Stock valuations are elevated, at least according to the Shiller price-to-earnings ratio, also known as the cyclically adjusted price-to-earnings (CAPE) ratio. This ratio recently crossed 40, officially making it the second-most expensive market in history, behind only the dot-com bubble.
Another measure that has some investors raising their eyebrows is the Buffett indicator, named for famed investor Warren Buffett. This indicator measures the total value of the U.S. stock market in relation to the size of the U.S. economy (as determined by gross domestic product (GDP)). This measure is nearly 225% and has surpassed a level Buffett has called “playing with fire.”
With these elevated valuations, investors may be hesitant to jump in and buy stocks. However, there are still value opportunities in this market if you know where to look. If you have $1,000 available to invest in the stock market, here are three dirt-cheap stocks to scoop up right now.
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Chubb(NYSE: CB) runs one of the largest property and casualty insurance companies in the world. The company has built expertise across several domains and demonstrated an excellent ability to balance risk with pricing for its insurance policies. This is evidenced by its outperformance across key metrics, such as the combined ratio.
What makes Chubb appealing is its steady cash flows and global reach. Over the past 12 months, the insurance giant has generated nearly $14.7 billion in free cash flow. This is the amount Chubb has remaining after paying expenses, which supports stock buybacks and dividend payments to investors, while also providing the company with capital to invest in future growth. This strong cash flow is also why Chubb has raised its dividend for 32 consecutive years.
Another benefit to owning insurers is their investment portfolios. Insurers invest heavily in high-quality bonds, such as U.S. Treasuries, which generate steady interest income and provide an alternative revenue stream beyond insurance premiums. When interest rates rise or remain elevated, insurers benefit from higher interest income, which gives the stock strong defensive characteristics. Through Sept. 30, Chubb has generated $4.8 billion in net investment income.
Chubb is a leading insurance company with a stable business model and a strong ability to assess and price risk. Right now, the stock trades at a price-to-earnings (P/E) ratio of 12.6, which is below its 10-year average P/E ratio of 15. For investors seeking value and income, Chubb is an excellent choice.
Citigroup (NYSE: C) operates as the fourth-largest bank in the U.S. today, but has struggled to keep pace with its peers, such as JPMorgan Chase and Bank of America. That’s because it has a sprawling business and faced regulatory actions, which have weighed on profitability metrics, such as return on equity.
To get back on track, CEO Jane Fraser and her management team took steps to cut costs, reduce layers of management, and eliminate less-profitable business units. The company has undergone a reorganization to flatten management and focus on its core businesses. This is part of its plan to cut 20,000 roles, approximately 8% of its global staff, and to achieve $2 billion to $2.5 billion in run rate savings by the end of next year.
In the long run, Citigroup is targeting a return on tangible common equity (ROTCE) of 11% to 12%. ROTCE is an essential measure of how efficiently a bank generates returns from shareholders’ equity, excluding goodwill and intangibles. The bank is making progress here. Through Sept. 30, its ROTCE was 8.6%, up from 7.2% one year ago.
Citigroup is priced at 1.15 times its tangible book value (P/TBV), which is well below that of JPMorgan Chase (2.88) and Bank of America (1.89). The bank trades at a significant discount to its peers, reflecting its historical underperformance. However, it’s taking steps to streamline operations and appears to be a good value for investors today.
It’s been a rough few years for PayPal(NASDAQ: PYPL) stockholders. Since peaking at over $310 per share, PayPal stock has declined by over 80% and trades at a dirt-cheap valuation.
The fintech is another company undergoing a transformation, with CEO Alex Chriss leading the way. Chriss came over from Intuit a few years ago, where he helped manage its small- and medium-sized business unit. After taking the top role, Chriss has made an effort to expand PayPal’s reach by working with small and medium-sized businesses by creating a platform catered to their specific needs.
Not only that, but PayPal has been riding the buy now, pay later trend, which it has integrated into its PayPal ecosystem. This makes it easy for customers to access and helps merchants increase sales. More recently, PayPal introduced an advertising platform based on its extensive payments data and partnered with OpenAI to develop an agent-based shopping tool with integrated payments.
PayPal stock has underperformed, no doubt about it. However, the company views its stock as cheap, and earlier this year it approved a $15 billion stock repurchase program. PayPal aims to grow free cash flow in line with earnings and to use buybacks to deliver low-teens earnings per share growth by 2027. With shares trading at about 10.4 times next year’s forecast earnings, PayPal looks like an excellent value stock to buy today.
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Citigroup is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in JPMorgan Chase and PayPal. The Motley Fool has positions in and recommends Intuit, JPMorgan Chase, and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.
