Solid long-term investing should be a little more boring that it usually is for the average investor. Trying to get cute and buy dirt-cheap stocks without catalysts can often end up costing investors hard-earned money. Finding blue chip companies whose shares are beaten down and undervalued is a less exciting strategy than buying dirt-cheap asset plays with a catalyst, however sticking with the big and boring companies pays dividends over the years if you stick to your discipline and realize that the greatest bull markets usually are, well, kind of boring.
Look at gold: Its rise has been pretty meteoric, yet gold bulls still get looked at funny at investment conferences and certainly would garner little respect for their incredibly boring yet incredibly brilliant investment at the Berkshire Hathaway (BRK.A) annual meetings. That said, a boring investment in a dull yellow metal has outperformed just about all other investment classes over the past five years.
Here are 8 dirt-cheap stocks to consider. Some of them may be too boring to diligently research for many of you, but I would counter that during today’s financial engineering armageddon, it’s far better to invest like an 80-year-old than to invest like a 20-year-old. In fact, go ahead and sell call options against your stock in these names if, like me, you think the overall markets may have a bit more downside left before finding a permanent low.
Teradyne (TER) is a cheap Magic Fomula stock that keeps getting cheaper. If metrics like a 6.60X P/E ratio, a 2.77X EV/EBITDA Ratio, an 8X forward estimate, and a 32% return on equity don’t get you out of bed early in the morning, I don’t know what will. TER lost a good deal of money a couple of years ago, but is slowly making its way back. Because of the losses in recent years, Graham would probably avoid this name at this point in time, but that doesn’t mean the shares aren’t a bargain at current levels.
SanDisk (SNDK), another Magic Formula name, has rallied a bit higher over the past few trading sessions, but shares are still relatively undervalued at current levels. Brian Pampcara at the Motley Fool did a good job of explaining that Sandisk is really in the Flash business more than anything else, and described why Flash was in a long-term bull market, because tablets like the iPad depend on Flash memory versus hard drives. With a trailing P/E ratio of just 7X, Sandisk shares appear to be a good bargain at these levels. SNDK has a forward P/E of 8.33X with a price-to-book ratio of 1.45X and an EV/EBITDA of only 4.65X.
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