4 Stocks Under $50 to Buy and Hold Forever

If you're looking for inexpensive stocks, at least for the share price, we have got four that are really compelling right now, trading for under $50 per share. This doesn't mean that they're necessarily cheap, but a lot of the more highly valued companies today are getting much over $100 per share. That was really rare when I started investing. But Lou, the first one that I wanted to bring to the table is one we've talked about before. That's Lyft. Shares are trading for $14.75 as we're recording today. But this is one of these companies I think just continues to be completely overlooked. You you get the disruption story from autonomous vehicles. That's why Uber stock is, you know, relatively cheap to its historical valuation. But then you look over at Lyft, price to earnings multiple on a forward basis is 8 1/2. Price to free cash flow is 4 and a half. They could buy back 20% of their shares outstanding on an ongoing basis. You know, there's a little bit of variability based on insurance costs and all that kind of stuff, but this is a company that's still growing, still growing their bookings almost 20% year-over-year, yet the market just doesn't give it a lot of credit. And oh, by the way, we should talk about the fact that somebody could just come in and buy them and jumpst start their autonomous vehicle strategy. >> It feels like someone should buy them. But yeah, this is the classic Pepsi is a fine business business, right? you know, we always Coke is the go-to, but look, you do pretty well over time with uh Pepsi. Uh yeah, I don't think they will be independent forever, but I think there's a probably enough value there that investors who buy today, if and when that inevitable acquisition comes, I think you do okay. Uh we've talked this before whether or not there's a world where we just summons our autonomous vehicles through Google maps one day and the whimo comes or something like that. There is still at least for now a value in the aggregator. They've never been able to step up mano and mano with uh Uber and Uber has gone in a lot of different directions. >> There is value in that customer list. There's a value in that network and yeah it's kind of afterthoughts can be great investments. There's so many things that I think Lyft has as far as optionality goes as as from an investor perspective. One one thing that I want to highlight is that the autonomous vehicle supply that is coming to market, you know, there's a lot of companies that say they're going to be doing something commercial either late this year or early next year. We're still looking at two, three, four years from before they really scale things out. This all takes longer than we think. I mean, right, it's easy to talk about the disruption story. I think it always takes longer than we think. But the other piece of it is that if autonomous vehicles beyond just one or two companies, let's let's just mention Whimo and then Tesla, you know, as I think viewed as two of the leaders, but if somebody else of a bunch of other suppliers coming into the market, Lyft has a better ability to just burn the boats and go allin on autonomy and saying, you know what, in Dallas, we're going to launch 5,000 vehicles. we're going to run. They're all going to be autonomous. You're going to be able to get a ride anywhere you want at any time of day and it's going to be, you know, a twominute pickup time on Lyft. That's at least an option that they have that I think Uber just simply doesn't. They're just too big. 200 million people are using them. You know, millions of people are using them for for income uh in with driving. So that's a there's just so much optionality when you're buying a company that's this cheap to be able to go in and say, you know what, this could go a number of different ways and they all kind of work out work out well for me. >> Yeah. I mean, I like that. Also, you have a good idea. Lift for boats. >> I mean, it probably wouldn't be a bad business. All right. Stock number two we wanted to talk about is a momentum. You're going to have to you're going to have to explain this one to me. >> Yeah. So, this one. All right. So, so what do we got here? This is a sort of the defense contract everyone forgot about. They haven't been public for too long. And I'll be honest with you, Travis, it is a mess right now. But I like what this can be. Okay, they are they're a collection basically a private equity rollup merged with the government business of a construction firm and they have gone through a lot of tossing and turning trying to kind of clean up contracts, clean up kind of turn into a company. What do they do? They run the Kennedy Space Center. thing happens at the Kennedy Space Center unless they're there to do that job. They are responsible for all of our nuclear waste. They run the containment facilities and kind of the cleanup disposal for that. They help build and maintain military equipment. They also provide cyber security and intelligence. They're a leader in running these nuclear facilities, not just cleaning it up. Uh they are actually working on AI. They have just basically teams of scientists, scientists on demand that just do projects for governments in AI. This you see this not just running JFK2. They're not just cleaning the bathrooms. They are they are actually at the Kennedy Space Center working on trajectories and they have the contract to figure out that satellites don't run into each other. A lot of the behindthescenes things. What do all these have in common? They're not the sexiest things. They're not talking about F-35s or what you see, but imagine >> you're not building something going to Mars, >> right? Right. But imagine what would happen to the government