These are the best stocks to buy now for 2022 that are undervalued currently!

Jabran Khan details some of his best stocks to buy now for 2022 that are currently undervalued and could be bargains for his portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Lady researching stocks

Image source: Getty Images.

I believe some of the names on my best stocks to buy list now are currently undervalued. The pandemic and market crash paved the way for many stocks to lose value. With the market stuttering today, there could be even more value opportunities around for my portfolio.

I believe some are still undervalued and there are some exciting opportunities to pick up cheap shares for the long term. Investing in undervalued stocks is not a new practise. In fact, legendary investor Warren Buffett is one of the most famous value investors of our time.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

I have pinpointed three undervalued shares I would happily add to my portfolio at current levels.

FTSE 100 broadcaster

ITV (LSE:ITV) shares are trading for 110p as I write. A year ago shares were trading for 95p, which is a 15% return. At current levels, shares are trading at a price-to-earnings ratio of just 12, which I think is seriously undervalued.

ITV suffered due to the pandemic but has also been on a downward trajectory for some years. A rise in digital disruptors and competitors ate away at ITV’s previously dominant market share. A recent shift towards digital transformation has prompted a comeback of sorts for ITV. I believe ITV could be an excellent recovery play in the long term.

ITV’s Q3 update released to the market earlier this month noted impressive performance for the nine months in its fiscal year to date. Revenue easily surpassed 2020 pandemic levels by 28% but, more impressively, it surpassed 2019 pre-pandemic levels. The digital transformation seems to be working with online viewing numbers up by 39% too.

The best stocks to buy now do have risks too despite what seems like cheap valuations. ITV is in a highly competitive market. The race for new viewers and the best content is spread among more traditional names like BBC and ITV as well as popular so-called newer platforms like Amazon Prime, Netflix and Apple TV to name a few. 

ITV is still one of the largest media companies in the UK. It holds 13 of the 15 regional TV licenses and is cheap currently. It has a dividend yield of close to 4%, which is over the FTSE 100 average of 3%. I would buy shares for my portfolio today.

Aerospace giant

Defence, security, and aviation is a very large and lucrative sector to be in, especially when you take into account the various geopolitical factors around the world. BAE Systems (LSE:BA) is one of the biggest players in the market so I am quite surprised and buoyed to see it undervalued at current levels. BAE has a presence and operations in over 80 countries, most notably in the UK, US, Saudi Arabia, and Australia.

At the time of writing on Friday, shares are trading for 546p whereas a year prior, shares were trading for 504p, which is a 8% return. BAE has a price-to-earnings ratio of just over 10, which I believe is cheap for such a quality stock.

I believe BAE has defensive traits as governments worldwide spend handsomely on defence, which is where BAE comes in. BAE has a multi-billion dollar order book that goes all the way to 2030! BAE is also a good dividend payer and has a dividend yield of over 4%. Like ITV, BAE’s current yield is above the FTSE 100 average of 3%.

My best stocks to buy now usually have a consistent track record of performance too. I understand past performance is not a guarantee of the future but I use it as a gauge when reviewing investment viability. Revenue and gross profit have increased year on year for the past three years. A recent update provided by the company was also promising.

BAE Systems also comes with risks. The primary risk is that in times of economic austerity or pressure, defence spending can often be one of the first items to be cut by governments. Due to the pandemic and other macroeconomic pressures currently, BAE could experience some challenges of this nature.

Overall I would buy BAE Systems shares for my portfolio at current levels. It pays a good dividend, has defensive traits, a positive track record, has a good forward looking order book, and continues to win new business. Furthermore, it continues to acquire smaller businesses to enhance its offering.

The best stocks to buy now make me a passive income

Imperial Brands (LSE:IMB) is a leading supplier of tobacco, cigarettes, and other smoking-related products. Some of its brands include Davidoff, Winston, and West.

It is worth noting that smoking firms don’t have the best reputation at times. This is because smoking has fallen foul of changing consumer habits. This outlook has been more prevalent in developed countries. In less developed countries, smoking is actually on the rise. In addition, the rise of environmental, social, and corporate governance (ESG) investing means firms like Imperial are out of favour for some investors. 

At the time of writing, shares are trading for 1,553p, whereas a year ago shares were trading for 1,413p, a 9% return. At current levels, Imperial’s price-to-earnings ratio stands at just over five, which is extremely cheap in my eyes.

Imperial has a juicy dividend yield of 9% and is one of the go-to stocks for passive income seekers. With a current cheap price and a high dividend yield, there is a lot for me to like.

Imperial also has real risks. Investor sentiment issues have hampered it but performance has not really been affected in the past nor has it affected its attractive dividend yield. When the pandemic struck, it did have to cut dividends to conserve cash. With risks of new variants and restrictions, like those recently reported, there is a credible chance this could happen once more. Finally, if demand in more developed countries continues to decrease, performance and payouts could be affected.

I believe Imperial is one of the best stocks to buy now as a passive income investment for my portfolio and I would add cheap shares to my portfolio at current levels. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended ITV and Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

Here’s why the Renalytix share price is tanking

The Renalytix share price has lost almost 90% of its value in one year. Our writer is a shareholder --…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could I make big buck with cheap Aston Martin shares?

Aston Martin shares plunged nearly 10% on Thursday morning amid rumours of another capital raise. But, maybe now is a…

Read more »

Risk reward ratio / risk management concept
Investing Articles

A top penny stock to buy in July

Penny stocks can carry higher risk for investors than larger companies. However, here is one low-cost UK share I think…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Why 2022 could turn out a great year for buying growth shares

The appetite for growth shares appears to have waned in 2022, as the US Nasdaq has hit a bear market.…

Read more »

Piggy bank group pastel color background
Investing Articles

Should I buy PayPal stock in July?

The PayPal share price has fallen quite a long way from its all-time high. So, could July present a buying…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

2 great FTSE 100 stocks to own heading into a recession

Jabran Khan identifies two FTSE 100 stocks he feels are recession-proof and details their defensive capabilities.

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

The Lloyds share price is down. Where will it go next?

In this article, this Fool looks at where the Lloyds share price could be heading, and whether it can return…

Read more »

positive mental health woman
Investing Articles

Waiting for a stock market recovery? I’m not

I'm not in a hurry for a stock market recovery. In fact, I think market volatility can be good for…

Read more »