2 deep-value stocks I’d buy right now!

Value stocks have outperformed growth equities over the past 18 months. But I think that these two stocks – one small and the other of mega-cap proportions – remain very undervalued. I will buy both today.

Epwin Group

Epwin Group (LSE: EPWN) is a small stock capitalized at just £111m. The West Midlands-based group is a vertically integrated manufacturer of energy-efficient and low-maintenance building products.

These include high quality PVC windows and doors, cladding, gutters, decking and prefabricated building components. It supplies these products to the repair, maintenance and repair, new build and social housing sectors.

Obviously, the housing market in the UK is currently undergoing a correction, and the risk could get worse from here. Epwin sales could be hit, depending on how long this slump lasts.

However, this risk has been reflected in the share price, which has fallen 36% in 18 months.

This makes the stock trade at a low price-to-earnings ratio (P/E) of 8.2 times. And investors are rewarded with a 5.8% dividend yield for taking the risk.

Despite the shaky housing market, last year’s profits were in line with expectations and trading has been strong so far in 2023. Analyst consensus for this year is for over £360m in sales, around £20m in profits, and a dividend of 5.0p each. show.

With shares currently at 77p, that would yield 6.3%.

In the longer term, millions of new homes will need to be built in the UK, and all will need to be fitted out. This should support rising profits at Epwin. That’s why I added this value stock to my own portfolio.

Alphabet

It seems strange to associate the deep-value status to a tech juggernaut Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL). The parent company of Google and YouTube has historically traded at a premium to the rest of the US stock market. Until now, that is.

Today, the sports search giant sports a P/E of 19.8. On a forward-looking basis, that can drop to around 17. That means the stock is now the lowest ever.

Of course, the stock is cheap because there is risk here. The company faces well-documented competition from the artificial intelligence (AI) ChatGPT chatbot. And the cyclical slowdown in digital advertising doesn’t help.

But the company is a pioneer in this space, having developed (but not released) its own AI chatbot technology a few years ago. So I expect to be able to integrate my own generative AI into all major products, maybe in a few weeks.

Google Cloud business posted 32% year-over-year revenue growth in Q4. By 2022, cloud revenues will exceed $26bn, about 9% of group revenues.

Sales of Pixel phones are growing, and the Pixel Watch was launched last year. In addition, there are future initiatives like self-driving vehicle technology and quantum computing. It’s not priced in stock right now – but it might be one day if the project is successful.

The company remains a free cash flow generating machine. It has more than $113bn in cash, cash equivalents, and marketable securities at the end of 2022. This gives it an enviable position to finance its ‘Other Bets’.

I think it is premature to talk about the end of the dominant competitive position. That’s why I recently picked up some stocks.