Key Points
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Alphabet trades at a much cheaper valuation than its Magnificent Seven peers.
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Realty Income’s low valuation is a big driver of its high dividend yield.
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Energy Transfer trades at one of the lowest valuations in its peer group.
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10 stocks we like better than Alphabet ›
Following a brief dip earlier this year driven by tariff concerns, the S&P 500 has resumed its rally as those fears faded. As a result, we now find the broad market index fetching nearly 22 times its forward earnings. This level is nearing its highest points in the past quarter-century.
Even in today’s pricier market, several stocks trade at dirt cheap levels. Realty Income (NYSE: O), Energy Transfer (NYSE: ET), and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) stand out as very inexpensive stocks. For anyone with $500 to invest, these stocks make compelling buys right now.
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Image source: Getty Images.
An AI bargain
Tech titan Alphabet trades at the lowest valuation in the “Magnificent Seven,” at around 19 times forward earnings. That’s dirt cheap compared with those super growth stocks, which fetch more than 27 times forward earnings.
What’s holding back Alphabet’s valuation? Concerns about AI’s impact on its lucrative search business. However, as of the first quarter, AI chatbots have not dented its advertising revenue. Google’s search revenue actually climbed 10% in the period, to almost $51 billion.
Instead, the company is benefiting from AI. CEO Sundar Pichai stated in the first-quarter earnings release, “Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews, which now has 1.5 billion users per month.” The company also recently rolled out its Gemini 2.5 AI model, which “is achieving breakthroughs in performance and is an extraordinary foundation for our future innovation,” according to Pichai. The company is also expanding its other businesses, including Google Cloud, YouTube, and others. Alphabet’s long-term growth potential makes it look like an especially attractive investment these days.
A dirt cheap REIT
As a leading real estate investment trust (REIT), Realty Income boasts a diversified portfolio that delivers stable rental income through long-term net leases. Management expects to generate between $4.22 and $4.28 per share of adjusted funds from operations (FFO) this year. With shares of the REIT recently trading below $57, the stock sells for less than 13.5 times its forward earnings. This bargain price is why it offers an attractive dividend yield of more than 5.5%.
Rising interest rates have presented some headwinds for REITs such as Realty Income, making it more expensive to borrow money for new investments. Nevertheless, Realty Income continues its steady growth. The company made $1.4 billion worth of acquisitions in the first quarter, enabling it to raise its monthly dividend several times this year. Realty Income projects it will have the financial capacity to invest about $4 billion in portfolio expansion this year.
If interest rates fall, which many expect will eventually happen, Realty Income would be able to make even more acquisitions. That would allow it to grow faster, which should boost its valuation.
A bottom-of-the-barrel valuation
Energy Transfer is one of the country’s largest master limited partnerships (MLPs). The midstream company owns a large and diverse portfolio of energy infrastructure assets, such as pipelines, processing plants, storage terminals, and export facilities. Those assets generate stable cash flow, with 90% coming from fee-based structures.
Despite its stable cash flow profile, Energy Transfer currently trades at the second-lowest valuation in its peer group. That’s a big reasonit boasts a monster 7.5% distribution yield.
Other than the fact that the MLP sends investors a Schedule K-1 federal tax form each year, there’s no reason for Energy Transfer’s discounted valuation. The MLP is in its strongest financial position in history, with a leverage ratio in the lower half of its target range. It also has a low distribution payout ratio, at less than half of its stable cash flow. Meanwhile, it’s growing at a solid rate, with a reacceleration expected in 2026 and 2027 as it benefits from a slew of upcoming project completions. The growth from those projects will give it plenty of fuel to continue increasing its high-yielding distribution.
Cheap stocks in a pricy market
While the S&P 500’s valuation is rising to expensive levels, there are still some very reasonably priced stocks out there worth buying. Alphabet, Realty Income, and Energy Transfer currently trade at dirt cheap valuations. With solid growth prospects despite some headwinds, they’re great stocks to buy right now for those who have around $500 to invest.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Matt DiLallo has positions in Alphabet, Energy Transfer, and Realty Income. The Motley Fool has positions in and recommends Alphabet and Realty Income. The Motley Fool has a disclosure policy.
