These value, growth, and income stocks are incredibly cheap in a historically pricey stock market.
Investors have plenty to be thankful for in 2024. They’ve witnessed the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all rocket higher by a double-digit percentage and head to multiple record-closing highs.
But investing is all about looking forward. As we get ready to turn the page to 2025, here are five unbeatable stocks I’m looking to buy.
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Sirius XM Holdings
The first stock I plan to add to in the new year is satellite-radio operator Sirius XM Holdings (SIRI -1.32%). Despite facing increased competition from online radio companies and lowering its 2024 sales guidance, there are clear-cut catalysts that make Sirius XM a bargain.
To start with, it’s a legal monopoly. Being the only licensed satellite-radio operator more often than not affords the company significant subscription pricing power. With Spotify Technology increasing the price of its services in June, Sirius XM wisely updated its pricing structure in November, which moves away from discounting practices and focuses on subscription simplicity.
Sirius XM is also better positioned than terrestrial and online radio providers to ride out inevitable downturns in the U.S. economy. Whereas traditional radio companies are almost exclusively reliant on advertising to keep the lights on, Sirius XM has brought in nearly 77% of its net sales through the first nine months of 2024 from subscriptions. People are far less likely to cancel their service with Sirius XM during a period of economic uncertainty than advertisers are to meaningfully pare back their spending.
The valuation is tough to ignore, as well. This Warren Buffett-favorite stock is valued at less than 8 times forward-year earnings in a historically pricey stock market, and is approaching a 5% dividend yield.
Pfizer
A second stock I can’t wait to buy in 2025 is pharmaceutical colossus Pfizer (PFE 0.23%). Shares of Pfizer have been clobbered as sales of its blockbuster COVID-19 therapies, Comirnaty and Paxlovid, have retraced. However, this shortsightedness on the part of Wall Street is an opportunity for long-term investors to pounce.
Though estimated combined sales for Comirnaty and Paxlovid of $8.5 billion in 2024 will be markedly below the more than $56 billion registered in 2022, Pfizer’s net sales, based on the midpoint of its guidance in 2024, have risen by 46% over the last four years. Investors are completely missing the bigger picture, which shows that Pfizer’s key operating segments, including oncology and specialty care, continue to grow.
Another major catalyst for Pfizer in 2025 and beyond is its acquisition of cancer-drug developer Seagen, which closed in December 2023. This $43 billion deal notably expands Pfizer’s oncology pipeline and provided an immediate boost to sales. Beginning in 2025, it should have a positive effect on earnings per share (EPS) and result in tangible cost savings.
Like Sirius XM, Pfizer’s relative valuation and yield are incredibly attractive. A forward price-to-earnings (P/E) ratio of 9, and a historically high yield of 6.5%, point to Pfizer being a screaming bargain.
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Alibaba
Next up on the prospective buy list in 2025 is China-based e-commerce leader Alibaba (BABA -1.19%). While there’s certainly concern about trade relations between the U.S. and China following Donald Trump’s November election victory, these worries appear to be fully baked into Alibaba’s historically cheap valuation.
Alibaba is China’s top online retail marketplace, with the International Trade Administration estimating in 2023 that Taobao and Tmall combine for almost a 51% share of online sales. Whereas online sales matured a while ago in the U.S., China’s burgeoning middle class gives the country’s e-commerce sales a considerably lengthier growth runway.
Furthermore, Alibaba is the leading cloud infrastructure service platform in the world’s No. 2 economy — a 39% share entering 2024, per Canalys. Alibaba is taking full advantage of the artificial intelligence (AI) revolution and is counting on its cloud segment to lift its margins and deliver sustained double-digit growth.
Alibaba’s balance sheet and valuation make it an enticing value, as well. It closed the September quarter with almost $61.9 billion in cash, equity securities, short-term investments, and restricted cash. This gives management the flexibility to repurchase stock and invest in growth initiatives. At less than 9 times forward earnings, you’d struggle to find a more attractive China stock.
PubMatic
Along with Sirius XM, another existing holding I’ll be looking to add to in the new year is adtech stock PubMatic (PUBM -2.14%). Although concerns persist about the health of the U.S. economy — ad spending is highly cyclical — PubMatic is ideally positioned within the ad industry to deliver sustained low-double-digit earnings growth.
PubMatic’s claim to fame is that it’s focused entirely on digital advertising. Its cloud-based programmatic ad platform helps publishing companies sell their digital display space, with a focus on video, mobile, and connected TV. Since economic expansions in the U.S. last disproportionately longer than recessions, ad-driven businesses like PubMatic are on the right side of history.
Something else that makes PubMatic an attractive company to own shares in is the (in hindsight) decision by its management team to build out its cloud-based infrastructure. While relying on a third-party provider would have been the easy choice, developing its own platform will result in PubMatic hanging on to more of its revenue as it scales. In other words, this should lead to a superior operating margin over time.
To keep with the theme, PubMatic has a cash-rich balance sheet, and its valuation makes sense given its robust long-term growth prospects. PubMatic ended the third quarter with $140.4 million in combined cash, cash equivalents, and marketable securities, and has no debt. What’s more, it’s valued at 18 times forward-year earnings while capable of sustained double-digit EPS growth.
Johnson & Johnson
The fifth unbeatable stock I’m eager to add to my portfolio in 2025 is none other than Dow Jones Industrial Average member Johnson & Johnson (JNJ -0.36%). Though financial uncertainty regarding outstanding talcum-based baby powder lawsuits has some investors skittish about J&J, its big-picture outlook remains promising.
The first thing to note about Johnson & Johnson is that it’s one of only two publicly traded companies to sport the highest possible credit rating (AAA) from Standard & Poor’s. Even with some legal uncertainty, J&J has more than enough operating cash flow and cash on its balance sheet to cover an eventual settlement.
Another reason for investors to trust in J&J is its decisive shift to novel drug development. Despite brand-name drugs having a finite period of sales exclusivity, they provide Johnson & Johnson with a path to faster growth and substantially higher margins.
Investors also get continuity with J&J. Since its founding in 1886, the company has only had 10 CEOs. The lack of a revolving door at the top ensures that important strategic initiatives are being seen through.
Last but not least, Johnson & Johnson stock is historically inexpensive. Its forward P/E ratio of 13.7 is a low-water mark over the last decade. Meanwhile, its 3.4% yield is nearly at its highest point in 10 years.
