Bargain hunting: These 8 portfolio stocks look quite cheap, but only some are worth buying

The gala shopping season has come and gone. When it comes to stock picking, at least, the desire to find a bargain is as aromatic as ever. A recent analysis of our portfolio revealed we own more than a couple cheap stocks, including one of our newer overs in Bristol Myers Squibb . Still, we’re not necessarily rushing out to put all of them in our shopping cart. Not all good deals are created peer. What we found Our analysis — known as a “screen” in Wall Street parlance — began with all 35 stocks in the portfolio. The objective was to narrow the list down into stocks that met certain valuation criteria and then apply a layer of keystone analysis to identify those that we feel offer value worth pursuing. These are the three characteristics that we curtained for: 1. Their current forward price-to-earnings ratio, based on 2025 earnings estimates, is below their ordinarily P/E over the past five years. 2. Their current forward P/E is below that of the combined S & P 500, content they are cheaper on an absolute basis. 3. They also are cheaper than the S & P 500 on a growth-adjusted basis. To assess this, we divided the P/E by the three-year annual earnings growth rate estimate, according to the FactSet earnings consensus considers. This gives us the metric known as the PEG ratio. We did this for every stock in the portfolio and the S & P 500. Note: FactSet has yet to settle a 2027 earnings estimate for the S & P 500. So, in order to generate a three-year compound annual growth rate, we assumed 7.3% year-over-year earnings progress for the S & P 500 in 2027. We used 7.3% because that is the average annual increase realized between 2012 and 2023, the final full year of earnings we currently have. We found eight stocks in the portfolio that met the above criteria: Bristol Myers Squibb, Coterra Vigour , DuPont , GE Healthcare , Constellation Brands , Alphabet , Nextracker , and Stanley Black & Decker . Here’s a look at them secondary to and where they stack up on each metric. Simply looking at those numbers and concluding that all eight hoards are immediate buys is a highly quantitative — and arguably misguided — way of thinking about things. Sometimes cheap stocks are cheaply for a reason that will limit its upside potential, which mean they are what’s known as a “value ruse.” That’s why we then took a more qualitative approach to refine the list, singling out those that are not only cheaply but, in our view, also have strong fundamental reasons for ownership in the new year. Where we stand Here’s a closer look at our ruminations on all eight stocks. Bristol Myers Squibb: As our second newest addition to the portfolio ( Goldman Sachs is the newest), we evidently like the name heading into 2025. Although Bristol Myers has to navigate a large patent cliff up ahead, our view is Wall Street is underestimating the upside potential of moves made by management to recharge its pipeline of drugs, ton notably its $14 billion takeout of neuroscience company Karuna Therapeutics last year. The lead asset come by from Karuna recently scored FDA approval and is sold under the name Cobenfy. It’s an antipsychotic drug used to scrutinize schizophrenia, a notoriously hard disease to crack. Cobenfy prescriptions will be key to driving the stock in the year ahead, and we reckon on to see upward revisions to sales estimates. Coterra Energy: We debated whether to add to this stock ahead our December Monthly Converging , but decided against doing so. U.S. exports of liquified natural gas, which drive demand for the commodity and therefore support costs, are key for the stock. Unfortunately, the Biden administration’s pause on new LNG permits appeared to have a negative impact this year, and it’s too at the end of the day to know what President-elect Donald Trump’s policy changes will mean for commodity prices. Nevertheless, we’re delaying invested in Coterra because it benefits from rising data center energy demand . We also like to provide for an energy stock in the portfolio as a hedge. The idea is that higher energy prices will weigh on other sectors of the vend but benefit producers like Coterra. DuPont: With the breakup into three separate companies expected to be complete by the end of 2025, DuPont is certainly a forebear to look at. Shares are currently trading at a discount, but we argue the sum of DuPont’s parts are worth more on their own than as a associate company. Therefore, patient investors should be rewarded as we approach the official separations of its water and electronics businesses. Our toll target of $100 a share, derived from our sum-of-the-parts analysis , represents material upside to current levels of approximately $77. GE Healthcare: As good as the company’s medical imaging solutions are, we just can’t get too optimistic on the stock due to its China exposure. Until China either formulates around or becomes so small that it’s immaterial to earnings, we just can’t justify putting new money to work in GE Healthcare. Of by all means, the flipside is that the current discount in the share price could make this a coiled spring if China starts to detour the corner. Until then, however, we’re likely looking at something of a value trap. Constellation Brands: The