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Ask a Fool: Are There Any Stocks Still Undervalued Now?

By Matthew Frankel, CFP® – Jul 28, 2017 at 2:45PM

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With the market at record highs, finding bargains can be tough.

Q: The stock market seems to be reaching new record highs every day. Are there any stocks that still look cheap?

Corporate earnings have exhibited pretty impressive growth as a whole over the past few years, so the market's performance is somewhat justified. However, many stocks do look to be rather expensive right now -- particularly in the tech sector. Yet some bargains remain.

One of my favorite "cheap" stocks right now is AT&T (T 0.43%), even after shares popped following the company's strong quarterly report. The telecom giant pays a dividend yielding more than 5% and is a Dividend Aristocrat, meaning that it has increased its dividend for more than 25 consecutive years.

Despite a low price-to-earnings multiple of just 13 times 2017's expected earnings, AT&T has lots of room to grow, especially thanks to its purchase of DIRECTV and its pending acquisition of Time Warner, both of which should give it an advantage over the competition when it comes to bundling services and broadcasting content directly to smartphones and tablets.

The real estate sector has some compelling bargains as well. Not only has the sector been beaten-down as interest rates have been rising, but REITs that invest in certain property types have faced headwinds.

For example, many retailers are struggling, so most REITs that invest in those properties have fallen. However, not all have exposure to troubled retailers.

Realty Income (O -1.52%) is one excellent example. The company invests in retail properties that are resistant to e-commerce and recessions, and its tenants are on long-term leases. Despite maintaining occupancy above 98%, the stock, which pays a 4.4% dividend yield in monthly installments, has fallen by 17% over the past year.

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Matthew Frankel owns shares of AT&T and Realty Income. The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy.

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