One primary goal of any investor should be to buy stocks for less than they're worth. But in today's market, it's seldom clear when a stock is truly undervalued relative to the potential of its underlying business. 

So we asked three top Motley Fool contributors to each find a stock they believe is absurdly cheap right now. Read on to learn why they chose Tencent (TCEHY -0.27%), ExxonMobil (XOM -0.84%), and (JD -2.14%).

Red SALE SALE SALE Sign in a shop window


Tencent's (gaming) ball is finally rolling

Steve Symington (Tencent): Chinese gaming and internet-service giant Tencent suffered over the past year, when a government regulatory shakeup led to an extended freeze in approvals for new game licenses -- though the company most recently managed to post respectable growth in the third quarter despite not being able to monetize some of its most promising game titles. For that, Tencent investors could thank the company's burgeoning social-media streaming, digital content, and online advertising businesses.

In December, however, Chinese regulators finally began to wade into their backlog of license requests. And though Tencent's games were absent from the list of approvals at first, shares began to rally as two of its mobile game titles finally made the cut late last month. 

As it stands, Tencent has rallied nearly 40% from its 52-week low set in late October. But shares are still down almost 30% over the past year. The stock might not look particularly cheap trading at around 29 times this year's expected earnings. But I think they'll prove a bargain for investors willing to buy now before Tencent's gaming rebound becomes evident. 

This oil giant is on sale in a big way

Reuben Gregg Brewer (ExxonMobil): You'd jump at the chance to buy a U.S. postage stamp, which today costs $0.55, for the price it cost in 1995, when it was just $0.32, or, even better, in 1988 for just a quarter. That's not going to happen, but you can buy ExxonMobil Corporation for valuations that, incredibly, hark back to those eras. The giant integrated oil major's yield hasn't been as high as it is today since the 1990s. And the stock's price to tangible book value hasn't been this low since the 1980s. 

XOM Dividend Yield (TTM) Chart

XOM Dividend Yield (TTM) data by YCharts

The oil company is cheap for a reason, including slumping production in recent years and elevated spending plans. However, it appears Exxon is righting the ship. The most direct example is two quarters of sequential production increases, driven largely by increased drilling in the onshore U.S. market. That's just one of the company's big projects, however, so there's likely to be more good news on the production front as it works through its 2025 growth plan. The early success of this effort, meanwhile, hints that the spending Exxon has on tap -- as much as $30 billion a year -- will be worth the cost.

Investors, however, are still not convinced that the company can pull off a turnaround. But with long-term debt at just 10% or so of the capital structure, there's little reason to doubt Exxon's ability to spend heavily no matter what happens to oil prices. If you can take a long-term view, you can collect more than a 4.3% yield from a historically cheap stock with a turnaround story that looks like it's just starting to unfold. 

A Chinese e-commerce behemoth

Leo Sun ( JD is China's second largest e-commerce player, after Alibaba (BABA -3.08%). The stock was cut in half over the past 12 months on concerns about slowing sales growth, rising expenses, and a recently dropped rape allegation against its founder and CEO, Richard Liu. Trade tensions and a broader market downturn in growth stocks exacerbated that pain.

Yet JD's stock now trades at just 0.5 times its projected sales this year. That's a remarkably low ratio compared with its estimated sales growth of 30% this year. JD's sales growth decelerated over the past year, partly because of slower sales of big-ticket electronics and appliances, but it's still expected to post 19% sales growth next year.

JD's profitability was uneven over the past year, because of aggressive investments in its online marketplace,its  logistics network, and its Prime-like "JD Plus" membership plans. However, JD believes that these ambitious efforts, which include autonomous robots and delivery drones, will pay off and boost its margins over the long term. JD also recently started offering its logistics services to other companies as a paid service.

Analysts expect JD's earnings to decline 47% this year as its expenses rise. But they also expect that figure to more than double next year as it moves past those investments. That means JD's forward P/E of 49, which doesn't seem cheap, could quickly contract as its earnings improve.

That's why JD is buying back its own stock, and why Tencent, Walmart (WMT 0.48%), and Alphabet's (GOOG 0.92%) (GOOGL 0.93%) Google all hold stakes in the company. It might be smart to follow their lead.

Check out the latest earnings call transcripts for JD, Tencent, and Exxon.

Everyone loves a bargain

In today's fast-changing world, we can't guarantee that these three stocks will go on to beat the market. But whether we're talking about the turnaround of Tencent's gaming business, Exxon's historically low valuation, or's deceivingly inexpensive shares and long-term-oriented investments in its business, we believe they're poised to do exactly that. And we think investors would do well to put their money to work accordingly.