There is no shortage of attractively priced stocks in the market right now, especially from a long-term perspective. Admittedly, it is difficult to sort through all of the companies down by 20%, 30%, 40%, 50%, or even more to decide where the best opportunities are.
However, here are three stocks that I already own in my portfolio, but that look so appealing at the current levels, I'm planning to add significantly to my positions in the weeks ahead.
A unique homebuilder at a discount
Dream Finders Homes (DFH +1.28%) isn't a massive homebuilder -- yet. In fact, it isn't even in the top 10. But its growth momentum has been fantastic and it is using a time-tested business model that could produce incredible returns for patient investors.
NYSE: DFH
Key Data Points
Dream Finders was founded in 2009 in Jacksonville, Florida, and now has a massive presence in that market, as well as in Orlando, both Carolinas, Texas, and more. These are some of the hottest markets in the U.S., and have positive net migration, as well as strong job and wage growth. And unlike most other homebuilders, Dream Finders takes a land-light approach, meaning that it has options to buy tens of thousands of building lots, but doesn't actually buy land until it is ready to build. Larger homebuilder NVR is the only other major homebuilder to do this, and it has used this model to generate 42,250% total returns since its 1993 initial public offering.
In a nutshell, Dream Finders looks like an investment in an earlier-stage NVR, but with the added benefit of a focus on some of the hottest markets in the U.S.
To be sure, there are some big headwinds facing homebuilders right now, and the next few quarters could be ugly (which is why the stock is down over 50%). But I can't wait to watch the next chapters of this growth story unfold.
A solid REIT at a massive discount
Real estate investment trust, or REIT, EPR Properties (EPR +1.34%) actually held up quite well in the bear market until recently, but is down by 34% since August. There's a good reason -- about 40% of EPR's rental income comes from movie theaters. Regal Entertainment parent Cineworld Group is set to declare bankruptcy, and Regal is EPR's second-largest tenant.
NYSE: EPR
Key Data Points
However, the fears surrounding this development appear to be overblown. For one thing, Regal represents less than 15% of EPR's rental income, and as it demonstrated during the early days of the pandemic, EPR can remain profitable with a very small portion of its properties occupied. Second, EPR's theater properties are some of the most attractive in their markets, and even if Regal walked away from some of its leases, the properties would likely re-lease.
In the meantime, EPR has a well-covered 9% dividend yield, and more than $1 billion in liquidity to pursue growth opportunities as they arise.
Investors are far too pessimistic about this bank
Last but certainly not least, while there are some excellent bargains in the financial sector, perhaps none is more compelling than Bank of America (BAC +1.78%) right now. The stock is down by about 40% from recent highs, and to be fair, there are some good reasons. In tough economic times, consumers spend less, which hurts loan demand, and could have trouble paying their bills, which could lead to a rise in loan defaults.
NYSE: BAC
Key Data Points
However, it's important to realize that Bank of America could be a big beneficiary of the current environment as well, especially when it comes to rising interest rates. So far in 2022, consumer lending rates have soared, but Bank of America's deposit interest rates have barely budged. In fact, it might shock you to learn that the average interest rate the bank pays on consumer deposits is just 0.02%. Management estimates that every 100-basis-point (one percentage point) increase in rates could produce an additional $5 billion in annual net interest income.
Expect a bumpy ride
I own and am planning to add to these stocks as long-term investments. I have absolutely no idea what they'll do over the coming weeks or months, and under some circumstances (for example, if third-quarter earnings season is ugly), they could certainly go down more in the short term. But these are three excellent businesses with the potential for excellent long-term returns for patient investors.
