3 dirt-cheap stocks to buy by hand in June

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These stocks are priced at a discount and have excellent long-term recovery potential.

Over the past year, the market has been on a solid uptrend, reaching new all-time highs several times in recent months and confirming the bull market that began in October 2022. S&P500 reaching new highs, value-oriented investors still have several options to find deals on individual stocks that have not yet fully recovered.

Investing in these dirt-cheap stocks offers equity buyers a margin of safety and the opportunity to benefit from the upside of the recovery. Despite rising alongside the market, these three stocks still have incredibly cheap valuations and appear ripe for the taking.

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1. Citi Group

Citi Group (C -0.26%) is the fourth-largest bank in the U.S., but has struggled over the years with its sprawling operations, making it difficult for the bank to manage risk. As a result, Citigroup has underperformed comparable banks bank of America, Wells FargoAnd JPMorgan Chase on the most important profitability figures. Citigroup finds that its shares are at a 28% discount to tangible book value.

Over the past decade, Citigroup’s return on equity (ROE) has been around 6.3%, well below its peers. The company was also hit with regulatory actions and fines in 2020 for several long-standing deficiencies.

CEO Jane Fraser is on a mission to improve Citigroup’s profitability and has taken steps to increase the bank’s efficiency. To achieve this, the bank has reduced its workforce and flattened its management structure.

The company has also begun winding down and selling off its consumer franchises, with nine of the fourteen franchises sold or wound down since March. Citigroup is also on track to spin off its profitable Mexican consumer business through an initial public offering (IPO) in 2025.

The CEO said she wants to take Citi’s ROE to 11% to 12%, which would be more in line with its peers and could catalyze significant upside in the stock. Given that peers are trading at a 59% to 133% premium to tangible book value, Citigroup has excellent upside potential as it moves closer to its long-term goals.

2. Lincoln National

Lincoln National (L.N.C 0.18%) provides life insurance and retirement planning, but has struggled in recent years. In 2020, the pandemic wreaked havoc on the world, and life insurers struggled with rising claims payouts. The unfortunate events led life insurers to see claims payouts increase 15% year over year, the largest increase since the 1918 flu epidemic, according to the American Council of Life Insurers.

In addition, Lincoln National has made some significant changes to the assumptions about its guaranteed universal life insurance policies. In the third quarter of 2022, it reported a net loss of $2.6 billion, and its risk-based capital ratio (RBC) fell below management’s desired level. In response, management suspended share buybacks, raised equity and cut costs.

The insurer is in the early stages of its turnaround. It has taken steps to reduce costs and is shifting its business mix to focus on more profitable areas.

Investing in the life insurer has an additional advantage: a higher interest rate. Analysts at Jefferies Financial are optimistic about life insurers, especially the annuity segment. That’s because annuities offer a steady stream of income, which can be attractive to retirees if interest rates remain high compared to recent history. Annuity sales will set a record for the second consecutive year in 2023, according to the Life Insurance Marketing and Research Association.

Lincoln National costs 4.5 times earnings, the cheapest it has been in a decade. With the turnaround underway and the potential tailwinds from its longer-term annuity business, Lincoln looks like an attractive, high-value stock to buy today.

3. Credit Club

CreditClub (LC 0.48%) has reinvented itself in recent years, from a peer-to-peer lending platform to a personal lender backed by a bank charter after acquiring Radius Bancorp in 2021.

The stock rose in the months following the acquisition, allowing the company to keep loans on its books and collect interest income. However, the higher interest rate environment suppressed consumer demand for personal loans, and LendingClub’s performance has been lackluster in recent years.

Although things have slowed, investors have reason for optimism. LendingClub could take advantage of a potential “historic refinancing opportunity” from credit card borrowers. With credit card debt at an all-time high and extremely high interest rates on that debt, consumers may be turning to personal loans to help consolidate their debt.

To prepare for this, LendingClub is developing tools to help customers monitor and manage their debts. Products are also being developed that allow members to roll credit card balances into payment plans, making it easy for members to maintain a single payment on their consolidated debts.

Today, the stock is valued at a price-to-earnings (P/E) ratio of 24.5, which makes it look expensive at first glance. However, it is priced at a 22% discount to tangible book value. With earnings growth expected to pick up, the stock is priced at 12.8 times one-year forward earnings and appears ripe for the picking for patient investors.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Courtney Carlsen holds positions in LendingClub. The Motley Fool holds positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool has a disclosure policy.