Time to buy these 3 extremely undervalued stocks

Over the past 15 years, investors have largely been rewarded by picking companies with the highest and most sustainable growth rates and buying any dips that have occurred. Indeed, those who bought a pandemic discount for a number of large-cap tech stocks have been handsomely rewarded, with valuations less worrisome than future growth.

Times have changed, with a number of prominent investors suggesting that evaluating the fundamentals of individual companies will be more important than simply focusing on growth rates alone. I think looking at companies’ valuation ratios, free cash flow growth and liquidity and profit margins will become much more important as we move into the next phase of this cycle.

That’s because various recession signals are flashing red right now. Whether it’s the inverted yield curve (which just inverted), the Sahm rule, or the various employment and spending reports that suggest the economy may be slowing, it’s becoming increasingly clear that market risks are growing. Just look at the Volatility Index (VIX) and its recent massive run.

For those looking to take a more defensive stance in their portfolios, finding stocks that are undervalued and buying over time can be a decent strategy. Here are three such stocks that I think could fit into any investor’s portfolio right now.

Key points about this article:

• Valuations are starting to matter again, with many investors increasingly looking for companies with strong balance sheets and strong cash flow growth profiles.
• Here are three companies with very cheap valuations and strong fundamentals that investors may want to take a closer look at.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Geographic group (GEO)

A government official sitting at a desk with an American flag in the background

GEO Group (NYSE:GEO) is an often overlooked stock outside of investors following Michael Burry. The former private prison operator has made a massive turnaround to become a diversified provider of government services, with a particular focus on electronic monitoring and detention management.

It’s a pretty dicey deal for many investors, and there’s a reason why this stock is so often overlooked. But it’s also important to note that this company has produced outstanding financial results in recent quarters. Of the company Q2 2024 earnings results highlighted impressive earnings per share from $0.23. That underlying number easily beat analysts’ estimates of $0.14. Revenue came in at $607.19 million, also beating the forecast of $606.77 million.

In addition, tThe company has updated its Orientation data 2024expecting full-year net income of $0.51 per share on revenue of $2.44 billion and a tax rate of 24%. This also included debt of $82.4 million and adjusted net income of $0.93 per share. Adjusted EBITDA is expected to range from $485 million to $505 million.

For the next quarter, the company expects net income of $0.25 per share, revenue of $616 million and adjusted EBITDA of $140 million. Q4 estimates were $0.29 per share, revenue of $621 million and adjusted EBITDA of $138 million. So as long as Geo Group can continue to smash analyst expectations, it’s a stock I think is worth buying on the downside.

Real Income (O)

Real estate experts look at a physical home model and chat while holding pens

Real estate income (NYSE:O), a REIT that owns more than 15,450 properties and 272 million square feet of commercial space, is a top option that many income investors are already well aware of. Realty Income’s 5.3% annual dividend yield is paid out in monthly installments to investors. So for retirees or those looking for a steady stream of passive income, this is a great option to consider.

Importantly, Realty Income maintained its dividend for 650 consecutive payoutswhich include 126 rises since 1994. Bets on rising interest rate cuts have boosted the stock 27% from recent lows, with a 5% gain year to date. Wall Street had forecast earnings growth of 8% this year and 21% next year to $1.65 per share. I think if the rate cut materializes as the market expects, this is a stock that could see even more upside from here.

Income from real estate revenues from the second quarter increased 31% to $1.34 billion due to the acquisition of Spirit Realty and new real estate investments. Same-store rental income rose 0.2% with occupancy at 98.8%. Industrial properties saw a 2.1% increase in same-store rental growth, gaming properties rose 1.7% and data centers rose 4.1%. However, same-store retail rental revenue, the company’s largest segment, fell 0.3 percent. Realty Income’s diversification into gaming, data centers and industrial properties through recent acquisitions has shown positive results.

Realty Income’s dividend safety was strong with AFFO per share of $1.06 and a dividend payout of $0.777 per share, improving its AFFO payout ratio from 76.5% to 73.3%. This indicates sufficient cash flow to cover dividends and the potential for future growth. While the company has seen pricing pressure when it comes to specific tenants, Realty Income’s solid payout ratio makes O stock one to watch for any further downside.

Lockheed Martin (LMT)

A Lockheed Martin F35 fighter jet on a runway

Lockheed Martin (NYSE:LMT) remains a top defense contractor that investors look to in turbulent times. And with geopolitical risks on the rise, this is a stock that could certainly continue to see strong growth.

Also, the company is increasingly viewed as a play in space though its core defense business remains the most important piece of the puzzle most investors examine. Last quarter, space sales rose 10% to $310 million and operating profit rose 16% to $45 million. However, the company’s biggest gains were in strategic and missile defense programs, up $140 million, and national security space programs, which added $115 million, driven by Transport Layer programs and GPS III. The growing geopolitical space race is expected to boost demand for Lockheed’s space revenues and profits.

The company’s space segment earned over $3.2 billion in Q2representing 18% of revenues and 17% of operating profit with margins of 11%. While Lockheed is primarily a military contractor, its space operations provide added value. Most of its revenue comes from government contracts, making it dependent on defense budgets. As a result of ongoing global conflicts and the reduction of US munitions, Lockheed’s business remains stable, with stocks down less than 1% amid the market decline. With strong funding from the Department of Defense and GODMOTHERLockheed is a solid investment in space.

Recently, Lockheed Martin announced that it is acquiring Terran Orbital for $0.25 per share and retires its debt, the deal being valued at $450 million. The acquisition, which will close in Q4, follows Lockheed’s previous investments and strategic partnership with Terran. Despite accounting for more than 90% of Terran’s contracts, Lockheed plans to keep Terran as a commercial supplier of small satellites.

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