There's one main downside to the tremendous performance of the stock market so far in 2023. Many stocks are now priced for perfection. And unfortunately, perfection is rarely attainable.
The good news, though, is that not every stock has a sky-high valuation. Some are actually available at bargain prices. Here are three stocks to buy while they're on sale.
1. AbbVie
Shares of AbbVie (ABBV -4.58%) currently trade at only 13 times forward earnings. By comparison, the S&P 500's forward-earnings multiple is 19.5 times.
Why does AbbVie have such a low valuation? Many investors are concerned about Humira. AbbVie's top-selling drug now faces biosimilar competition in the U.S. and in Europe. As a result, Humira's sales are declining and weighing on AbbVie's overall revenue and profits.
But these headwinds will only be temporary. AbbVie already has two successors to Humira on the market -- Rinvoq and Skyrizi -- that should together generate peak sales that exceed Humira at its zenith. The company also has other products and pipeline candidates that it expects to enable a return to solid long-term growth within the next couple of years.
In the meantime, AbbVie pays investors handsomely to wait for its story to get better. Its dividend yield tops 4.1%. The company is also a Dividend King with 51 consecutive years of dividend increases.
2. Alibaba Group Holding
AI stocks have led the market this year. As a result, many of them now command premium valuations. Alibaba Group Holding (BABA 0.59%) stands out as a notable exception. The stock trades at less than 10.5 times forward earnings.
There are several reasons why Alibaba stock is so cheap. Most importantly, the company's revenue growth has tapered off dramatically, rising only 2% year over year in its latest reported quarter. COVID-19 continues to be a major issue impacting growth.
However, Alibaba's underlying business still has tremendous prospects. That's especially true of its cloud-services segment with the surging interest in generative AI.
The company plans to break up into six separate units. This should unlock value for shareholders. But investors don't have to wait for the restructuring to take advantage of Alibaba's bargain valuation.
3. Bank of America
Bank of America (BAC -0.21%) isn't as cheap as it was earlier this year. However, the bank stock still trades at only 9.4 times forward earnings.
The failures of several U.S. banks in Q1 2023 caused chaos for most of the banking industry. Shares of Bank of America (BofA) fell as much as 26% before rebounding.
Business boomed for BofA throughout the banking crisis, though. The company reported that revenue jumped 11% year over year in Q2 with earnings soaring 19%. CEO Brian Moynihan even said that Bank of America "delivered one of the strongest quarters and first half net income periods in the company's history."
Bank of America ranks No. 1 in estimated U.S. retail deposits, online banking, small-business lending, and customer satisfaction for U.S. retail-banking advice. It's not too late to buy this high-quality stock at an attractive price.
