These stocks are underperforming the markets this year, but they have loads of potential in the long run.
If you have $5,000 that you can afford to invest in the stock market, you'll have to decide between investing in just one stock or spreading it across multiple investments. What's more challenging, however, is finding a safe place to invest that $5,000.
Three growth stocks that are not only safe but also cheap right now are United Parcel Service (UPS -0.92%), PDD Holdings (PDD -2.40%), and Lowe's (LOW 1.33%). Here's why they could be underrated buys right now.
United Parcel Service
United Parcel Service has been struggling to generate much growth these days. When it reported its latest numbers -- for the second quarter of 2024 (which ended on June 30) -- revenue totaling $21.8 billion was down 1% from the same period last year.
But this is still a growth stock, and UPS should do well as the economy improves. The opportunities in e-commerce alone could propel it to much greater revenue growth. And the silver lining is that volumes are going in the right direction. CEO Carol Tomé called the quarter a "turning point" for the business as it has "returned to volume growth in the U.S., the first time in nine quarters."
Analysts at Mordor Intelligence project that between 2024 and 2030, the freight and logistics market will have a compound annual growth rate of 5.1%. And with UPS being a big player in that market, it still has a lot of growth ahead.
Its stock is down 18% this year, but investors shouldn't count it out for the long haul. It trades at less than 17 times its estimated future profits, and now could be an excellent time to add it to your portfolio.
PDD Holdings
PDD Holdings is the company behind the popular e-commerce site Temu, known for its incredibly cheap deals. It has been making enough noise that Amazon is rumored to be looking at launching a new service to better compete with it.
It's hard not to see the market opportunity. Temu has been luring shoppers away from other sites, as well as discount retailers and dollar stores. As long as consumers are willing to wait for their orders there's an opportunity to save a lot of money, as Temu's shipments are often far slower than what consumers experience with Amazon.
But the demand appears strong as business has been booming. During the first three months of the year, the Chinese company's revenue totaled $12 billion and rose by 131% year over year.
That being said, shares of PDD are down 13% this year. The Chinese economy grew by 4.7% in the second quarter, slower than in the first quarter, when it increased 5.3%. It fell below analyst expectations as concerns of a slowdown are mounting, and that could be weighing on the stock.
Investors might be wary of investing in PDD Holdings, but it has the potential to generate a lot more growth. And with the stock trading at 11 times its estimated future profits, it's an incredibly cheap buy right now.
Lowe's
Home improvement retailer Lowe's rounds out this list of cheap growth stocks. It's trading around 20 times its estimated future profits, which is higher than the other stocks listed here, but that is still a modest multiple given the S&P 500 average is 22.
As discretionary spending has come under pressure due to inflation, companies such as Lowe's are struggling to generate growth. When it last reported earnings in May, comparable-store sales for the period ending May 3 were down by 4%, with the company noting a sizable decline in "big ticket discretionary spending." But just as with UPS, these trends aren't likely to persist in the long run.
Year to date, Lowe's is the only stock on this list that has generated gains. But at 7%, it trails the S&P 500 with its 15% returns thus far. Investors have become a bit more bullish on Lowe's as optimism rises that interest rates might be coming down in the near future, which could entice consumers to take on large do-it-yourself projects that require financing. And there's still more room for the stock to rise even higher.
Lowe's gives investors a great way to tap into the housing market's growth since new home purchases often come with unexpected repairs and maintenance. While the stock's returns might look sluggish right now, this could be another excellent investment to load up on today.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Lowe's Companies and United Parcel Service. The Motley Fool has a disclosure policy.
