2 of the Cheapest Stocks I Own

My personal real money portfolio includes 32 different stocks. Most of them are soaring growth stocks, but some are heavily discounted value investments. It’s hard to beat the bargain rating I see in it Nokia (NYSE: NOK) and IBM (NYSE: IBM) – two of the cheapest stocks I own.

IBM

Computer veteran IBM embarked on an ambitious strategy shift in 2012, and the stock has seen disappointing returns since then. We Big Blue investors are not keeping up with the gains of the broader stock market.

IBM data from YCharts.

At the same time, IBM’s ATM never really slowed down. The company’s free cash flow for the past four quarters was $ 14.5 billion. As a result, IBM stock trades at the Red Tag valuation of 9.3 times free cash flow or 14 times future earnings. Plug those numbers into a discounted cash flow calculator and you will find that the stock is trading more than 50% below its cash-based fair value.

The funny thing is, IBM is poised to achieve market-leading business results for the next decade or more. Red Hat’s $ 34 billion buyout was incredibly smart, and IBM is arguably transforming itself into a bigger version of this open source software specialist with deeper pockets and better global market reach.

Playing the long game can be frustrating at times, but I have no doubt that IBM is preparing for fantastic returns. The company’s focus on artificial intelligence, data security and business services, all of which are based on hybrid cloud services, will pay off in the post-pandemic era.

The spin-off of IBM’s Managed Infrastructure Services as Kyndryl later this year will give new investors a choice between higher growth rates from the remaining IBM business or ultra-stable cash generation from Kyndryl. I look forward to holding these two stocks for many years to come.

Image source: Getty Images.

Nokia

Telecommunications infrastructure giant Nokia is affordable in many ways. The stock trades at a discount of 54% to its present value, with the added distinction that it trades for less than $ 6 per share. Just like IBM, I believe Nokia will hit the market for the foreseeable future as telecom companies around the world roll out their 5G wireless networks.

The Finnish company operates in a cyclical market that depends on the generation change in mobile communications standards. Nokia’s 4G cycle has been skewed by the fact that smartphones from Apple and alphabet destroyed this company’s leading position in the market for simpler telephones with voice-plus-text. This time around, Nokia can move back into the infrastructure market without worrying about the financial health of a larger and more important division.

Looking beyond the current boom, Nokia is already busy defining the standards of the 6G platform. In other words, the 5G revolution isn’t the end of the road.

The low stock price resulted in Nokia stock being swept away in the Reddit trading games of 2021. The stock has been volatile this year and could fall back to around $ 4 per share in the short term. If so, I’ll be the first in line at the purchase window.

Don’t let this stop you from taking a position in this healthy stock, however. Even without going back to last year’s valuation metrics, Nokia is a cheap ticker tied to a business with promising long-term growth prospects. The same cannot be said of most other meme stocks.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

source https://dailyhealthynews.ca/2-of-the-cheapest-stocks-i-own/