3 Cheap Stocks to Buy With Your Tax Refund Check

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David Jagielski, The Motley Fool

Fri, Mar 7, 2025, 3:30 AM 5 min read

The average tax refund in 2024 was $3,138, which was similar to the $3,167 it averaged the previous year. While tax refunds will vary depending on a person's individual financial situation, if you receive one, it can provide you with some extra cash you can put toward paying down debt, adding to savings, or perhaps even investing in stocks.

If you're in a good-enough financial position where you can allocate some of your tax refund into stocks, there are many intriguing options that could pay off long term. Three stocks you may want to consider now are AbbVie (NYSE: ABBV), Alibaba Group (NYSE: BABA), and FedEx (NYSE: FDX). Here's why these stocks can be excellent options to add to your portfolio today.

1. AbbVie

AbbVie is a top healthcare company with a market cap around $370 billion today. It has a diverse business with plentiful growth opportunities, and it also pays an attractive yield of 3.1% -- that's more than double the S&P 500 average of 1.3%.

In recent years, investors have been worried about the company losing patent protection for top-selling arthritis drug Humira. But the company's newer immunology drugs, Skyrizi and Rinvoq, combined for $17.7 billion in revenue last year, proving to be effective replacements for Humira, which brought in just under $9 billion as its sales fell by 38%.

AbbVie's robust business is diverse and includes treatments related to immunology, oncology, neuroscience, and aesthetics. One intriguing opportunity may be in aesthetics, which could be an underrated growth catalyst in the future as GLP-1 weight loss treatments rise in popularity and more people turn to Botox (which AbbVie owns) to further enhance their appearance.

Trading at 17 times its expected future earnings (based on analyst expectations), AbbVie looks like a solid buy for the long haul for both its dividend income and growth potential.

2. Alibaba Group

Chinese tech company Alibaba has been picking up steam of late, as it has been gaining the attention of growth investors. In just the past six months, it has risen by more than 60%.

Last month, it announced the release of its newest artificial intelligence (AI) chatbot, Qwen 2.5-Max, which it says exceeds ChatGPT-4o and other top AI models. Investors were also bullish on the news that Apple was partnering with Alibaba on the development of AI-powered features for its phones.

Alibaba's growth rate hasn't been all that exciting, with sales rising by just 8% for the last three months of 2024, to $38.4 billion. But with its AI looking to be the real deal and even leading to a partnership with Apple, that could be a great sign of things to come for the business in the future.

This is a stock that has looked to be long overdue for a rally (last year I said it may have been the most underrated AI stock to own), and this could still be the early stages of a strong bull run for Alibaba. At just 13 times expected future profits, the stock could be a steal of a deal. On top of its growth potential, Alibaba also provides you with a solid dividend yield of 1.5%.

3. FedEx

Rounding out this list of top stocks to buy is shipping and logistics company FedEx. It yields 2.1%, and for long-term investors, this can be the type of investment you can buy and forget. E-commerce continues to be a huge opportunity for the business, as that market is estimated to grow at an annual rate of around 19% through the end of the decade, according to Grand View Research.

FedEx plays a pivotal role in helping move packages to their destinations, and while economic conditions may not be ideal right now under the looming threat of tariffs and trade wars, in the long run, the business is in a good position to benefit from promising opportunities in e-commerce. It hasn't been an easy path for FedEx of late, with sales declining by 1% over its past two quarters and operating income declining by 23%, but as the company works on improving efficiency and it invests in AI, that should help improve its bottom line in the future.

Although it may be a bumpy road ahead for FedEx in the short term, this can be a great investment to hold on to for years. At a forward price-to-earnings multiple of just 12, this is another cheap buy.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Apple, and FedEx. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

3 Cheap Stocks to Buy With Your Tax Refund Check was originally published by The Motley Fool

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