I think there are some great opportunities to buy shares trading below their intrinsic value right now. Rising interest rates and the prospect of a recession are pushing investors towards dividend stocks.
The most attractively valued stocks, though, are the ones that are being left behind. With the stock market looking the other way, I’m seeing some former favourites trading at bargain prices.
Rightmove
Rightmove (LSE:RMV) has been one of the worst-performing FTSE 100 shares over the last year. While the index advanced by 14%, the stock fell by 13%.
As far as I can tell, though, that has almost nothing to do with the underlying business. The stock might have been expensive a year ago, but it looks undervalued today.
Revenue in 2022 grew by 9%, and earnings per share grew by 10%. And the business maintained its dominant market position, with the amount of time spent on its platform remaining high.
Best of all, the company demonstrated that it is largely immune to most macroeconomic threats. Neither rising inflation, nor a faltering property market could slow the business down.
A change in CEO brings a risk of a sort. But with no debt and strong cash conversion metrics, I think this is one of the best FTSE 100 stocks to buy and hold for the long term.
J D Wetherspoon
The FTSE 250 is up around 5% over the last 12 months. But that’s no thanks to J D Wetherspoon (LSE:JDW), whose shares are down 23% and look like a bargain to me.
The amount of debt on the company’s balance sheet constitutes a risk. But I think the market is significantly overestimating this risk, causing it to price the stock too low.
Most of the debt is fixed until 2031 at 1.24%, so there’s a while until that becomes an issue. And the company has been taking advantage of a difficult time for the industry to secure its position.
Wetherspoon has been investing heavily in its pubs. It has also been working to maintain its low prices to customers, something that I think will prove crucial in the long term.
Lower prices today gives the business scope to raise them in future while remaining cheaper than its competitors. I think this will drive long-term profitability for the company.
Alphabet
Shares in Google’s parent company Alphabet (NASDAQ:GOOG) have fallen by around 25% over the last year. That’s created the kind of buying opportunity that doesn’t come around very often.
There are a couple of risks with the stock at the moment. The emergence of ChatGPT as a threat to Google Search is one and the latest antitrust lawsuit aimed at Google Maps is another.
I don’t see either of these as a threat to Alphabet’s long-term growth, though. Despite a PR blunder, I don’t think that ChatGPT is obviously superior to Alphabet’s own AI search offering.
Moreover, antitrust lawsuits come and go for big tech companies. I suspect that any fine that might be forthcoming is unlikely to be significant in the grand scheme of things.
Meanwhile, analysts are expecting 21% annual growth in earnings per share year until 2027. If that happens, then the stock is cheap at a price-to-earnings (P/E) ratio of 20.
