Ford tops the list of the cheapest stocks in the market right now
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Despite the market’s current precarious outlook, long-term investors looking to buy stocks for their portfolio will likely find plenty of value opportunities after this year’s large pullback. CNBC PRO did a screen to determine which stocks were the least expensive relative to other market participants and what their historic valuations were. Here’s the criteria: Cheap relative to the market: Forward P/E below 17.38 (The S & P 500’s current forward P/E.) Cheap relative to history: Current forward P/E 50% below its average valuation for the last five years Earnings holding up: EPS for this year expected by analysts to increase or fall no more than 5% Here are the 9 S & P 500 stocks that made the cut: Ford tops the list with its valuation collapsing this year as investors lost some of their enthusiasm for its electric vehicles, causing the shares to return to a price-earnings ratio more befitting a century-old automaker. Wall Street believes that Ford’s long-term plan for electric vehicle growth is not being given enough credit by this valuation. Citigroup’s last week note stated that U.S. data points could prove reassuring over the next months. “We think sentiment in Ford shares will improve, especially since the underlying story of Ford (including key EV launches/ramps), appears to be going in the right direction. This suggests the stock should respond well to positive auto cycle developments.” According to the company, the share price could increase over the following three months. Forward P/E refers to the price-earnings rate based on the company’s earnings for the next 12 month. Moderna and Netflix, pandemic-dancing darlings, are the rest of the top list. Their valuations crashed back to Earth as the U.S. tried to get on with Covid. Not all shares are beaten up. Due to rising oil prices, a few energy stocks are included in the list. They will see an increase in earnings this year. Wall Street is noting that Exxon Mobil has a forward PE of 10.7. Evercore ISI upgraded Exxon to a “good” rating on Tuesday. This was despite the 61% price increase this year. The analyst wrote in a note that he believes it worthwhile to consider the right’ multiple, “in light of the longer-term energy cycle ahead as well as the strong earnings profile (rising return) at XOM and Integrated Oil peers.” The names of most companies are not cheap because they do not include energy stocks. Shares like Ford may continue to be cheaper if there is a recession. This could happen because auto sales will take a huge hit. These stocks could still be worth a historical buying opportunity if there is no significant downturn in the U.S. —With reporting by Michael Bloom
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