Snapping up low-cost stocks in this environment can be one of the best ways to amplify your portfolio when the broader market bounces back. The downturn investors saw over the last two years has caused the stock prices of many well-established companies to plunge to historically low prices, due to short-term concerns about their profitability and revenue generation potential. However, buying into these businesses may be a great choice, since I have no doubt that well-established brands have what it takes to bounce back and surprise Wall Street.
It’s worth noting that these low-cost stocks are also very low risk. If you compare them to the red-hot stocks right now, and weigh their returns over a multi-year timeframe, these undervalued gems are clear winners. Let’s dive into these three names right now.
AT&T (T)
You can buy AT&T (NYSE:T) for a bargain valuation of less than $15 per share, at the time of writing. Not only did this telecom stock decline to unreasonably low valuations due to the 2022 selloff, but the recent concerns around lead cables have worsened the stock’s position even more. That said, in my view, this is a great opportunity to snap up not just AT&T, but Frontier Communications (NASDAQ:FYBR) and Verizon (NYSE:VZ). All three of these stocks are trading well below their intrinsic values right now.
Of course, I will discuss stocks in other sectors in this article in order to provide more value to readers. So, let’s stick to AT&T for now.
The company generates very impressive revenue, and profits are expected to bounce back slowly. Currently, T stock also comes with a forward dividend yield of 7.6%. It is a very safe company if you consider its balance sheet, and the market has already priced in a lot of the lead cable litigation and dividend cut fears into the stock.
If you’re willing to get on board here and weather the storm, you’ll be looking at enormous gains over the very long-term. That’s especially true if the company keeps its dividends steady. Right now, AT&T is about as close to a no-brainer low-cost stock as it gets in this market right now.
Tyson Foods (TSN)
Tyson Foods (NYSE:TSN) is trading a hair above $50 as of writing, and considering its upside potential from here, I recommend snapping up the stock right now.
At the time of writing, TSN stock is down around 47% from its peak last year. However, the environment looks just right for the stock to start lifting off from here. That’s because Tyson operates a very stable business with enormous leverage over the consumer staples market. Expectations are also low due to earlier earnings misses, and I see little further downside risk here.
In contrast, Gurufocus considers the stock as “significantly undervalued” and believes it will have a fair-price value of almost $90 by 2025. It also helps that TSN stock pays a forward dividend yield of 3.7% with 11 years of consecutive dividend increases.
All things considered, Tyson Foods looks like nothing short of a bargain in this range.
PayPal (PYPL)
While PayPal (NASDAQ:PYPL) trades at around $75 per share, it is still a very low-cost stock. That’s partially due to the fact that PYPL stock used to trade around $120 even before the pandemic, making the current entry point with this high-growth stock simply too compelling to ignore.
Of course, let’s address why PYPL stock is down first. The market has pushed this stock lower, mainly due to PayPal’s already-declining user accounts growth slowing down to a crawl. Even before Covid, user growth came in around 15% year-over-year, but this number has since declined to less than 1% annual growth. Now, PayPal has consistently squeezed out more in revenue from its existing user base, providing reasonable revenue growth of around 8.6% on a year-over-year basis.
Despite these issues, I am confident that PayPal can recover. The company does operate in a highly-competitive environment. But its existing user base has proven to be very profitable, and willing to accept higher prices. PayPal is now a “mature” tech company, but still retains some headroom for growth, especially in some developing markets. And, I see the recovery of e-commerce as a long-term catalyst that will continue to support PayPal’s user growth.
This payment platform is accepted almost everywhere online, and the recent slowdown in user growth isn’t the end of the world for this company. I believe PYPL stock can shoot past $150 or more over the next couple years, especially as its aggressive share buyback program picks up.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
