By Jack Hough
The cheapest stock in America is up 520% in a year. Those are two things that shouldn't go together. It's like saying that the smelliest dog in town got four baths this week. How is it still the smelliest? The answer has to do with artificial intelligence -- I mean for the stock, not the dog. It's one of a few things that stand out from a recent screen for the 10 lowest forward price/earnings ratios in the S&P 500 index.
This is a semiregular act of morbid curiosity, not a sound investment strategy. But the numbers aren't helping to prove my point: Had you pulled up the 10 lowest-P/E stocks a year ago and put equal dollar amounts in each, you'd have since made 70% with dividends, trouncing the S&P 500 by 49 points. If you had done so two years ago, you'd have outperformed by nine points. Five years ago, and you're ahead by 73 points. Ten years, more than 300 points.
I'm pretty sure that's a fluke. The P/E is way too simplistic to be a reliable signal of value. For that, we need a team of business school graduates with spreadsheets modeling at least 10 years of hypothetical business results, and then layering on concepts that are both mathematically sound and totally made up, like weighted average cost of capital, terminal value, and risk adjustment. Only then can we calculate a fair present value. I live within the gravitational pull of New York City, and my property value is riding on the continued prosperity of these spreadsheet people, so let's not pretend that we can spot cheap stocks ourselves.
But let me run quickly through the list just the same, with a few observations. At the end, I'll guess which of these stocks will do the best over the coming year. I have reliably poor instincts about that sort of thing, so this will be a valuable contrarian signal. You're welcome in advance.
Micron Technology has the lowest P/E on the list: just 4.4, versus 20.5 for the S&P 500. Companies that end up on this list typically have an underperforming P, but this one has had an outrageously rising E. The company has never earned more than $12 a share, but earnings are now pegged at $56.74 a share for the fiscal year through August, and $93.24 next year, versus $8.29 last year.
Micron makes memory, which is in fierce demand for AI data centers, leading to shortages and soaring prices. Cue "Lyin' Eyes" by the Eagles: investors who've seen past memory booms fizzle are wary about this one. So, the stock hasn't climbed as quickly as the earnings.
By the way, the AI spending rush has done something similar for hard-drive maker Western Digital, which isn't on this list, but was on it a decade ago. Its return of more than 1,000% since then is one reason the lowest-P/Eers thumped the market over that stretch. Another reason is a company called United Rentals, which has cashed in on a trend toward companies borrowing rather than buying construction equipment. It, too, has returned more than 1,000% in a decade, and is no longer close to making the lowest-P/E list.
General Motors, 6.2 times earnings, is no stranger to this list, but it has also returned 68% over the past year, and 127% over the past three, easily beating the market. It's generating heaps of free cash by focusing on pricey trucks and sport-utility vehicles. On a somewhat related note, Delta Air Lines and United Airlines, which would have easily made this list a decade ago, have since graduated off it, and are weathering a spike in fuel prices well.
Global Payments, 4.7 times earnings, and Fiserv, seven times, are heavily indebted players in a decidedly unsexy part of fintech: processing card payments for merchants. Prudential Financial, 6.9 times earnings, and Everest Group, 6.3 times, are insurance and reinsurance companies that can have lumpy earnings. Prudential's 5.8% dividend yield is the highest on the list.
Cable companies have been losing their pay-television subscribers to streaming for years. Increasingly, telecom is coming for their cable broadband customers, too, with faster fiberoptic service. Those trends have left Charter Communications at just 5.2 times earnings.
Gen Digital, 6.8 times earnings, is a mash-up of Avast and NortonLifeLock, players in home cybersecurity. It's growing, but also heavily indebted. The stock enjoyed little of the past decade's run-up in shares of enterprise cyber giants like Palo Alto Networks and CrowdStrike Holdings, but has participated in all of the recent downside on AI disruption fears.
AES, 5.9 times earnings, is a debt-heavy utility that recently agreed to a buyout by BlackRock's Global Infrastructure Partners and others.
That leaves Viatris, 5.6 times earnings. It might as well have been named Hate Sponge when it began trading in November 2020. There was a company called Mylan, which was best known for buying EpiPen, the lifesaving injector for severe allergic reactions, especially for kids, and then multiplying the price sevenfold in under a decade. It merged with a part of Pfizer that owned off-patent former blockbuster drugs for cholesterol, impotence, arthritis, and depression. The idea was to use the cash flow to produce new, growing drugs, while quietly letting the EpiPen thing fade from memory.
I think it's working. My disgust feels like it's down at least 40% from 2020, and I notice that Viatris' earnings per share are expected to grow slightly this year for the first time since then, although the estimate has been slipping, so let's see. Viatris is my top pick from this group. If it outperforms in the year ahead, I'll gloat. If it tanks, I'll have jinxed it on behalf of all those EpiPen overpayers from the mid-2010s. I figure I can't lose.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 10, 2026 02:30 ET (06:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments