3 Dirt Cheap Stocks to Buy With $1,000 Right Now

The current stock market is facing a historic moment, with valuations reaching epic proportions. According to the Shiller price-to-earnings ratio, also known as the cyclically adjusted price-to-earnings (CAPE) ratio, stocks are near their most expensive valuation ever.

And let's not forget about the Buffett indicator. Named after the renowned investor Warren Buffett, this indicator measures the total value of the U.S. stock market in relation to the size of the U.S. economy, as determined by the gross domestic product (GDP). This measure has pushed past 200%, a level Buffett has called "playing with fire."

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In this expensive market, hidden gems are available if you know where to look. Despite the high valuation on a large scale, there are still quality companies with solid growth prospects that are priced attractively for investors. If you have $1,000 to invest and want to diversify your portfolio with value stocks, here are three to consider today.

1. EQT Corporation

EQT Corporation (NYSE: EQT) is a leader in America's booming natural gas industry. Its expansive business ranges from the exploration and production of natural gas (upstream operations) to the transportation and sale of it to utilities, power plants, LNG exporters, and other industrial users.

Demand for natural gas is expected to skyrocket. As the world shifts away from coal and oil, natural gas offers a cleaner-burning fuel that produces less carbon dioxide and fewer pollutants. Natural gas also provides reliable baseload electricity, available at all times when needed, unlike intermittent sources like wind and solar.

The versatility of natural gas means it not only powers homes but also fuels factories and serves as a key ingredient in the production of chemicals, fertilizers, and plastics. As coal plants retire and electricity demand increases, utilities are increasingly choosing gas because it's cost-competitive and can be quickly ramped up to balance renewable energy.

A huge source of growth for U.S. liquefied natural gas (LNG) exporters has been Europe and Asia, where countries are replacing coal with natural gas while also reducing dependency on less stable energy suppliers. This should help provide sustained demand over the coming years. The U.S. is the world's largest LNG exporter, shipping 11.9 billion cubic feet per day in 2024, and it continues to build out export terminals.

Today, EQT is priced at 13 times next year's projected earnings per share of $4.47, making it an excellent value stock that stands to benefit from rising demand.

2. Expand Energy Corporation

If you're bullish on energy and natural gas, Expand Energy (NASDAQ: EXE) is another major natural gas producer you should consider. The company was born from the merger of Cheseapeake Energy Company and Southwestern Energy Company. Now standing as the largest natural gas producer in the U.S., Expand Energy boasts significant production assets in the Appalachian Basin and in the Haynesville Shale in Louisiana.

Expand stands to benefit from those same tailwinds boosting EQT, notably strong demand for natural gas to power data centers, along with a growing manufacturing sector.

The merger has made Expand Energy a major play while improving its operational efficiency. According to Nick Dell'Osso, Expand Energy's president and chief executive officer, it has achieved a 50% increase in run-rate synergies. It expects to achieve $500 million in annual synergies this year and another $600 million next year. In simple terms, the efficiencies from the merger are expected to lead to 30% more free cash flow this year and 20% more next year.

Analysts expect Expand Energy to generate $9.63 in earnings per share next year, putting its forward valuation at 11.8 times earnings.

3. Ares Capital Corporation

In a world shaped by tighter regulations and higher capital requirements since the 2008-2009 Global Financial Crisis, Ares Capital Corporation (NASDAQ: ARCC) has stepped up to fill the void left by traditional banks.

Ares Capital is a business development company (BDC) that provides financing to middle-market companies. These are companies that tend to be too large for small-business financing and aren't quite large enough to access public debt markets. Ares Capital defines them as companies with annual earnings before interest, taxes, depreciation, and amortization (EBITDA) between $10 million and $250 million.

The stock has struggled recently due to concerns about elevated credit risk in its portfolio and potentially weakening net investment income. Notably, concerns about credit risk have arisen recently following the failures of some private companies, like First Brands and Tricolor. These bankruptcies have sent ripples through the market, with some investors expressing concern about the potential for weak underwriting and opaque financing structures. Ares Capital has emphasized that it does not have direct exposure to those specific borrowers; nevertheless, the stock has taken a hit.

Ares Capital has diverse debt investments across companies and industries, with investments ranging from $30 million to $500 million, while its overall portfolio is valued at approximately $28 billion. The BDC has a long track record of lending to middle-market companies, having operated in this space since 2004 with a management team that has navigated numerous market environments along the way.

The recent weakness has Ares Capital Corporation's stock priced right at its book value and slightly below its five-year average. With an ultra-high dividend yield of 9.5%, Ares Capital is an excellent income stock that investors can buy at a reasonable valuation today.

Courtney Carlsen has positions in EQT. The Motley Fool has positions in and recommends EQT. The Motley Fool recommends Ares Capital. The Motley Fool has a disclosure policy.