In between doing my Christmas shopping, I’m on the lookout for bargains in the stock market at the moment. There are a few cheap shares that I’ve got my eye on to buy in December.
The Meta Platforms (NASDAQ:META) share price has fallen by around 65% since the start of the year. That’s a significant decline that I think puts the stock well into value territory right now.
The stock has been falling because the company has been investing heavily in the metaverse. And this has been inhibiting the company’s ability to generate free cash.
There’s a risk that this could continue for some time. But at today’s prices, I think investors are looking overly pessimistic.
Meta’s social media platforms are maintaining their user numbers and this drives the value proposition for advertisers. With that remaining intact, I think the shares look cheap.
The company also has a strong balance sheet. With more cash than debt, Meta’s financial future looks secure to me even as interest rates rise.
Also on my list of cheap shares to buy is Forterra (LSE:FORT). The UK-listed company is a brick manufacturer.
Forterra shares have fallen by around 27% since the start of the year. They look cheap to me at these prices, so I’m looking at buying them for my portfolio.
Like Meta Platforms, Forterra has more cash than debt. The company also trades at a price-to-earnings ratio of around eight, which looks cheap to me.
Unlike Meta, though, Forterra pays a dividend. At today’s prices, the stock has a dividend yield in excess of 5%.
An economic slowdown in the UK presents the biggest risk to the company. But I think that the stock is too cheap for me to ignore at today’s prices.
At first sight, Kraft Heinz (NASDAQ:KHC) doesn’t look like a particularly cheap stock. Shares currently trade at a price-to-earnings (P/E) ratio of almost 50, which is pretty high.
Furthermore, the stock is actually up this year. Shares of Kraft Heinz are around 10% more expensive than they were at the beginning of January.
But I think that this hides an important feature. The company’s earnings are being artificially depressed by some asset impairment charges, which makes them look lower than they are.
The current share price represents a multiple of around 14 times free cash flow. To me, that looks cheap.
The biggest risk that I perceive with Kraft Heinz is the company’s debt. But management has been working to bring this down steadily, making the stock a buy for me at today’s prices.
Shares are cheap, in my view, when they have a low price tag relative to the cash I expect the underlying business to produce. There are a few ways to look for cheap shares.
Some, like Meta, become cheap when the stock market overreacts to bad news. Others, like Forterra trade at low P/E multiples. And some, like Kraft Heinz generate more free cash than meets the eye.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Stephen Wright has positions in Kraft Heinz and Meta Platforms. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2022