Let’s not sweeten the deal: it’s been a trying year for most investors. Since hitting their all time high closing records, the iconic Dow Jones Industrial Average and widely followed S&P500 decreased by more than 10%. It’s been an even uglier descent for those dependent on growth Nasdaq Compoundwhich has lost up to 31% of its value peak to peak since November and is squarely in the grip of a bear market.
While the speed and unpredictability of bearish moves during bear markets can be disconcerting and test investors’ resolve, history conclusively shows that these declines are buying opportunities, at least for investors. patient investors. Over time, every notable drop in major indexes, including the Nasdaq Composite, was eventually erased by a sustained bull market.
For cash-flow investors looking to grow their money, cheap stocks abound. The following are three of the cheapest stocks you can buy with confidence right now, even with the Nasdaq in a bear market.
Ford Motor Company
Early investors in exceptionally cheap stocks can pick up as Nasdaq plunges is automaker Ford Motor Company (F 3.30%). Ford shares are currently valued at just six times Wall Street’s projected earnings for 2023.
Similar to the broader market, investors have held back Ford shares and other auto stocks over the past five months. Ford stock has lost half of its value during this period, with Wall Street clearly concerned about the growing prospects of a recession in the United States, as well as continuing supply chain problems affecting the ‘automobile industry. Although these are significant headwinds, they offer investors the opportunity to buy a profitable and well-known company at a discount.
The most exciting thing about Ford is the constant electrification of its product line. By the end of 2026, the company plans to invest $50 billion in electric vehicle (EV) and battery research. Ford plans to operate its electric vehicle business separately from its combustion engine vehicles, aiming to launch 30 new electric vehicles globally by the middle of the decade. By 2026, CEO Jim Farley predicts his company will produce 2 million electric vehicles a year.
Although most investors are focused on Ford’s domestic ambitions – it’s a Detroit automaker, after all – they might overlook its international reach. The company has notably succeeded in increasing its sales in China by almost 4% in 2021 to around 624,000 units. Ford has the deep pockets, the necessary infrastructure and the brand awareness to become a major player in China, the world’s largest auto market, over time.
Another reason investors can bank on Ford is its industry-leading truck lineup. The company’s F-Series pickup has been the top-selling truck in the United States for 45 consecutive years. Additionally, the F-Series has been the best-selling vehicle in the United States, period, for each of the past 40 years. Since trucks have significantly better margins than sedans, steady F-Series sales provide Ford with significant operating cash flow.
A second storage solutions company is a second storage solutions company western digital (WDC -2.22%). Based on Wall Street consensus, Western Digital is valued at just six times expected earnings for next year.
Similar to Ford, the big hit against Western Digital is going to be its cyclical nature. When the US and global economy is struggling, it is not uncommon for sales of personal computers and other technology orders to decline.
The other potential downside for Western Digital and its peers is that they have a habit of over-provisioning storage solutions when pricing power improves. However – and this is an important “however” – pandemic-related supply chain issues have all but ensured that the company and its peers will not be able to ramp up production in 2022, if not well. beyond. This “bad” news is actually good news in disguise, as it should help to build pricing power over the products it sells.
On the other side of the coin, Western Digital has multiple catalysts for growth. It has benefited from increased personal computer sales during the pandemic and, at least in the short term, has received a boost from the increased storage requirements of next-generation game consoles.
But the biggest catalyst of all for Western Digital arguably has yet to take shape. In the coming years, standard data center hard disk drives (HDDs) may be replaced by solid-state drives using NAND flash memory. NAND is generally less expensive and offers more storage capacity than standard hard drives. By mid-decade, Western Digital could very well be riding a wave of growth with its NAND solutions.
If you need another good reason to buy Western Digital, consider this: Activist investor Elliott Management is asking the company to split into two businesses (one for legacy PC hard drives and one that focuses on flash memory). While nothing is guaranteed when activist investors get involved, the goal of investor activism is to create shareholder value. If Elliott Management sees hidden value, you might too.
Teva Pharmaceutical Industries
The third ultra-cheap company investors can buy with confidence on the Nasdaq in a bear market is pharmaceutical stock Teva Pharmaceutical Industries (SUITS YOU -0.51%). Teva is arguably the cheapest stock of the three I’ve listed here, with a P/E multiple for the year ahead of just over three.
As pandemic and recession fears have hit Ford and Western Digital, Teva’s market share endured over the past five years is somewhat self-inflicted. The company grossly overpaid generic drug maker Actavis, which inflated its debt; it saw its best-selling drug lose its exclusivity (Copaxone for multiple sclerosis); and he faced a mountain of litigation. As for the latter, Teva has been sued by 44 state attorneys general for its role in the opioid crisis.
While Teva has faced its fair share of headwinds, there are also plenty of reasons to believe things are looking up.
For example, investors should understand that, on a macro basis, healthcare stocks are quite defensive. No matter how poorly the stock market performs, people still get sick and need prescription drugs and health services. This means that historically high inflation and a bear market should have virtually no impact on Teva’s operations.
On a more company-specific basis, CEO Kare Schultz has done wonders since taking the reins in late 2017. In just over 4.5 years, Schultz has reduced the company’s annual operating expenses. billion dollar business and reduced net debt to north of $34. billion to $20.7 billion at the end of March. Although there is still work to be done, Teva’s financial flexibility is better than it has been in a long time.
Additionally, Teva has made notable progress with its oversight of opioid-related litigation. Despite losing a lawsuit in New York, the company won in California and settled with regulators in a number of other key states. It is entirely possible that the gray cloud of Teva will disappear within the next two months.
While Teva doesn’t offer the growth prospects of Ford or Western Digital, it seems incredibly cheap given its potential to generate $2 billion or more in annual cash flow.