3 undervalued stocks to buy before they rebound


For investors looking for real-value stocks, few options were available until this year. Indeed, the number of undervalued cheap stocks in the market is now staggering, with the valuations of many stocks plummeting past their peak levels.

Some may consider last year’s valuations unsustainable, and they probably were. But with interest rates near zero for so long, such valuations were natural.

Now investors are asking, “What is the right price to pay for a stock?” Indeed, depending on how investors value various factors, two different investors can generate completely different valuations for the same company.

That said, there are some stocks that most investors view as undervalued bargains. In this article, I’m going to highlight three such companies that I would put in this category right now.

Many companies have low valuations for good reasons. However, investors who are patient enough to accept some short-term pain can see the long-term impact on wealth creation that holding undervalued, high-quality stocks can have for the long term.

IBM IBM $136.73
AXP American Express $162.63
COMQ Qualcomm $147.14

International Business Machines (IBM)

Source: Twin Design / Shutterstock.com

IBM (NYSE:IBM) is a company that, until recently, had been down for many years. Indeed, since its peak in 2012-2013 and its subsequent decline, IBM stock has remained relatively stable at $120-150 per share.

That made sense, given the company’s shift away from hardware. But for several years, IBM has been reshaping its business again. And by recently spinning off its managed IT services business, IBM has sought to become more of a pure AI and cloud computing player.

Given the growth of these sectors, one would think that IBM’s valuation should have been boosted. However, the shares trading at only 22 times IBM’s revenueowners of its shares enjoy one of the cheapest exposures to AI and cloud in the stock market.

Maybe investors think this old dog can’t learn new tricks. IBM may cede most of its market share to more aggressive and focused companies.

Or maybe long-term investors looking for steady growth and a 5% dividend yield would do well to keep this stock and be patient. After all, even if IBM doesn’t do much over the next decade, with a few small dividend increases, investors will receive more than half the value of their initial investment. This translates into a pretty good risk-reward ratio in my book.

American Express (AXP)

the American Express logo carved into the wood

Source: First Class Photography / Shutterstock.com

American Express (NYSE:AXP) is one of the world’s leading credit card payment processors. A credit card player focused on high-end consumers, American Express has traditionally offered better benefits than its peers.

With demand for travel-related services increasing globally (travel services are another key aspect of American Express’ business model), the company has generated impressive growth. However, after looking at the long-term chart of AXP stock, I think it’s clear that investors have started paying less and less for its growth.

Unlike its credit card peers, American Express’ valuation is very juicy. Trade at only 17 times tracking profits, investors get a high-growth stock, with a larger target market than its peers. Plus, investors get a modest but meaningful dividend yield of 1.3%.

Those who are optimistic about the continued transition to credit and moving away from cash should consider taking a bullish position on AXP.

Qualcomm (QCOM)

Source: nikkimeel / Shutterstock.com

Qualcomm (NASDAQ:COMQ) advancements in technology have contributed more to wireless products than those of any other organization. The company’s most recent contributions have focused on facilitating the transition to 5G mobile networks.

Qualcomm has indeed established itself as one of the leading providers of 5G products and services. As a result, Qualcomm shares have moved significantly above their pandemic lows.

It’s safe to say that the 5G revolution is still in its infancy and Qualcomm looks poised to lead the wireless industry’s transition. The company’s underlying fundamentals indicate that QCOM stock has ample headroom. Indeed, despite the company’s strong and cyclical growth drivers under this business, QCOM stock is a relative bargain, as it trades at just 13 times his earnings.

For a company of this quality, I think that’s an incredibly attractive valuation, and the shares also offer investors a meaningful 2% dividend yield. For long-term investors looking for a place to hide, QCOM stock is a great place.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative and long-term investment outlook.


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