if any of these chores aren't done. Imagine if just like the construction services arm at the big Fort Benning, if if they just stopped doing maintenance on the uh on the soldier dorms. There is so much that you know the we did have government shutdowns still matter and all that. So you still have that noise too. But in terms of sticky revenue and with upside with science, we're not just talking all man u um you know janitorial services, you're getting it under 10 times expected earnings because again they have to turn this into one succinct company. I love the long-term nature to contracts. I love the massive backlog they have. I think this is a winner, a big winner for patient investors. Yeah, this is one of those businesses that you you look at where there's tailwinds. There are definitely tailwinds in all of those industries, but this is just the nuts and bolts, right? Like this is the stuff that's just got to get done that isn't going to get a huge multiple if you're SpaceX or something like that. But, you know, you've got to have these kind of facilities up and running. Uh the profitability is improving. You know, they they have been operating income positive at least for the for the last 5 years. So, that's positive. Those margins look like they are improving. So if if uh those margins are continue to move in the right direction, there's a lot of opportunity given 14.2 billion worth of revenue. >> Yeah, this is a business that just isn't going anywhere. And I kind of like those as a long-term focused investor. >> Yeah. Uh speaking of not going anywhere, I don't think SoFi is going anywhere. So that's number three that we want to talk about. Shares uh trading for about $17 per share. Now we've talked about SoFi before on this channel. The debate I think about SoFi is oftent times more about valuation than it is about is this actually a real business? Is are they going to be profitable in the future? Because it does trade more like a tech stock than it does like a typical bank. Right now price to book value is about two. So that's going to be lower than you probably have historically. You know, we've we've talked about it when it's been more like four times uh book value. But Anthony Roto has actually been really good at selling shares high and then building the business longterm with that additional capital. The the big thing I think SoFi can do differently than so many other banks, whether you're talking about the the major banks or whether you're talking about regionals, is they're digital first. And so they're going to be able to do things that scale in a way that most companies can't. I still think the SoFi deal, it sounds the the the SoFi stadium deal in Los Angeles sounds crazy when it's announced and then you realize that they're growing their member base at 30% year-over-year. That's not something most banks can do because they can think about how are we going to be able to scale this business across the country and get customers using more and more of our products. They've just been really good at executing that strategy. There are plenty of questions about what's going to happen with their technology business. You know, that that's been a little bit of a dud, but financial services continues to grow. Lending continues to grow. I just think this is one of those companies that if you can get it in one of these downturns like we're in right now, it's a good long-term hold. >> Yeah. I I I don't hate the company. I look I I I don't think there's much to the software business, period. There's just so many banking as a service companies out there. I don't think there's anything special there. And I think that's been their experience. it's customer journey. You can always find someone to pick up the platform, but there's just nothing really special about them, you know, or anyone else. Uh, as you say, a year ago, you would have paid about four and a half times book. And I do like book for banks. Um, you're only paying two times book. Now, that's better. Regional banks, you can get really good regional banks that pay a four or five percent dividend at basically their book value right now. So it's still expensive for a bank even among as you say the digital first uh Ally Financial which I think is another well-run bank is half of the multiple. So I don't know if I think it's the best deal but I agree with you. They're wellrun. They do grow faster than at least for now um a lot of the a lot of the banks. So you do deserve a premium there. My question for you and I think it's it's not knowable, but will it get back to four times book? Is that valuation sort of a product of the early growth trajectory and kind of some of the numbers as it matures as it expands its products as the like the quote unquote lowhanging fruit disappears? Is this a more normalized valuation? You can still win from here because if they continue to grow, book value will go up. But I just I I I'm cautious about looking to the past for valuation. But I do think it's a well-run company. >> I think the question is going to be how much of their particularly their lending business becomes a platform business and how much stays on their balance sheet. You know, I think that's one of the the bullish cases for a higher multiple is that the what they call the loan platform business becomes a bigger piece of the business actually when you look at their income statement. The loan platform business fees sit in financial services. So that's one of the things that help that's helping that high margin financial services business grow. But if you're just the place that customers are coming to, you're you're the interface, the aggregator, if you will, in the banking industry, and customers come to you and say, "Hey, I'd like to take