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3 Dirt-Cheap Stocks You Simply Shouldn't Ignore

By Keith Speights – Jun 6, 2020 at 6:02AM

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Look no further for attractive valuations, solid businesses, and great growth prospects.

Let's face it: There are a lot fewer bargains in the stock market than there were a couple of months ago. That's a natural consequence of the major stock market rebound.

However, you can still find some stocks trading at very attractive prices. And several of them are blue chip stocks that should be solid long-term winners. Here are three such dirt-cheap stocks that you simply shouldn't ignore.

Tiny shopping cart with $100 bills in it.

Image source: Getty Images.

1. Bank of America

Bank of America (BAC -1.48%) shares trade at only 0.89 times the book value. The stock is still more than 20% off of its highs from earlier this year despite a nice bounce since mid-March.

It's understandable why Bank of America stock fell. Businesses are closing and people are losing their jobs because of the COVID-19 pandemic. The company set aside a whopping $4.8 billion for loan losses in the first quarter because of the impact of the viral outbreak.

But Bank of America remains financially strong. It holds the No. 1 spot in U.S. deposit market share. While some companies have suspended their dividends, Bank of America has kept its dividends flowing and should be able to continue doing so.

The economy will recover from the COVID-19 pandemic. As it does, I think that Bank of America stock will recover too. This solid bank stock won't be this cheap for too long.

2. Berkshire Hathaway

Warren Buffett isn't as rich as he used to be. Most of his fortune is in Berkshire Hathaway (BRK.A 0.59%) (BRK.B 0.43%) stock, which sank nearly 30% in March and is still close to 13% off of its highs from earlier in the year. And it's still well below levels in 2019, when Buffett and his management team were happily leading the company to aggressively buy back shares.

It's no surprise that Berkshire repurchased $1.7 billion of its stock in the first quarter of 2020. If anyone knows a bargain when he sees one, it's Warren Buffett.

Some of the businesses owned by Berkshire Hathaway will suffer in the economic downturn caused by the COVID-19 pandemic. But not all of them. The company's insurance businesses should continue to generate strong cash flow, as they've always done.

Berkshire ended the first quarter with a cash stockpile of more than $137 billion. I expect that Buffett will use a big chunk of that cash when he finds the "elephant" kind of deal that he likes to make. Investors who are willing to buy and hold Berkshire over the long term will likely one day be glad they bought shares at the current price.

3. Bristol Myers Squibb

Bristol Myers Squibb (BMY 0.30%) has rebounded in a bigger way than Bank of America or Berkshire Hathaway. The big drugmaker's shares were down more than 30% in March but are now only around 9% off of the peak in January. What's more, BMS shares trade at less than 10 times expected earnings.

Few stocks offer attractive valuations, solid growth prospects, and nice dividends, but Bristol Myers Squibb does. The company's lineup includes several drugs that are growth drivers, notably including anticoagulant Eliquis, immunology drug Orencia, and multiple sclerosis drug Zeposia. BMS' cancer immunotherapy Opdivo also should enjoy a sales boost after winning FDA approval (in combination with Yervoy) as a first-line treatment for non-small cell lung cancer.

BMS' pipeline is loaded with potential as well. The company hopes to pick up new approved indications for several drugs, including Opdivo and Zeposia. It also has new pipeline candidates that could become blockbusters if approved, including cell therapies ide-cel and liso-cel.

Last but not least is the dividend. BMS' dividend yield currently stands at a little under 3%. With this dividend yield added to its great growth prospects, I think this dirt-cheap pharma stock will generate impressive total returns over the next several years.

Keith Speights owns shares of Bank of America, Berkshire Hathaway (B shares), and Bristol Myers Squibb. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Bristol Myers Squibb and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$30.57 (-1.48%) $0.46
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$70.36 (0.30%) $0.21
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$401,490.00 (0.59%) $2,362.25
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$265.47 (0.43%) $1.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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