Five Cheap Stocks in a Pricey Market

By Dan Caplinger, The Motley Fool

The stock market has been on a tear over the past two years. With the Nasdaq having recently hit a 10-year high, the Russell 2000 at an all-time record, and the S&P 500 hitting multiyear highs repeatedly in recent months, anyone who bought a broad-market index fund during the financial crisis has been laughing all the way to the bank.

But a rising stock market isn't perfect, especially if you have new money to invest. As the market goes up, it gets harder and harder to find stocks that haven't gotten ahead of themselves. Are there any stocks that actually carry attractive prices anymore? Later in this article, I'll give you the names of five stocks that fit the bill even in a booming market.

Trading Two Markets

Unfortunately, this investing environment has largely polarized stocks into two categories. On one side of the fence are companies like Molycorp (MCP) and Silver Wheaton (SLW) , which have cashed in on huge investor interest in commodities. Throughout the market, across hot sectors from energy to mobile computing and smartphones, you'll find lots of stocks that have had their shares bid up to the stratosphere.

On the other hand, plenty of stalwart companies haven't produced impressive performance. Cisco (CSCO) and Microsoft (MSFT), for instance, have plodded along with reasonable results, but it's clear that their highest-growth heydays are over. That has depressed investor interest in their shares, which have fallen significantly in the past year.

The key to finding good yet attractively priced stocks is to avoid both of these categories. Ideally, you want companies that have good growth prospects for the future, but you don't want to pay double or triple what you would've paid two years ago for the same shares.

Finding Needles in the Haystack

I did a simple screen looking for stocks with those attractive attributes. In particular, I wanted relatively low earnings multiples, double-digit future growth estimates, and share prices that hadn't participated in the bull market over the past year. Here are the stocks that topped the list:

Stock

P/E

5-Year Expected Growth Rate

1-Year Return

Best Buy (BBY) 10.1 10.2% (30.2%)
Bank of New York Mellon (BK) 14.1 12.8% (5.6%)
Gilead Sciences (GILD) 12.2 15.2% (2.2%)
Whirlpool (WHR) 10.8 13.0% (19.2%)
Washington Post Co. (WPO) 14.0 29.4% (12.1%)

Source: Yahoo! Finance

These stocks are as eclectic as the overall market, but they share common traits: Each has suffered setbacks recently, but has the strength to get through those setbacks if it starts executing better. For instance, Best Buy has suffered as consumers have disappointed with low sales of high-priced TVs, but it has the ability to cash in on mobile and tablet sales going forward. Bank of New York Mellon may not have the same brand-name loyalty as bigger Wall Street banks, but that could be a positive going forward if it tries to capture disgruntled customers from competitors. Gilead's profits fell as reduced fears of a flu pandemic hurt sales of Tamiflu, but in the long run, the world will face future problems which Gilead will be able to address.

In addition, sometimes even staid companies have more growth potential than you'd think. Whirlpool could benefit as emerging-market consumers improve their standard of living enough to buy entry-level appliances. And despite the problems of the newspaper industry, Washington Post has a diversified set of businesses under its umbrella, including the Kaplan education franchise.

Keep Looking for Cheap

Regardless of how high the stock market goes, you can always find stocks that still have some value left in them. Sometimes you just have to look a bit harder. But by refusing to compromise and demanding stocks with at least the potential for growth to go with decent prices, you'll stand the best chance of avoiding damage in the next market downturn while locking in good long-term prospects for your portfolio in the coming years.



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Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government"in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and you will not be accepted civil servants here just because you say you are here to do the right thing.

May 28 2011 at 11:54 PM Report abuse rate up rate down Reply
Jetncat

get out! Before you still have your shirt on your back! I am shirtless today

May 04 2011 at 12:54 PM Report abuse rate up rate down Reply
americandoo

TODAY IS THE PERFECT TIME TO START BUILDING THESE TYPE OF CITIES & NECESSARY.

"TIME FOR ALL AMERICAN INVESTORS TO STEP UP TO THE PLATE LEAD AMERICA BY INVESTING IN AMERICA"


"WHEN YOU INVEST IN AMERICA YOU INVEST IN YOUR CHILDREN'S FUTURE..OUR FUTURE"

"INVEST IN A LARGE PROJECT THAT WILL MAKE A DIFFERENCE FOR THE FUTURE"

Similar to this idea;

In past history when the USA needed a Moral Boost to our Country we built such
things as;

The Largest Bridges, Dams, Statue Of Liberty, Worlds Largest Futuristic
Fair, Landed on the Moon etc. It is overdue for us and time for us to build the
Largest & Best Futuristic CITY IN THE WORLD, using ALL OF OUR CUTTING EDGE
TECHNOLOGY AND ALL OF CHINA'S, GERMANY, RUSSIA and all other Countries CUTTING
EDGE TECHNOLOGY and BEYOND ALL OTHERS ! !

We need to find a location in the USA somewhere that has the space for our
"FUTURE CITY PROJECT" where our Future City will Utilize all of the Newest and
Cutting edge combined technology in the world to build our City using entirely
GREEN energy with 0 pollution

Our City Could Have A NEW VERSION OF THE STATUE OF LIBERTY, Holding the torch
in one hand and our GREEN PLANET EARTH in her other hand, her head raised high
looking Up at the sky.

This would make a GREAT FILM & Could be based on a True Story with the help of A
TEAM OF BIG MONEY INVESTORS ! ! !

Use your Imagination and think how GREAT THIS WOULD BE FOR AMERICA & OUR
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" COULD BE A HISTORICAL EVENT IN OUR HISTORY BOOKS FOR OUR NEXT GENERATION
TO FOLLOW"

"DREAM BIG...DO BIG" "LETS REBUILD AMERICA'S FUTURE TOGETHER THE RIGHT WAY"

Thank You, Respectfully, Michael V. Caldwell, Proud American
Inventor/Dreamer..Dream Big..Do Big ! ! !

May 04 2011 at 10:10 AM Report abuse rate up rate down Reply
heybeerman95

Washinton Post Co. at $444.89? Cheap? What the hell are you smokin?

May 04 2011 at 9:34 AM Report abuse +1 rate up rate down Reply
Franco

Buy cheap, you get cheap, sounds familiar?

May 04 2011 at 4:46 AM Report abuse rate up rate down Reply
glasses60

I would not be a buyer of any of the recommended stocks. With the horrible inflation we are experiencing under this
administration there is not much discretionary income left to invest in anything. The middle class is disappearing. Who will foot the bill with Obama's plan to redistribute wealth?

May 03 2011 at 10:32 PM Report abuse -2 rate up rate down Reply
Philinbos

Whirlpool? No thanks... There is no longer any quality in their products

May 03 2011 at 9:57 PM Report abuse rate up rate down Reply
dgs755

The stock market has been fraudulently manipulated by the Federal reserve and the wall street crooks hoping to get the average retail investor back into the rigged casino so they can fleece them. And it has all been done at the expense of the American taxpayer via debt and the inflation created that everyone but the Bernanke can see.
These people need to be put in jail and the entire Federal Reserve that aint so Federal should be abolished.

FED UP pun intended !

May 03 2011 at 7:52 PM Report abuse rate up rate down Reply
Robert & Lisa

The poverty rate has almost doubled since Obama took office. His real distribution of wealth plan was not from the rich to the poor as most assumed, but from the poor and middle class to the rich. With his ultra rich friends getting richer and we the people getting poorer, the facts speak for themselves. WHY IS NO ONE REPORTING THIS?

May 03 2011 at 7:17 PM Report abuse -1 rate up rate down Reply