Undervalued large-cap stocks present a particular opportunity here. Markets are rebounding from their September doldrums, but all three major indices in the U.S. remain down significantly on the year with both the S&P 500 and Nasdaq in a bear market.
The latest data out of the U.S. showed that inflation rose 8.2% in September from a year ago, its highest level in 40 years and still well above the U.S. Federal Reserve’s 2% target. This raises the likelihood that the central bank will continue raising its benchmark interest rate into 2023.
As rates continue climbing, stocks are likely to remain volatile. Stocks climbed significantly higher in October, but the pulldown over the first three quarters has left many large-cap stocks deeply undervalued. This presents an opportunity for investors who can tolerate the near-term ups and downs of the market and keep their eyes fixed on the long-term.
Here are seven seriously undervalued large-cap stocks to buy now.
Undervalued Large-Cap Stocks: Amazon (AMZN)
Amazon (NASDAQ:AMZN) stock is now trading under $100 a share. Consider that an early Christmas gift.
Following disappointing third-quarter earnings and lowered guidance, AMZN stock is down 44% on the year. Even a 20-for-1 stock split undertaken at the beginning of June hasn’t helped the share price.
Having given up most of the gains it achieved during the pandemic when consumers were forced to shop online, investors seem to have given up on AMZN stock. Yet analysts say that is a mistake, and the company is poised for a rebound.
For its part, Amazon is doing what it can to try and get the share price up. The company earlier this year announced a $10 billion stock buyback program.
Amazon also just completed its second Prime sales event of the year in October, which should give its fourth-quarter earnings a boost. The company has also increased wages and salaries for both employees and executives, and continues to grow its operations around the world.
While Amazon’s price-earnings (P/E) ratio is hefty at 94 times, it is not that high when one considers the company’s $1 trillion market capitalization or that it generates more than $100 billion in revenue each quarter. Take advantage and buy the dip.
Walmart (WMT)
You’d think that with the essential nature of most of the products it sells, Walmart’s (NYSE:WMT) stock would be holding up this year. But no.
So far in 2022, WMT stock has come down 2%. While the decline is much less than the broader indices, it is a poor showing for a company that is supposedly built for troubled economic times.
Much of the blame for this year’s decline can be ascribed to rising fuel costs and higher inventory levels. It also has been unable to raise prices fast enough to keep up with inflation.
WMT stock fell sharply after it issued first-quarter results in May that missed Wall Street expectations. Walmart earned $1.30 a share, which was lower than the $1.48 expected among analysts.
The retail giant redeemed itself somewhat with its second-quarter print delivered in August. Earnings per share during Q2 came in at $1.77 versus the forecasted $1.62. Revenue in the second quarter totaled $152.86 billion compared to $150.81 billion expected.
The company’s e-commerce sales rose 12% compared with the year-earlier period and were up 18% over the past two years during Q2. Looking ahead, Walmart reaffirmed its outlook for the remainder of this year.
The elevated inventory levels that were a problem earlier in the year appear to be working themselves out. This is one of the undervalued large-cap stocks investors should be keeping an eye on, especially if the share prices softens further.