19 vaccine race from GSK. However, we see some traction on that end as well for the diversified conglomerate.
GlaxoSmithKline has agreed to help to manufacture up to 60 million doses of Novavax’s (NASDAQ:NVAX) vaccine candidate for the British public. It is a welcome respite for stockholders of GSK who are still reeling from the termination of the pharmaceutical giant’s partnership with China’s Clover Biopharmaceuticals to develop a vaccine.
GSK is still down 3.0% in the last three months. Hence, I believe it’s the ideal time to load up your portfolio with some GSK stock. The company has a return on equity (ROE) of 42.4% and a dividend yield of 5.8%. Now that the vaccine craze is wearing off a bit, it’s the ideal time to buy into some established names.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.
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