Stocks to buy now
If you want an investment priced at a bargain with huge growth potential, it's a great time to hunt for cheap stocks to buy now.
So far this year the stock market has put in a solid performance with the S&P 500 up a little more than 17% and the Dow Jones Industrial Average rising a bit more than 18%.
It has been a very broad advance with the aggressive U.S. Federal Reserve policy pushing money into a wide range of securities.
About 470 of the S&P 500 constituents have risen so far this year and 29 of 30 Dow issues are higher in 2013. There is a strong opinion among major market strategists that as long as the Federal Reserve keeps interest rates at or near zero, money will continue to flow into equities.
If this is the case, then the lagging issues may well be bargains with high profit potential.
The key to identifying to bargain issues is to apply some measure of valuation to identify those stocks that are mispriced by the market and may move higher.
Many of the stocks that are down including former tech darlings like Apple Inc. (Nasdaq: AAPL) and EMC Corp. (NYSE: EMC) are struggling to provide the type of earnings and sales that will get growth enthusiasts excited enough to begin buying the shares again.
Others like J.C. Penney Company Inc. (NYSE: JCP) are experiencing severe operational and financial issues that may preclude them from a strong price recovery anytime soon.
One measure of value used by many value investors is the price-to-book-value ratio. This is simply an accounting measure similar to a net worth statement. When companies fall out of favor and trade for less than book value they can be considered a bargain.
The shares may be out of favor for many reasons. It could be part of a sector that's going through the down portion of its economic cycle, but eventually the undervaluation attracts investors and invites takeover offers that more closely reflect the asset value.
Look for those underperforming S&P 500 stocks that trade for less than book value as potential bargain issues with strong recovery potential.
Why These Are Among the Best Stocks to Buy Now
One of the most successful long-term strategies when hunting for the best stocks to buy is contrarian investing.
It's a rather simple strategy: buy something when it is out of favor and everyone else is selling, which leads to bargain prices. Then wait for sentiment to turn, sell and pocket your profit.
Many contrarian investors are taking a long, hard look at one particular sector: gold miners. This is a sector that has not only been battered by falling prices for the gold they mine hurting profitability, but also a sector plagued by poor management at many companies.
But a closer look shows why some of these miners are among the best stocks to buy now when prices are low and potential is soaring.
Stocks to Buy: These Returns Nearly Tripled the S&P 500's
Barron's recently published its annual list of the 500 top U.S. and Canadian companies based on sales growth, cash flow, and return on investment, delivering juicy choices for investors on the hunt for stocks to buy.
Apple Inc. (Nasdaq: AAPL) took the top spot, with Wesco International (NYSE: WCC) snagging second. Western Digital Corp (Nasdaq: WDC) grabbed No. 3. and DaVita HealthCare Partners Inc. (NYSE: DVA) was No. 4. C.H. Robinson Worldwide Inc. (Nasdaq: CHRW) rounded out the top five.
Landing a spot on the coveted roster is indeed an accomplishment. But it hasn't always been a reliable judge of how a company's shares will perform in the future.
So, for the second consecutive year, Barron's teamed with financial data and software company FactSet Research Systems Inc. to find the cheapest stocks among its 500 list. FactSet used price/earnings ratios based on earnings estimates for each company's current fiscal year.
Last year's "cheap" list of 30, tracked for a year, averaged a 42% return over the period ended April 26. That's nearly triple the 15.6% gain over the same period for the Standard & Poor's 500 Index.
This year's bargains are a mixed lot. Here's a closer look at the lowest priced stocks to buy among the Barron's 500.
Stocks to Buy: Why Warren Buffett Is Hunting in Europe
Investment guru Warren Buffett is looking for stocks to buy now in struggling Europe- a region many investors refuse to touch thanks to the destructive Eurozone debt crisis.
"We've bought some European stocks," Buffett said. "And the fact that there are troubles in Europe, and there are plenty of troubles, and they're not going away fast, does not mean you don't buy stocks. We bought stocks when the United States was in trouble, in 2008 and it was in huge trouble, and we spent $15.5 billion in three weeks in between September 15 and October 10."
One reason for Buffett's interest in Europe: plenty of cheap buys.
Stock Market Today: What's Next After Dow at 15,000
After record rallies last week took benchmarks to fresh highs, the stock market today took a breather.
