Insider Monkey

15 Best Very Cheap Stocks to Buy Right Now

Fahad Saleem
11 min read

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In this article, we will take a look at the 15 best very cheap stocks to buy right now. To see more such companies, go directly to 5 Best Very Cheap Stocks to Buy Right Now.

Stock valuations are again a topic of discussion currently as some analysts are warning against the market’s optimism that is sending tech valuations soaring to record levels. While several analysts believe the Federal Reserve to raise interest rates just one more time in 2023 before hitting a temporary pause, there’s a section in the market that is hoping for rate cuts. This optimism is having a direct effect on the technology sector which looks great in the short term. The S&P 500 Information Technology Index is up 23% in 2023, compared to a 7.7% gain of the broader S&P 500 index in the same period. According to an analysis by Bloomberg, this was the IT sector’s strongest start to a year since 2009. However, this optimism is unfounded and could cause pain for investors in the coming weeks or months. The Bloomberg report said that tech stocks in the S&P 500 are trading at about 25 times their prospective earnings.

“To justify such a multiple, the Fed would need to cut rates by at least 300 basis points,” the report said, citing data from Bloomberg Intelligence.

The report cited Quincy Krosby, chief global strategist at LPL Financial, who said the following:

“Traders are betting on a big about-face in the Fed’s interest-rate policy, but there is no certainty as to whether, and when, this will happen. Longer-term, the sector’s growth prospects are attractive, but not at the current valuations.”

Data from Research Affiliates shows that valuations of US stocks are reaching extremely high levels.

Research Affiliates looked at the CAPE ratio metric and found that the US stock benchmark trades at a multiple around 29, pricier than it has been more than 90% of the time since 1881.

But not all sectors emit this euphoria. The banking sector, which was devastated by the collapse of multiple banks earlier this year, is still reeling from steep share price declines. Some analysts believe some bank stocks are offering attractive entry points since the fundamentals of several banks that are currently down remain strong.

Baird analyst David George recently said in a note that the sentiment around bank stocks has been “abysmal” over the past few weeks and “market participants seem to be pricing in permanent profitability destruction, which we think is unlikely.” The analyst said that the banking sector’s risk/reward is “very attractive following panic selling.” George believes these stocks have priced in a “catastrophe.”

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