Best Cheap Stocks To Invest In 2019 … {Warren Buffett Portfolio}

◊ Cheap Stocks To Buy Now ◊

1- Synchrony Financial ($36.60), a major issuer of charge cards for retailers, was spun off of GE Capital in 2014. It’s both a lender and a payments processor – like another Buffett stock, American Express (AXP) – but it caters to customers who skew more toward the middle and lower end of the income scale.

But SYF doesn’t jibe only with Buffett’s affection for credit-card companies and banks. It also appeals to his keen love of a bargain. Today, SYF trades at a 26% discount to its own five-year average forward P/E. It’s 56% cheaper than the S&P 500.

Berkshire initiated a position in SYF during the second quarter of 2017, paying an estimated price per share of $30.02. It’s up more than 18% from that level, and that’s before including dividends.

Analysts forecast SYF to deliver average annual earnings growth of 16.5% over the next half-decade, according to Refinitiv data.

2- Bank of New York Mellon ($47.50). Warren Buffett’s stocks have been increasingly peppered with banks over the past several quarters, but his interest in Bank of New York Mellon ($47.50) dates back to 2010 and the early innings of the current economic expansion.

Financial-sector stocks were generally cheap in the aftermath of the financial crisis. BK remains attractively priced to this day. Trading at just 10.4 times expected earnings, shares offer a discount of 23% to their own five-year average price-to-earnings ratio, according to data from StockReports+ from Refinitiv.

But wait, there’s more. BK is almost 40% less expensive than the S&P 500 on an expected-earnings basis. (The S&P 500 currently goes for 17.2 times projected earnings, according to Refinitiv.)

Warren Buffett last added to his BK stake in the fourth quarter of 2018 when he increased Berkshire Hathaway’s investment by 3%, or more than 3 million shares. With a total of 80.9 million shares, BRK.B owns 8.5% of all shares outstanding, making it BK’s largest investor by a decent margin, according to data from S&P Global Market Intelligence.

3- Wells Fargo ($49.15) is easily among the most troubled Buffett stocks. Buffett initiated his position back in 2001, and he’s stuck by the nation’s third-largest bank by assets despite a spate of scandals. Indeed, BRK.B remains WFC’s largest shareholder with 9.8% of all shares outstanding.

Opening phony accounts, modifying mortgages without authorization and charging customers for auto insurance they did not need are just some of the bad news WFC investors have had to contend with since 2016.

“If you look at Wells, through this whole thing they’re uncovering a whole lot of problems, but they aren’t losing any customers to speak of,” Buffett told Financial Times in an April interview.

On the bright side, headline risk — and extra scrutiny from federal regulators — has kept WFC stock cheap. Shares trade at just 9.2 times expected earnings. That’s 25% below their own five-year average and 47% less expensive than the S&P 500. The dividend yield of 4.0% only sweetens the pot. Analysts forecast WFC to deliver average profit growth of 8.5% a year over the next five


4- American Airlines ($31.20). As mentioned repeatedly, Buffett became an airline-stock convert in 2016, when he began taking stakes in four major U.S. carriers, among them American Airlines ($31.20).

American Airlines, unfortunately, hasn’t done much for the Oracle of Omaha, who first bought shares during the third quarter of 2016. Since the start of Q4 of that year, AAL shares have delivered a loss of 9% – or less than 7% once you factor in the airline’s small dividend. That includes a 35% drop since 2018 spurred by a host of issues, including fuel prices, labor costs and the grounding of Boeing’s (BA) 737 Max aircraft in the wake of a deadly Ethiopian Airlines crash.

On the other hand, the share-price decline has put AAL well into value territory.

The stock trades at less than six times forward earnings – a 64% discount to the S&P 500, and an 11% discount to its own five-year average. Not bad, considering that the analyst community thinks the airline is ready to reverse its fortunes. They’re projecting 16.3% average annual profit growth over the next half-decade.

5- Phillips 66 ($102.30). Buffett first bought shares in the oil and gas company in 2012. But despite having heaped praise on PSX in the past, Buffett has dramatically reduced his stake over the past year. Still, Berkshire retains 1.2% ownership of all Phillips 66 common shares outstanding.

That doesn’t mean Phillips 66 isn’t a good fit for a diversified portfolio, especially one lacking in cheap energy-sector stocks. With shares changing hands at just 9.7 times projected earnings, PSX offers a 29% discount to its own five-year average forward price-to-earnings multiple. It’s a whopping 44% cheaper than the S&P 500.

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