Finding stocks with both growth potential and a reasonable valuation can seem nearly impossible now, with the market trading near all-time highs, and average stock valuations far higher than historical norms.
But just because the market is both breaking records and richly valued doesn't mean there aren't any values out there. Three of our contributing investors have identified three that are not only relatively cheap but also have great prospects to grow their earnings for years t come.
Keep reading to learn why Walt Disney Co. (NYSE: DIS), Toronto-Dominion Bank (NYSE: TD), and Meritage Homes Corp. (NYSE: MTH) make the cut as solid values that should help you grow your nest egg for years to come.
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When you wish upon a stock
Demitri Kalogeropoulos (Disney): Disney is one of just a few stocks in the Dow that has lost ground even as the broader market climbed by double digits this year. That performance gap could set investors up for nice long-term returns, though.
Yes, the entertainment giant is struggling through a painful disruption of its media business right now. As subscribers flee costly pay-TV packages in favor of on-demand streaming services, its advertising and distribution revenue streams have come under pressure. In fact, Disney's media division endured an 11% profit slump over the past nine months.
Yet the company's other segments are picking up most of that slack, with the parks and resorts unit doing the heavy lifting right now thanks to the Shanghai Disney launch. That successful park just entered its second year after having trounced management's attendance goals for its inaugural season.
Its movie business, meanwhile, has a packed pipeline with major releases across the Pixar, Lucasfilm, Disney Pictures, Marvel, and Disney Animation studios set for fiscal 2018. And with a valuation of just 18 times earnings, compared with the broader market's P/E of 25, there's less of a risk that investors will overpay for that diverse entertainment business by purchasing Disney shares in hopes of building wealth over the next few decades.
Slow and steady has delivered decades of dividend growth
Reuben Gregg Brewer (Toronto-Dominion Bank): For all the hype about cryptocurrencies, boring old banks probably still play a vital role in your financial life. That's one reason I like, and own, Toronto-Dominion Bank. The other is that it's the largest bank by total assets in the very stable Canadian banking market, drawing 61% of its 2016 earnings from its home country, yet it still appears to have plenty of growth opportunities ahead in the United States, from which it drew 26% of 2016 earnings. (The bank's wholesale business and TD Ameritrade made up the rest). TD Bank is a top 10 bank in the U.S. with exposure to just 15 states.