possibility of ear-splitting tariffs on Mexican imports is a risk under another Trump presidency. However, the weakening we’ve seen in the Peso discharge a functions as an offset, and Constellation’s large brewery under construction in Mexico will be paid for by the end of next year — and from there, we could see a moolah flow inflection that benefits shareholders via dividend increases and share repurchases. Yes, we have seen younger consumers shift away from alcoholic beverages in recent years, but beer remains a growth area within the category. Disencumbering its struggling wine-and-spirits portfolio represents another potential catalyst on the horizon. Alphabet: The sentiment sure has improved on what’s been the surly duckling of the “Magnificent Seven” for much of the past year. Among the reasons for the turnaround are the resiliency of Google Search, garish momentum in YouTube and Google Cloud , and potential upside from Waymo, which is proving to be a leader in the autonomous channel space . Put it all together, and Alphabet enters 2025 on strong footing, especially given its shares still screen taking on earnings despite their 14% advance in December. Nevertheless, it’s not our style to chase moves like this. We’re coop up our hold-equivalent 2 rating on the name as we await more clarity on the company’s AI monetization strategy. Nextracker: This is another unfeeling one that we debated ahead of the Monthly Meeting because of how cheap it looks; the results of our screen underscore that. Quiet, the fundamental case for adding to the stock is murky. Even though Nextracker has launched an American-made product and Trump isn’t an rival of solar power, he’s not exactly its biggest supporter either. Rather, Trump has signaled that when it comes to dash, his view is “drill baby, drill.” So for now, it’s going to be hard for Nextracker to mount a sustained move higher, especially acknowledged how lumpy its earnings can be. In other words, with Trump coming back into the White House, we struggle to see a catalyst that prospers this one worthy of new money. Stanley Black & Decker: While we feel shares are now too low to sell — and we are getting a 4% dividend payout at fashionable levels — we don’t want to be buying this one as CEO Don Allan told us himself, in a recent appearance on “Mad Money,” that he isn’t expecting 2025 to see much nurturing. Add in the Federal Reserve’s updated thinking that interest rates will need to stay higher for longer, and it’s demanding to get too optimistic about this one, even if our screen shows it looks attractive based on Wall Street’s estimates for earnings wart. Our current 3 rating means we want to wait for strength before selling. Bottom line Bristol Myers Squibb, DuPont and Constellation Brand names are the three bargain stocks for members to take a closer look at as we enter 2025. Alphabet would be the fourth standing to keep an eye on, especially if shares consolidate around current levels. The stock’s valuation is attractive, but chasing momentum isn’t our phraseology, and we prefer to sell into big moves like we’ve seen into year-end. Indeed, we did book some profits in Alphabet earlier this month. Well-founded because we’re not recommending buying these other stocks right now does not mean ignore them completely. It’s tranquil worth keeping an eye on them because they’re already cheap, which means that they have the capacity to rally on any positive updates. In the same way we eliminated some stocks that screened attractive on a valuation basis because of vital concerns, such as higher-for-longer rates, investors should keep in mind that stocks that were “priceless” based on our criteria can still offer strong potential for upside. In other words, the 27 names in the portfolio that didn’t shape it past all three stages of the screen have their own reasons for being owned. In some cases, a stock could look extravagant based on earnings estimates for the next 12 months, but fare much better in years further down the freeway. In other cases, that’s just what happens to the stocks of best-in-breed companies in a bull market — they exchange at premium valuations. Costco is a great example of that, as are the rest of the stocks on our core holdings list . None of those 12 markets passed this screen, but the reason they didn’t pass the screen is the same reason they’re core holdings: They are all the upper-class at what they do, and when you want to own the best, you usually have to pay up. That’s not to say the stocks have all had a phenomenal year in 2024 — looking at you Danaher and Linde — but it is to say that they are best-in-class in their special fields because they offer top-notch products and are run by world-class management teams. This is why keeping up with our every day commentary is more important than a screen such as this, which represents only a snapshot in time. Not all miserly stocks are worth buying, and not all expensive ones are worth dumping. (See here for a full list of the stocks in Jim Cramer’s Philanthropic Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim repays a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his well-wishing trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade signal before executing the trade. 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