In the 10 major U.S. market contractions since 1949, the Standard & Poor's 500 Index price-to-earnings ratio has never been as low as it is now, reports Bloomberg.
In fact, since the Reagan presidency in 1981, investors have never paid less for equities. "The last time stocks in the index were cheaper on average during a recession was the early 1980s, a decade when the index surged 227 percent, or 403 percent including reinvested dividends."
There are several reasons for this discounted market. According to Bloomberg, "Bears" are of the opinion that low interest rates will keep the U.S. in the economic slowdown that began in 2007. "Bulls" suggest the P/E ratios are low due to "indiscriminate selling" by investors who fear a repeat of the 2008 credit crisis.
Either way, Europe's debt crisis and the U.S. downgrade to an unthinkable AA+ credit rating has sparked a $2.3 trillion drop in market value.
Most analysts, uncertain of the near future, seem confident that a recovery, albeit a sluggish one, is imminent. To demonstrate their claims, they point to increasing corporate earnings, small boosts in consumer spending, and anticipated per-share profit and economic growth.
The future of the market remains uncertain, yet investors who are bullish on America's future see opportunity in the current financial climate. After all, low P/Es can mean big opportunities for investors looking to buy in at a discount.
Interested in discounted stocks? To help you start your search, we put together a list of companies trading on the U.S. stock market with low PEGs (below 1) and price to free cash flow ratios (P/FCF) under 10 -- both signals that that stock is undervalued.
To refine our search, we looked for the names experiencing positive levels of insider buying -- a bullish signal that insiders think the company is undervalued and has good future prospects.
Do you think now is a good time to buy these potentially undervalued stocks?
List sorted by insider buying. (Click here to access free, interactive tools to analyze these companies.)
1. American International Group
2. Dell
3. AOL
4. Mercer International
5. PH Glatfelter
6. Kohlberg Kravis Roberts & Co.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Becca Lipman and Daniel Guttridge do not own any of the shares mentioned above. Insider Data sourced from Yahoo! Finance, all other data sourced from Finviz.