The Savvy Investor’s Cheat Sheet: 3 Deep Value Picks for May 2024

Stocks to buy

With many market strategists turning slightly bullish amid this bull market, investors may wonder if there’s still any deep value left for the rest of us. Undoubtedly, not all companies have pulled their fair share of weight in the 2024 market surge. Some investors may have ditched the lagging stocks for some hotter names, some of which may have more exposure to the latest needle-moving trends (generative AI, anyone?).

As the first half of 2024 comes to a close in just over a month, we may see some of the more underrated stocks emerge as potential catalysts begin to kick in a bit. In this piece, we’ll try to identify three deep value plays that savvy investors should watch closely as the magnificent returns look to broaden beyond the group known as the Magnificent Seven.

So, get your cheat sheets ready, investors, as these could be the deep-value stocks to buy.

Chubb Limited (CB)

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Chubb Limited (NYSE:CB) is an insurance firm that was spotlighted when it was revealed that Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) took a whopping $6.7 billion stake in the first quarter.

Berkshire’s big mystery investment reveal sent CB stock spiking, as Warren Buffett followers chased down the name. The Berkshire-induced pop has since come in slightly, now down around 2.5% from the peak, but the Buffett premium is now in the books.

Despite this, I still view the $108.6 billion insurer as pretty cheap at just 11.79 times trailing price-to-earnings (P/E). Chubb isn’t just a seemingly cheap insurer, though; it’s one of the better-run companies in the property and casualty (P&C) insurance business.

As you may know, cheapness is just one trait Buffett and Berkshire look for. With solid managers and an impressive underwriting track record, value investors should look to catch the stock on the way down.

Pfizer (PFE)

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Pfizer (NYSE:PFE) stock has one of the ugliest two-year charts I’ve seen of late. With the COVID-19 vaccine boom now behind us and some patents slated to expire in time, Pfizer must take drastic action if it’s to make a glorious return to growth.

The company’s acquisition of Seagen can help bolster the Pfizer narrative. But in the meantime, it’s tough to beckon in the value investors, given a relative lack of catalysts. At the time of writing, PFE stock has already shed more than 50% of its value from its late-2021 highs. Recently, Pfizer shares gained more than 3.6% as the firm announced its multi-year cost reduction program.

It’s a pretty big move that seems to be garnering enthusiasm. But whether such cost cuts will be enough to sustain a turnaround remains the big question. Though likely undervalued at 3.1 times price-to-sales (P/S), there are timelier stocks in the market for investors who don’t see themselves sticking around long enough for Pfizer’s cuts to fully work their way into the stock.

Cheesecake Factory (CAKE)

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Cheesecake Factory (NASDAQ:CAKE) still seems to be in the midst of a sugar hangover, with the stock in no rush to gain higher after shedding over 40% of its value between its 2021 peak and its mid-2022 trough. Year to date, CAKE stock is up 6%, trailing the S&P 500 by almost 6%. Despite lagging the market so far this year, there are reasons to believe things could get sweeter from here.

Looking ahead, Citigroup (NYSE:C) analyst Jon Tower is optimistic Cheesecake Factory can finally turn a corner. Specifically, Tower likes the unit growth outlook and relative traffic trends versus other restaurant companies.

I think Tower is right to recommend CAKE. The market is way too bearish on the name right now, possibly due to exaggerated fears that obesity drugs could curb hunger for those delicious cheesecakes.

As the mid-cap comfort food restaurant strives to find relief in the second half, I certainly wouldn’t bet against CAKE here — not while it’s trading at a very high 11.7 times forward price-to-earnings (P/E). There are still headwinds to overcome, but they’re likely fully baked in (forgive the pun) into CAKE stock at this point.

On the date of publication, Joey Frenette held shares of Berkshire Hathaway. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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