Have $1,000? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Key Points

• After a rough three years, there’s a light at the end of the tunnel for General Mills, as well as for its shareholders. (The dividend yield newcomers will be plugging into is just a nice bonus.)

• China’s online shopping giant Alibaba has turned the corner, but not because of rekindled growth of its e-commerce business.

• Berkshire Hathaway is more than a collection of Buffett’s individual stock picks. In fact, its stock holdings are a minority of the conglomerate’s current value.

• 10 stocks we like better than General Mills ›

The overall market remains quite expensive, with the S&P 500 (SNPINDEX: ^GSPC) priced at more than 25 times its trailing 12-month profits, and nearly 22 times its forward-looking earnings. Both are multi-year highs, intimidating many would-be buyers.

Not every ticker sports a sky-high valuation right now, however. Some stocks worth owning are still surprisingly cheap. Here's a look at three of these names that just might make sense for your long-term portfolio.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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1. General Mills

The food business isn't just boring. It's also a slow-growing, low-margin industry, not to mention vulnerable to even merely modest inflation. Never even the massive amount of competition in this space.

These are all reasons General Mills (NYSE: GIS) shares are down 44% from their 2023 peak, dragged lower by the curbing of the COVID-19 pandemic and the subsequent fallout of several decisions made during the coronavirus contagion. Sales as well as profits have been dwindling.

The sellers, however, have arguably overshot their target.

That's not to suggest the company behind brands like Pillsbury, Green Giant, Progresso, and Lucky Charms is thriving. Organic revenue for the fiscal first quarter ending in August was down 3% year over year, while operating profits fell 18%, starting a fiscal year that isn't expected to look much better; General Mills' guidance for the full year is for flat sales and a 10% to 15% decline in operating profits.

The company's finally got a compelling comprehensive turnaround plan, though, that includes a rethinking of its packaging, pricing, and promotion. Notably, while rivals may be defensively scaling back their advertising budgets, General Mills is planning to spend more on marketing in the foreseeable future, capitalizing on the unique economic situation in place right now that's made most consumers more value-conscious.

Given the plausibility of the plan to rekindle long-term growth, it's surprising that GIS shares can be bought for less than 14 times this year's expected earnings. Better still, you're plugging into a stock with a forward-looking dividend yield of 4.9%. And that's based on a well-protected dividend, by the way, that's been paid like clockwork for over a century -- one of the upshots of selling goods that consumers always need.

2. Alibaba

It's been a great year for Alibaba Group (NYSE: BABA) shareholders. While the stock went nowhere for nearly three years in the wake of Beijing's 2022 regulatory crackdown on many of China's biggest technology companies, something clearly sparked some serious bullish interest this year. Shares are up an incredible 93% since the end of 2024, and seemingly still going strong.

That something was mostly the company's move into the artificial intelligence (AI) space, of course. Although e-commerce is still Alibaba's single-biggest business as measured by revenue and profits, the organization's cloud intelligence arm that developed a conversational AI platform called Qwen produced company-leading year-over-year revenue growth of 26% for the three-month stretch ending in June.

This is still just the beginning, though.

See, there's something of an artificial intelligence arms race between China and the United States. The U.S. is arguably leading it, but China's certainly no slouch. Indeed, now that its technology companies are achieving a great deal of successful AI development without relying on American suppliers, analysts with Morgan Stanley have used the term "a sleeping giant awakens" to describe China's artificial intelligence revolution that's expected to produce a 52% return on their collective investments in AI by 2030. Alibaba will feature prominently in that growth, particularly now that it's building its own high-performance AI processor chips.

The irony? China's adoption of its own home-grown AI solutions could spur economic growth that boosts the country's domestic consumer-spending Alibaba's e-commerce business needs more of. Goldman Sachs analysts believe AI will add 8% to China's GDP growth over the course of the coming 10 years. That's not a big number, but it's a lot when you're talking about any nation's GDP growth.

It's admittedly a lot of dots to connect, which is why most investors aren't connecting them. Neither are most analysts, for that matter.

Regardless, given the potential explosion of revenue and earnings here, Alibaba stock's a bargain at less than 20 times its trailing-12-month per-share earnings.

3. Berkshire Hathaway

Finally, its individual stock holdings are so frequently discussed that it's easy to forget Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is a publicly traded entity itself. But it is, and a compelling one right now, while valued at about 20 times its trailing and projected profits.

This is an approximate number that requires an explanation.

Yes, Berkshire holds a bunch of stocks that individual investors frequently use as ideas for their own portfolio. Berkshire Hathaway isn't just a de facto mutual fund, though. In fact, its current holdings in publicly traded companies only account for about one-third of Berkshire's total value right now. Another one-third is its sizable cash hoard, while yet-another one-third of its $1.0 trillion market cap reflects the value of all of Berkshire's privately owned businesses like Duracell batteries, Geico insurance, railroad BNSF, Fruit of the Loom, Pilot Travel Centers, and more. All of these cash cow companies contribute to what the conglomerate regularly reports as operating earnings, usually in the ballpark of $40 billion to $50 billion per year (while any investment gains or losses on its stock holdings are reported completely separately).

Based on nothing other than these recurring operating earnings, Berkshire Hathaway shares are valued somewhere around 20 times this year's likely actual operating earnings without factoring in any gains on its stock picks.

Now, take this number with a big grain of salt. Like any other business or group of businesses, this conglomerate's bottom line can be impacted by unforeseen economic turbulence. All I can say with any real certainty is that Berkshire booked about $17 billion worth of net operating income through the first half of 2025.

It's still a pretty typical number, making Berkshire an attractive long-term value holding at this time.

Making it even more attractive is the fact that one-third of your investment is effectively held safely as cash, which means the remaining third is reflective of all the stocks currently held by Berkshire Hathaway. Even in the unlikely event of all of these stocks suddenly crashing, the value of Berkshire's cash-generating businesses as well as its large cash position would still protect much of the conglomerate's per-share value. Of course, Buffett's stock picks tend to not only hold up, but reliably thrive in the long run.

In other words, Berkshire Hathaway's relatively low valuation still overstates the actual risk investors are taking by owning a stake in the conglomerate.

Should you invest $1,000 in General Mills right now?

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Goldman Sachs Group. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.