The S&P 500 has soared to record levels, and many investors are torn between wanting to benefit from the artificial intelligence (AI)-driven market enthusiasm and being wary about inflated stock prices.
There's at least one strategy that will work well within any investing approach: buying dirt cheap stocks. Even with the market at highs, there are always well-priced stocks that can add value to any portfolio. They certainly work with a value-focused portfolio, and they're even more important today to add protection and hedging for a growth or AI-focused portfolio.
If you have $1,000 available to invest, consider Target (NYSE: TGT) and Carnival (CCL +0.60%)(CUK +0.17%).
Image source: Target.
1. Target: A Dividend King
No one could have anticipated that Target would struggle so much when it was on top of the world a few years ago. The retailer had invested in its digital channels early on, and it benefited from a shift to omnichannel shopping.
However, there have been a number of trends that have not worked in its favor over the past few years. Inflation has been a major problem for the company, whose stores are concentrated in the discretionary parts of shopping that its mass consumers have been cutting back on. Its grocery section isn't as big as some of its competitors, and this has rippled through the company's operations, resulting in markdowns and lower margins.
NYSE: TGT
Key Data Points
The bright spot has been the digital business. Although sales were down 1% from last year and comparable sales (comps) declined 2% from last year in the 2025 fiscal third quarter (ended Aug. 2), digital comps increased 4%, driven by same-day options.
There are many different things happening at Target, starting with a new CEO coming on board in January. The market wasn't thrilled with the choice of a company insider, who it sees as part of the mess, but he has a chance to make real progress. Some of the initiatives he's working on include revitalizing the company's owned brands, which have been a significant part of its business for years already, and refining the flair that has always attracted customers to Target stores.
While the company works on its turnaround, shareholders can benefit from its amazing dividend. Target is a Dividend King, and it has raised its dividend for the past 54 years, including throughout this challenging period.
Target stock trades at the dirt cheap P/E ratio of 10. That's low vote of confidence in the stock from the market, but it looks cheap enough to be a value at this price.
2. Carnival: The cruise industry leader
Carnival has made an incredible comeback from the pandemic, and its stock is up 167% over the past three years. However, despite impressive performance, strong profitability, and skyrocketing demand, the stock has sputtered this year, and is up only 2%.
The rebound has been priced into the incredible stock gains over the past few years, and now that growth is slowing and a large debt remains, the market is cautious again.
NYSE: CCL
Key Data Points
However, business is booming. There are many signs that demand is strong, with half of 2026 already on the books as of the end of the fiscal 2025 third quarter and a strong start to 2027 bookings, which are at historical highs. Deposits were a record $7.1 billion in the quarter, and they're coming from places beyond ticket prices, like pre-cruise onboard purchases.
As interest rates come down, Carnival's management is responsibly paying off the debt. It ended the third quarter with $26.5 billion in debt, down from a high of $35 billion at its peak just two years ago. This year alone, the company has already prepaid $1 billion and refinanced $11 billion at better rates. It continues to get upgraded credit ratings, and it received an upgrade from Moody's in the third quarter.
There's a lot to be confident about for the future. The company's model has proved resilient despite inflation, and it continues to be stringent about costs, leading to record quarterly net income of $1.9 billion in the third quarter.
At the current price, Carnival trades at a P/E ratio of less than 14. That's a great entry point for new investors, and a bargain in a high-valuation market.
