If you've done your due diligence, then a bear market is most likely the best time to buy stocks since they're usually trading at a discount. While you should be careful to avoid value traps, the market will eventually re-price shares of companies with promising long-term growth. Right now, there are plenty of growth stocks trading at low multiples that can potentially set you up for some significant gains in the years ahead.
Two cheap stocks that should be on your radar today are Pfizer (PFE 0.23%) and United Parcel Service (UPS 2.42%). They're trading at low forward earnings multiples and are safe investments that you can buy and hold for years or even decades.
1. Pfizer
Pfizer is a big name in healthcare, but it is trading at a discounted price. At less than 10 times its future earnings, it looks incredibly cheap compared to the average healthcare stock, which trades at a multiple of nearly 16.
There's no doubt Pfizer's financials won't look as impressive next year because revenue from its COVID-19 products is likely to decline. However, future earnings numbers factor into analyst projections for the year ahead. And while there may be some uncertainty about the future, it doesn't warrant the kind of discount the stock is trading at today.
After all, Pfizer's business is more than just COVID. Through the first six months of the year, the company generated $31.7 billion in sales from Comirnaty and Paxlovid, accounting for 59% of its total revenue ($53.4 billion). While that's a sizable chunk, Pfizer still has billions in revenue pouring in from products focused on rare diseases, oncology, internal medicine, and inflammation and immunology. The company has also been busy buying up healthcare businesses in the past year, including its announcement last month to acquire biopharmaceutical company Global Blood Therapeutics for $5.4 billion.
Down 20% year to date and performing worse than the S&P 500 (which is down 19%), investors have been treating Pfizer like a risky COVID stock, and that could be a costly mistake. This is a business with solid financials that is always on the hunt for deals and more growth.
2. United Parcel Service
United Parcel Service (UPS) has done a bit better than the markets this year, but it is still down 16% year to date. At 13 times future earnings, it's a cheap stock compared to the S&P 500, where the average earnings multiple is more than 17. Shares of rival FedEx look a lot cheaper: They're trading at just seven times future profits, with the stock recently falling off a cliff after the company reported disappointing earnings numbers.
UPS normally posts higher profit margins than FedEx, which can make it a safer buy for long-term investors. By running a tighter ship, the company is in a better position to handle adversity, such as increases in costs due to inflation or supply chain interruptions. Over the past four quarters, UPS' operating income of $13.6 billion was nearly 14% of its revenue ($100 billion). FedEx, meanwhile, reported an operating margin of just 5.1% in its most recent quarter (the period ending Aug. 31).
Both logistics companies are likely to do well in the long haul, but FedEx faces more of an uphill battle because it is looking to slash costs in order to improve its bottom line. In the short term, these businesses could face challenges with a recession potentially weighing down their operations. However, with a lot of that bearishness already priced into these two stocks, now may be an opportune time to invest.
UPS may not be trading at a 52-week low, but investors shouldn't also assume it will follow FedEx into a tailspin, as its financials are much better. UPS provides investors plenty of value, and with more growth in e-commerce likely, this could be a strong growth stock to hold on to for years.
