BABA

Got $1,000? 3 Stocks to Buy Now While They're on Sale

When it comes to the stock market, $1,000 might seem like pocket change. After all, a single share of many of the market's top stocks already cost hundreds or even thousands of dollars.

However, most brokerages now allow investors to buy fractional shares of companies via commission-free trades. Therefore, it's actually easy for investors to gradually build up positions in their favorite stocks with less than $1,000.

A person fans out a handful of hundred dollar bills.

Image source: Getty Images.

But before you start buying fractional shares of the market's hottest stocks, you should recall Warren Buffett's famous quote about value investing: "Whether we're talking about stocks or socks, I like buying quality merchandise when it is marked down." So for those shrewd bargain hunters who want to follow the Oracle's advice, I believe Alibaba (NYSE: BABA), Vici Properties (NYSE: VICI), and Kraft Heinz (NASDAQ: KHC) are great value stocks to buy.

1. Alibaba

Alibaba, China's largest e-commerce and cloud infrastructure company, trades more than 70% below its all-time high. It's also risen less than 30% since its IPO nearly ten years ago, and looks cheap at eleven times forward earnings.

Alibaba's stock is trading at a discount because its growth was temporarily derailed by regulatory, macro, and competitive headwinds over the past three years. China's antitrust regulators slapped it with a record fine in 2021 while imposing tighter restrictions on its e-commerce marketplace, the country's "zero COVID" lockdowns exacerbated that pressure, and aggressive competitors like Pinduoduo lured away some of its shoppers.

The escalating trade and tech war between the U.S. and China made Alibaba's stock even less appealing, and its stock crumbled. However, Alibaba's revenue actually rose 8% in fiscal 2024 (which ended this March), representing an acceleration from its 2% growth in fiscal 2023, and analysts expect another 8% growth in fiscal 2025.

That recovery is being driven by the expansion of its overseas e-commerce marketplaces, the growth of its logistics business, and the stabilization of its domestic businesses. Alibaba also generated enough cash to repurchase $12.5 billion in shares in fiscal 2024 and approve its first annual dividend of $1.00 per ADR, which equals a forward yield of 1.3%. Those strengths suggest that Alibaba is deeply undervalued, and it should recover as investors rotate back toward China's top stocks.

2. Vici Properties

Vici Properties is a real estate investment trust (REIT) that owns casino and entertainment properties across the U.S. and Canada. Its largest tenants include Caesar's Entertainment, MGM Resorts, Penn Entertainment, Century Casinos, and Bowlero. It locks in those tenants with multi-decade contracts, and it's maintained an occupancy rate of 100% ever since its IPO six years ago.

As an REIT, Vici is required to pay out at least 90% of its taxable earnings to its investors as dividends to maintain a favorable tax rate. It's also a net-lease REIT, which means it requires its tenants to cover their own insurance costs, maintenance fees, and taxes. That simple business model makes it a reliable play for conservative income investors.

Like many other REITs, Vici lost its luster as rising interest rates made it tougher to buy new properties and reduced the appeal of its dividends. But with interest rates set to stabilize and decline in the near future, it makes sense to buy Vici as a long-term income play again. Vici currently trades at just 14 times its estimated adjusted funds from operations (FFO) per share for 2024, and it pays an attractive forward dividend yield of 5.5%.

3. Kraft Heinz

Kraft Heinz, which was born from the merger of Kraft Foods and Heinz in 2015, is one of the world's largest packaged food companies. In addition to its two namesake brands, it also owns Oscar Mayer, Velveeta, Jell-O, Philadelphia, and Kool-Aid.

In its first few years, Kraft Heinz struggled to grow as many of its shoppers pivoted toward healthier products and private label brands. Instead of innovating to reverse that slowdown, it focused too much on cutting costs to boost its profits.

But under Miguel Patricio, who became its CEO in 2019, Kraft Heinz gradually fixed its ailing business by rolling out new marketing campaigns for its classic brands, divesting its weaker brands, expanding its stronger brands, and raising its prices to offset its slower shipments. It also streamlined its spending to stabilize its earnings growth.

That turnaround strategy paid off. In 2023, its organic sales rose 3% as its adjusted EPS grew 7%. For 2024, it expects its organic sales to grow 0%-2% as its adjusted EPS rises 1%-3%. Based on the midpoint of those estimates, its stock trades at just 12 times this year's earnings. It's also paying an attractive forward yield of 4.4%. Kraft Heinz's stock won't blast off anytime soon, but it's a reliable blue-chip stalwart that still trades at a discount to many of its industry peers.

Should you invest $1,000 in Alibaba Group right now?

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Leo Sun has positions in Vici Properties. The Motley Fool has positions in and recommends Vici Properties. The Motley Fool recommends Alibaba Group and Kraft Heinz and recommends the following options: long January 2025 $25 calls on Penn Entertainment and short January 2025 $30 calls on Penn Entertainment. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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