out a $10,000 personal loan or I'd like to take out a $500,000 mortgage." That could be a good place to sit. The challenge is that a lot of companies are trying to do that. I mean, in the the home mortgage, Zillow's Zillow is trying to do that. Yeah. So, um, it isn't like there's no competition, but if it is more of a feebased business and you're not holding that liability on the balance sheet, that's where you potentially get a higher multiple. There are, you know, strengths and and weaknesses to that strategy. But I I just think they've done a lot of things really well. Uh, you know, Robin Hood is the other one that kind of sits in this where being a digital first platform just puts you in such a better position. I use all these brokerages. I try try all the brokerages. I've I've got a number of different bank accounts just to see what they're all like and Robin Hood and SoFi just sit in such a better position than your older banks like a Wells Fargo or like a a Schwab uh if you're investing. So, I I just I I think eventually those things end up mattering and help continue drive that member growth. I think they're still only at about 14 million members. So, a lot of potential growth ahead in that member base, but we'll see. You know, you got to keep growing to deserve that higher multiple, but if they can keep a third 30% growth rate in members, I think they do. All right, stock number four today. QXO. First of all, Lou, you got to tell people who aren't familiar. What is a QXO? >> Yeah, what is a QXO? Okay, so let me give you the backstory here. QXO is the latest creation by serial entrepreneur Brad Jacobs. And he is I I respect him a lot, but one of his it he's got a thing with naming companies. Okay. His previous company was XPO. XPO broke into GXO and XPO and RXO. So now this is QXO. You might recognize XPO though along with United Rentals, another Brad Jacobs company. Those are two of the top 10 performers of the Fortune 500 over the last decade. So that's why this deserves your attention. He knows what he's doing. He also did a waste roll up that sold to uh Waste Management. So it's not on that list. Otherwise, he might have three of the top 10 performers. So, what does Jacobs do? Jacobs is a serial acquirer of kind of industrial businesses. He has a great eye for spotting value and then infusing technology to make things better. Uh QXO is in the building products distribution business. They have done a couple of deals. The one they did most recently, Top Build, it was it's great franchise and it gives them a great great market. Uh the stock has been beaten down because and I I think the impression was he was going to take assets on kind of that need to be fixed up and get them on the cheap. Top build is a good company. It didn't need to be repaired and he didn't get it on the cheap. I still think this works though. His goal is to build a $50 billion company by kind of the next decade. If he does, and that is an if because you are buying into a jockey here, you're buying into a rollup. Roll-ups are hard. and I and it can go wrong, but he knows what he's doing. He's got a clear vision. He's executing on it. I really really like the potential. If you look at XPO's returns, you know, they're in the four digits over time. I really like the potential of kind of this following the same course. What do you think about the rollup strategy being something that you know I think when he started doing some of these especially like United Rentals? It was a novel strategy and now there are a bunch of PE firms that this is what they're built to do. Does that make it harder to actually execute? >> There's always been competition and I think you know the thing is is that he picked a very fragmented industry so there's a lot to choose from. What could be different to some I don't worry about PE. I will say that look, money isn't free anymore. For most of the past couple decades, rates were just so low. And now, look, I think QXO because of Jacob's reputation, they have a cost of finance advantage that they can still get money cheaper than a lot of people. >> And that's the high stock price, which >> they stock price, but also just borrowing, you know? I mean, I think there's a lot of credibility on Wall Street, and that helps you get good terms. So, I think he still does have an advantage, but it is a different market if you're paying in, you know, a nonzero rate environment. You also have two deep pocketed competitors trying to buy things. Home Depot and Lowe's. They have all done deals. One of them, Home Depot appears, if you believe the reports, basically took from QXO or QXO was the other bidder. Uh, look, I think there's limits to how much those companies are going to invest. So, I don't think, you know, I mean, I think there is that that's a stumbling block, but I don't think it's a roadblock. But, yeah, there are always threats. And look, M&A is hard. I think Jacobs has a pretty good template for it and again he's done 500 something deals during his career. >> Uh past performance is not an indicative indicator of future success. It can go wrong but I like the track record. Again, you're betting on his team's competency here and that's a pretty good track record to bet on. Yeah, that is one of those things I think we learn over and over again especially with uh starting businesses with entrepreneurship is somebody who's succeeded once it's easier to succeed the second the third the fourth time feces will tell you that uh tends to be true in the market as well. So Lyft Amentum SoFi and QXO which one of those intrigues you the most? Leave your comments in the comments section below. Don't forget to subscribe to the MLY Fool's YouTube channel. Thanks for watching everybody. See you here next time.