There's no doubt about it: This has been a challenging year for the investing community. Since the curtain opened on 2022, the storied Dow Jones Industrial Average and benchmark S&P 500 have dipped into correction territory (a decline of more than 10%), while the technology-focused Nasdaq Composite has fallen into a bear market, with a peak-to-trough decline of 31% since November.
Although big drops in the stock market can be unnerving and tug on investors' emotions, they're also, historically, an excellent time to put your money to work. Corrections and bear markets tend to run their course relatively quickly, and all notable declines throughout history have eventually been erased by a bull market rally.
During bear markets, it's not uncommon for investors to place added emphasis on valuation. Time-tested companies with reasonably low multiples relative to earnings, sales, and/or book value tend to be popular buys that steadily outperform over the long run.
What follows are four ultra-cheap, time-tested stocks that can, with patience, turn a $300,000 investment into $1 million by 2030.
The first incredibly cheap stock that can more than triple investors' money by the turn of the decade is Meta Platforms (META -1.23%), the company formerly known as Facebook. Take note that Meta will be changing its ticker symbol later this week to (drum roll) "META."
What makes Meta such a special company is its social media engagement. Although public interest in social sites can ebb and flow, Meta's assets -- Facebook, Facebook Messenger, Instagram, and WhatsApp -- are consistently among the most downloaded social apps on the planet.
To build on this point, Meta's family of apps had 3.64 billion monthly active users during the first quarter. This effectively means that more than half the world's adult population visits a Meta-owned asset at least once per month. Advertisers are well aware of this, which is why Meta has historically had no trouble charging a premium for ads on its platforms. Even though CEO Mark Zuckerberg has pivoted his company's long-term focus to metaverse innovations, there's no question that ads remain Meta's cash cow.
Though it's going to take time to get the support infrastructure in place for the metaverse -- the next iteration of the internet, which allows users to interact with each other and their environment in 3D virtual worlds -- Meta can be a winner. Investing tens of billions of dollars now could make Meta one of the key on-ramps to metaverse engagement.
At no point in Meta's 10 years as a publicly traded company have shares been this cheap: 13 times Wall Street's forward-year earnings forecast.
American Eagle Outfitters
It's no secret that retailers are climbing a wall of worry at the moment. Supply chain disruptions caused by the COVID-19 pandemic and war in Ukraine, coupled with historically high inflation and inventory buildup, are creating havoc for retailers. American Eagle's latest report clearly cited these inventory and supply chain struggles.
However, this is a company with an experienced management team that's navigated its fair share of headwinds before. In particular, American Eagle Outfitters has shown time and again that it's a no-nonsense company that can quickly move excess inventory. Ridding itself of unwanted merchandise has helped boost margins by encouraging more full-priced purchases during long-winded economic expansions.
As I've previously pointed out, American Eagle Outfitters' brand also sits at the perfect price point. It offers teens and young adults brand-name apparel and accessories without cheapening the brand via huge discounts, or pricing customers out of a purchase.
Additionally, the AE story isn't just about teen apparel and accessories. Intimate apparel brand Aerie has been growing significantly faster than its teen retail category. With dozens of new Aerie stores set to open, this intimate apparel brand could be AE's key to more than tripling investors' money in eight years.
Shares of American Eagle Outfitters can be scooped up for less than seven times Wall Street's forward-year earnings forecast. To boot, investors are netting a nearly 6% dividend yield.
AGNC Investment Corp.
Ultra-high-yield dividend stock AGNC Investment Corp. (AGNC 0.43%) is yet another inexpensive, time-tested company that can turn $300,000 into $1 million by 2030. AGNC is a monthly dividend payer that's yielding 11.8%, as of June 1, 2022, and has sported a double-digit yield in 12 of the past 13 years.
AGNC Investment is a mortgage real estate investment trust (REIT). AGNC borrows money at low short-term lending rates, then uses the capital it receives to purchase higher-yielding long-term assets, such as mortgage-backed securities (MBSs) -- which is why it's known as a "mortgage REIT." The goal for the company is to maximize its net interest margin, which is the difference between the average yield on the assets it owns minus its average borrowing rate.
The beauty of the mortgage REIT industry is that there aren't any surprises. Simply following the Federal Reserve's monetary policy and the Treasury bond yield curve will give investors a good idea of how well or poorly the mortgage REIT industry is performing. At the moment, companies like AGNC are being challenged by flattened yield curves and rising short-term lending rates.
However, when things look their bleakest is often the ideal time to buy into mortgage REITs like AGNC. For instance, higher interest rates should also improve the yields on the MBSs AGNC is buying. Over time, this would be expected to widen the company's net interest margin.
Furthermore, $66.9 billion of AGNC's $68.6 billion investment portfolio at the end of March was comprised of agency assets. Agency securities are backed by the federal government in the unlikely event of default. This added protection is what allows AGNC to lean on leverage to boost its profit potential.
Investors can buy shares of AGNC right now for a 7% discount to its book value and roughly six times Wall Street's forecast earnings for the upcoming year.
Walgreens Boots Alliance
A fourth ultra-cheap, time-tested stock that can turn $300,000 into $1 million by the end of the decade is pharmacy chain Walgreens Boots Alliance (WBA 6.41%).
Normally, healthcare stocks are relatively immune to economic downturns. Since people get sick no matter how well or poorly the U.S. economy and stock market perform, there should always be a steady demand for prescription medicine, medical devices, and healthcare services. But with the initial stages of the pandemic leading to lockdowns, foot traffic-driven pharmacy chains like Walgreens struggled. The good news is that these short-term struggles are providing investors with an opportunity to buy into a highly profitable business at a sizable discount.
Long before the pandemic even began, Walgreens had initiated a multipoint plan aimed at boosting organic growth, lifting its operating margin, and increasing repeat visits to its stores. One aspect of this transformation -- cost-cutting -- is well ahead of schedule. According to the company, it managed to shave off more than $2 billion in annual operating expenses a full year ahead of schedule.
What's interesting, though, is that while Walgreens tightened the proverbial spigot in certain operating segments, it's been spending aggressively in others. For instance, it's built up its direct-to-consumer segment, which should be particularly fruitful in the wake of the pandemic. Though most of the company's sales will continue to originate from its brick-and-mortar locations, the convenience of online shopping and drive-thru pickup can lead to sustained organic growth.
The company is also willingly spending capital on opening co-located health clinics in cooperation with VillageMD. More than 100 of these clinics are already open, with 1,000 full-service clinics expected to be open in more than 30 U.S. markets by 2027. Since these clinics are physician-staffed, they should have success at driving repeat visitors and boosting business at Walgreens' pharmacy.
Shares of Walgreens can be purchased for less than nine times Wall Street's forecast earnings for next year, and shareholders can net a 4.4% annual yield for their patience.