In a volatile market, many investors follow the strategy of chasing their winners higher. Money has flooded stocks such as Nvidia (NASDAQ:NVDA). However, many of these stocks are objectively overvalued. While they may still be good investments, they’re hardly good deal stocks.
On the other hand, many investors understand the value of buying stocks when they’re on sale. But not every stock that is on sale is a real deal. That’s where the axiom “some stocks are cheap for a reason” applies.
To find real deal stocks, you’ll want to find stocks trading at a low price and with a chance for significant upside. In some cases, you’ll want to look at reliable dividend payers. That way, even if the stock doesn’t move higher right away, you benefit from collecting a reliable source of regular income. However, while that may be an approach endorsed by Warren Buffett, deal stocks are often still in growth mode.
Pfizer (PFE)
At 12x forward earnings, Pfizer (NYSE:PFE) is slightly less of a deal than a few months ago. However, it’s still trading at a discount to its mean historical P/E ratio of 19.32x over the last 10 years. The stock is also trading at a discount to the large biotechnology sector, which has a P/E ratio of 16.7x. Pfizer also pays an attractive dividend with a current yield of 6.05%.
PFE stock has been beaten down due to declining sales of its COVID-19 products. Some investors are also concerned about the company’s potential to be named in lawsuits. However, the bullish case for Pfizer comes from its pipeline, which has expanded with the company’s acquisition of Seagen (NASDAQ:SGEN). Pfizer is also getting into the weight loss arena.
It’s still likely to take some time before these drugs are on the market, but the company is projecting 25% earnings growth in the next 12 months. Analysts are also getting on board, with 10 out of 25 analysts issuing a Strong Buy rating for the stock.
BorgWarner (BWA)
BorgWarner (NYSE:BWA) is next on this list of great deal stocks. The company is an original equipment manufacturer (OEM) in the automotive industry. It also partners with many electric vehicle (EV) manufacturers.
As you might imagine, that relationship to the EV industry has been bearish for BWA stock, down 38% in the last 12 months and 28% in just the last six months. However, the stock trades at just 7x forward earnings, about half its historical average in the previous 10 years.
That alone should make it time for investors to take a closer look. When they do, they’ll see a company that has partnerships with notable EV makers, including Li Auto (NASDAQ:LI), which is rapidly picking up market share in China.
BorgWarner is projecting 15% earnings growth in the next 12 months. Analysts forecast 28% share price growth, and 9 out of 19 analysts give BWA stock a Strong Buy rating.
Penn Entertainment (PENN)
Over the past five years, sports betting has been one of the fastest-growing sectors. At the end of 2023, 38 states, plus the District of Columbia, have approved sports betting in some form. But Penn Entertainment (NYSE:PENN) has been a laggard.
The reason is the company’s partnership with ESPN, which it undertook after parting ways with Barstool. The company will pay the Walt Disney (NYSE:DIS) subsidiary $1.5 billion in cash over the next 10 years. ESPN can also exercise $500 million of warrants to buy 31.8 million of PENN common stock.
That payment to ESPN weighed on the company’s earnings in its most recent quarter. And it’s likely to continue being a headwind until the company launches the ESPN BET app at on-premise gaming locations in New York, which is expected to happen prior to the start of the 2024 NFL season.
In the meantime, investors can snag PENN stock at a discount. The company is expected to generate positive earnings in the next 12 months. Analysts give the stock a $26.75 price target, which is 56% higher than the stock’s closing price on Feb. 23, 2024.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
