It’s been a year of unparalleled volatility for the stock market. The year started with the market into its longest bull period in U.S. history, where it was incredibly difficult to search for cheap stocks to buy. However, that scenario quickly changed once the novel coronavirus pandemic wreaked havoc across the world.
Things have changed again, though, as the markets have effectively pushed the reset button to start a new bullish trend. Hence, if you’re looking for cheap stocks to buy now, there are several value plays in today’s fragmentary market.
There are typically a few yardsticks that can be used in determining cheap stocks. These include price-based ratios, including price-book value (PBV) and price-earnings per share (P/E) and the price-sales (P/S) ratios, to name a few. Typically, if these multiples are lower than the company’s or sector’s average, then the stock is undervalued.
That said, let’s look at the best cheap stocks to buy as we head ever so close to the new year:
- Lumen Technologies (NYSE:LUMN)
- Glu Mobile (NASDAQ:GLUU)
- Nautilus (NYSE:NLS)
- Baozun (NASDAQ:BZUN)
- AT&T (NYSE:T)
- Qualcomm (NASDAQ:QCOM)
- Ford (NYSE:F)
Now, let’s dive in and take a closer look at each one.
Cheap Stocks to Buy Now: Lumen Technologies (LUMN)
Lumen Technologies, formerly known as CenturyLink, is an enterprise technology platform which handles next-gen business applications and data. It ditched its previous name to rebrand its business model for the “4th Industrial Revolution”. Hence, the broadband services provider is now focusing its efforts on its enterprise platforms, which could help it explore opportunities in cybersecurity, edge computing, and related areas. LUMN stock is currently trading at 75% lower than its historical high P/S ratio, making it one of the cheapest stocks in its sector.
The stock has been weighed down by its decision to slash dividends due to falling revenues and its need to pay down its debt. However, it has enough free cash flows to meet these obligations and has an impressive dividend yield of more than 10%. It’s going all-in on with its turn-around efforts, and is exploring some exciting growth opportunities — which could help propel the stock in the future.
Glu Mobile (GLUU)
Video game developers such as Glu Mobile have had a stellar year with the social-distancing conditions created by the coronavirus. The pandemic has accelerated growth trends in the sector, which are likely to benefit the industry for years to come. GLUU stock, in particular, grew around 50% in 2020 — but its P/S ratio is still meager at just under 3.
Moreover, 2020 was solid from a financial standpoint, as the company beat revenue and earnings estimates by handsome margins. It is also expecting a blockbuster 2021, with several big releases in the year. It will be releasing a game from its most successful studio. Additionally, new games from its established franchises, including Covet Fashion and MLB Tap Sports Baseball, are also set for release. Moreover, it is also working on linking e-commerce stores into its games.
Thus, the company has many growth avenues that can help generate substantial returns in the coming year.
Cheap Stocks to Buy Now: Nautilus (NLS)
Nautilus is a sports equipment manufacturer that mainly focuses on fitness equipment under its long list of brands. The novel coronavirus kickstarted the trend of home and connected home gyms. Thus, companies such as Nautilus have enjoyed an incredible year so far, posting massive revenue gains throughout the year. However, despite its success in 2020, NLS stock is trading at 32.8% lower than its 52-week high.
The company is on a trajectory that focuses on leveraging technology to create recurring revenue streams. Its AI-powered, adaptive platform called JRNY allows its users to create personalized home workouts. That said, the company’s CEO Jim Barr, has been the driving force behind these changes, which will become a significant growth catalyst for the future. And apart from its strong earnings performance, its liquidity balance is solid and improving with every quarter.
Baozun is a Chinese e-commerce services provider providing tools for website creation, customer management, marketing, order fulfillment and more. Its platform is integrated with some of the country’s primary e-commerce hubs, including Alibaba’s (NYSE:BABA) Tmall, JD.com (NASDAQ:JD), and others. Unfortunately, it’s a strategic shift from warehouse and fulfillment to its web platform has impacted margins at a relatively slower pace. However, the company has shown great potential, as BZUN stock is trading at much lower than its high P/E ratio.
It’s been a mixed bag for the year, but the company has done relatively well in expanding its margins and increasing revenues. For the first two quarters, it witnessed double-digit growth in revenues. And in its most recent quarter, revenues improved by 21.7% on a year-over-year basis. Operating margins were also at 4.6% compared to 3.7% in the prior-year period.
Therefore, the company is picking up the pace and is may have massive success in the coming year.
Cheap Stocks to Buy Now: AT&T (T)
AT&T has had a rough year like many of the companies on the telecommunications side. However, it has performed relatively well compared to its peers, pursuing growth opportunities in its telecommunications segment and IP content and distribution. Right now, T stock is trading cheaply and is down about 27% from its 52-week high price.
The company’s financial position remained robust despite the challenges presented by the pandemic. It had a healthy cash flow position after paying down $30 billion worth of debt maturities in the year. Its FCF guidance for the year is at $26 billion with a dividend yield in excess of 7%. It seems to be back up and running by delivering a solid third-quarter earnings beat from an earnings perspective. It has several growth catalysts that ensure a brighter 2021 for the company.
Semi-conductor giant Qualcomm had an impressive 2020, despite the unique challenges it presented to the industry. The company has positioned itself as one of the 5G revolution leaders, outlined extensively in its recent earnings reports. However, legal troubles have weighed QCOM stock down. It is still one of the cheapest 5G plays out there in the market, though, with a P/S ratio under 8.
Furthermore, the company’s 5G strategy appears to be solid at this point. Its two-part strategy involves developing the infrastructure for the impending revenues and patent licensing measures. Its legal troubles pertaining to royalty charges has been a thorn in its side. However, investors should look past these near-term challenges and focus on its immense 5G potential.
Cheap Stocks to Buy Now: Ford (F)
The automotive giant has had a rough 2020 like most companies in the sector. In the second quarter of 2020, revenues dropped by a whopping 50% year-over-year. However, it seems to be mounting a recovery in its most recent quarter, beating analyst estimates and a 1% increase in revenues.
Additionally, F stock is trading much lower than its historical high P/S ratio. Therefore, it’s one of the best value plays in the sector at this time.
That said, 2021 is poised to be the comeback year for Ford. It has an incredible line-up of SUVs and trucks, including the release of its hotly-anticipated all-electric Mustang. Moreover, revenues are expected to jump to $145.22 billion from this year’s $118.33 billion estimates. All these elements, coupled with the improving economic backdrop, make Ford one of the best cheap stocks out there.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.