Just before noon, the Dow Jones Industrial Average gave back 18.70, or 0.12%, to 14,955.26. The Standard & Poor's 500 Index inched higher by 1.55, or 0.10%, at 1,615.96. The Nasdaq eked out a 0.28%, or 9 -point gain, at 3,388.14.
Stocks surged Friday after the April jobs report handily beat expectations. The Dow broke 15,000 for the first time, and the S&P surpassed and finished above 1,600. For the week, the Dow added 261 points, or 1.8%, at 14,973.96. The S&P tacked on 32 points, or 2%, at 1,614.42. Helped by tech, the Nasdaq gained 99 points, or 3%, at 3,378.63.
"I think investors got a lift in their step from Friday's jobs report," Mark Luschini, chief investment strategist for Janney Montgomery Scott told CNN Money. "[But] this week, we're absent anything newsworthy."
Indeed, the week's economic calendar is quiet, and earning season is winding down. Notable reports this week include The Walt Disney Co. (NYSE: DIS) on Tuesday; Dish Network Corp. (Nasdaq: DISH) and Groupon Inc. (Nasdaq: GRPN) on Wednesday; and Priceline.com Inc. (Nasdaq: PCLN) on Thursday.
While the number of companies that have reported this season nearly doubled from 855 in 2009 to 1,655, the percentage that have beaten estimates remains at the same 59%. Moreover, just 52% have beaten revenue estimates, compared to the average of 60% since the bull market began in 2009, data from Bespoke Investment Group reveals.
That supports the consensus view that the Fed's market-friendly stimulus measures are driving stocks.
But will the gains stick?
For just the sixth time in 30 years, markets were up in January, February, March and April, according to Schaffer Investment Research. May got off to a robust start, but a cache of analysts are warning of a looming pullback.
Stocks to Buy: Meet the New Defense Winners
One segment of the stock market that is widely ignored right now is the defense sector - but as contrarians know, that means there are hot stocks to buy now if you know where to look.
The reason defense is shunned is that future defense budgets will be cut to rein in government spending and hopefully reduce the U.S. budget deficit.
Some programs have been hit by the sequester. Other initiatives are winding down as the endless flow of dollars that has been seen since 9-11 is slowing.
The most recent budget proposals call for reducing defense spending by an additional $150 billion over the next 10 years. That's on top of the $487 billion of cuts already in place and the $41 billion spending cuts mandated by the sequester.
All of this has dampened enthusiasm for defense stocks. While some of the larger defense companies have rallied this year most of the sector has been moribund and is lagging the overall stock market. It is very difficult for analysts and investors to determine which stocks will make attractive opportunities when no one yet knows exactly how much may be cut from the overall budget.
But not all stocks will suffer.
Buy, Sell or Hold: With 46 Million People on Food Stamps This Is The Stock To Own
With over 46 million Americans on food stamps, price-conscious shoppers have been flocking to the discount stores.
It's a profitable and steady niche in what has become a "food stamp economy."
It's lead by the big-box discounters such as Wal-Mart (NYSE: WMT) on one end and a trio of high-rising "dollar" stores at the other --Family Dollar Stores (NYSE: FDO), Dollar Tree (NASDAQ: DLTR) and Dollar General (NYSE:DG).
Since the start of the financial crisis, all of these discounters have seen their share prices skyrocket as consumers work overtime to stretch each and every dollar.
My favorite company in this group is Dollar General Corp., which has seen its share price climb by 129% since its IPO in November 2009.
The question, of course, is whether or not Dollar General still has what it takes to stay in Wall Street's good graces and keep on growing.
Part of that answer depends on what your perception is about the overall state of the U.S. economy. The data is certainly a mixed bag.
But what I can tell you about Dollar General is how it differentiates itself from the competition and how the discounter will be able to hang on to shoppers even when the economy turns.
Here's why I like this company so much...
The 5 Most Shorted Stocks in the S&P 500
May's right around the corner and bears are piling on bets against the most shorted stocks - and the overall market - in preparation for the expected annual sell-off.
During the first two weeks of April, almost 60% of stocks in the Standard & Poor's 500 Index saw an increase in short interest, and the Nasdaq had an overall increase in short positions as well.
Right now, the most shorted stocks include a struggling retailer, a for-profit college and an alternative energy company - and one stock that's up a whopping 131% in 2013.
But don't be misled into going against the grain. These stocks are not "buys."
Rather, investors should steer clear of these risky stocks.