Stocks are so expensive that revered value investor Benjamin Graham might be spinning in his grave. The S&P 500‘s cyclically adjusted price-to-earnings (CAPE) ratio is at its highest level since early 2000 — right before the dot-com bubble burst. It’s even higher than the level in 1929, the year of the infamous stock market crash that was followed by the Great Depression…
There’s no question that many stocks now have nosebleed valuations. However, there are some exceptions. Here are three absurdly cheap stocks you can still buy in this ridiculously expensive market.
AbbVie‘s (NYSE:ABBV) shares currently trade at only nine times expected earnings. That’s less than half the forward-earnings multiple of the S&P 500.
Why is AbbVie stock so cheap? Many investors are worried about the inevitability of a steep sales decline for its top-selling drug Humira. The blockbuster autoimmune disease drug faces biosimilar competition in the U.S. beginning in 2023.
My view is that those worries are overblown. Sure, AbbVie will experience a sales decline in a couple of years. However, the company should quickly return to delivering solid revenue growth, thanks to several other drugs with tremendous momentum, notably including the successors to Humira, Rinvoq and Skyrizi.
AbbVie also offers one of the most attractive dividends around. Its dividend yield stands at 4.6%. The company is also only one dividend hike away from becoming a Dividend King — an elite group of S&P 500 members that have increased their dividends for at least 50 consecutive years.
2. Bristol Myers Squibb
If you think AbbVie’s valuation looks appealing, you’ll definitely want to check out Bristol Myers Squibb (NYSE:BMY), as well. The big drugmaker’s forward price-to-earnings ratio of 8.5 makes BMS one of the cheapest healthcare stocks on the market.
Like AbbVie, BMS faces the prospects of declining sales for its top product. In this case, blood cancer drug Revlimid will face generic competition starting next year. The good news is that only limited volumes of these generics will be allowed on the market at first due to contractual agreements. However, BMS will almost certainly take a hit to its top line.
BMS’ lineup, though, includes several blockbusters with solid sales growth. Blood thinner Eliquis, autoimmune disease drug Orencia, and…
Continue reading at THE MOTLEY FOOL