Price matters when it comes to ferreting out value stocks, which are different from cheap stocks. Still, getting a good price for a reliable company should be every investor’s goal.
As legendary investor Warren Buffett famously said: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
However, finding stocks of good companies that are affordable and likely to produce gains is not always easy. Oftentimes, investors can be lured into taking a position in a cheap stock only to see the bottom fall out and a sea of red in their portfolio.
Cheap stocks can be among the most volatile in the marketplace, meaning investors need to be especially careful and know what they’re buying before taking the plunge.
In this article, we look at four cheap stocks to keep on your short list. These are affordably priced stocks of solid companies that are likely to continue moving higher this year.
Cheap Stocks to Keep on Your Short List: Ford (F)
Ford Motor Co. has, at long last, enjoyed a breakout of its share price. Year-to-date, F stock is up 50%, proving once again that you should never lose hope.
Even the most bearish of stocks can turn around and enjoy a strong bull run. Selling at around $12.50 a share, Ford stock is still incredibly cheap, especially when compared to other automakers such as Tesla (NASDAQ:TSLA), which has a share price approaching $700.
With Ford’s share price still under $15, investors should take a position now as there is every indication that this stock has more room to run.
The reason for F stock’s rally this year can be summed up in one word: “electric.”
The legendary Detroit automaker is benefitting from its shift to electric vehicles, as well as its renewed focus on the company’s bestselling pick-up trucks and sport utility vehicles (SUVs) and away from sedans and compact cars that have fallen out of favor for consumers.
Add in new Chief Executive Officer Jim Farley (who took the helm last October) and growing signs that the company will restore its dividend this year, and there’s plenty of reason to invest in the blue oval.
Coca-Cola has held steady throughout the global pandemic, but the Atlanta-based company should perform even better as the economy reopens and gathers momentum this year.
Live and in-person events from sports and concerts to movie theatres and restaurants have been shuttered for much of the past year and that has deprived Coca-Cola of one of its key sales markets.
With people once again attending baseball games and outdoor music festivals, sales of Coke are expected to move appreciably higher this year, which should boost KO stock.
Year-to-date, KO stock is basically flat, up a slight 1% since the first trading day in January. Sitting today at around $53, Coca-Cola remains one of those cheap stocks that are also a re-opening play.
Plus, Coca-Cola pays a very attractive dividend yield of 3.2%, making it an attractive buy and hold stock. The fact that Coca-Cola is a largely recession-proof stock that pays a high dividend yield is one of the reasons legendary investor Warren Buffett is one of the company’s largest shareholders.
Cheap Stocks: Bank of America (BAC)
Bank of America has been one of the best-performing stocks in the financial sector in recent months.
Year-to-date, BAC stock has produced a 33% return. Bank of America stock is up 59% since last October, remains affordable at around $40 a share.
In fact, Bank of America’s share price remains among the lowest of the major U.S. banks and financial institutions when you compare it to the likes of JPMorgan Chase (NYSE:JPM) at $155 a share and Goldman Sachs (NYSE:GS) at just over $325 a share.
That make it easy to add BAC to a list of cheap stocks, but maybe not for too much longer. Signs indicate that BAC may continue to have a bullish run in the months ahead.
With the economy reopening, consumer spending ramping up, and interest rates trending higher, conditions are optimal for lenders such as Bank of America to capitalize on the economic boom that is forecast this year and beyond.
Plus, Bank of America remains a rock-solid blue-chip stock. Unlike many other financial institutions, Bank of America is extremely conservative (some say “cautious”) in its lending practices.
That conservative approach helped Bank of America generate $17.9 billion in net income last year and maintain a dividend yield of 1.82% during the pandemic. Now, given how well-capitalized Bank of America is, it has been given permission from the Federal Reserve to resume share buybacks, which should help to further boost its stock price in the near term.
Grocery retailer Kroger was largely immune to the impacts of the pandemic. KR stock is up 16% so far in 2021 for a decent return. While the stock is not likely to skyrocket higher in the short term it should still produce consistent profits for investors.
Trading around $37 a share, the stock remains a bargain. Investors who like value and focus on the fundamentals will find a lot to like about Kroger stock, notably that its operating profit jumped to $4 billion last year from $2.3 billion in 2019, and the company’s sales increase of 14% last year beat Walmart’s 9% rise.
Going forward, Kroger aims to double its digital sales by 2023 and boost the profitability of those online sales. The company’s online sales already got a huge boost during the Covid-19 crisis, growing by 116% in the most recent fiscal year that ended on Jan. 30, to over $10 billion.
Kroger is also investing heavily in automation, particularly at its warehouse facilities and has forecast earnings per share for this year of between $2.75 and $2.95.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.