Where can one find some cheap stocks? Put differently, where are the bargains in the equity market?
Don’t brave any answers. Because those are trick questions. There are no cheap stocks. Or if that’s too strong, we can say bargains are an endangered species.
That’s nothing new in the US context, but it’s worth noting that even in Europe, where a moribund overall growth profile, a lamentable lack of innovation and an almost total dearth of economic dynamism means everything’s a value stock compared to US shares, bargains are going extinct.
The figures above will be familiar to anyone who’s a fan of SocGen’s Andrew Lapthorne. They’re updated for February 2026. They show the share of stocks which trade in different forward P/E buckets across Europe (on the left) and in the US (on the right).
For this update, Lapthorne compared the current state of affairs (the black bars) with the situation as it existed at the end of 2024 (the red bars).
“The message in Europe is quite clear: All the very low single-digit P/E stocks have largely disappeared,” he wrote, noting that two years ago, around 15% of European stocks traded at 8x or below on a forward multiple. That share’s a mere 3% today.
Meanwhile, in the US, “very little has changed,” Lapthorne sighed. “There has been an absence of ‘cheap’ stocks in [America] for some time, and if anything, valuations are becoming increasingly bunched around an expensive mean.”
Although the share of US stocks trading at extremely rich (i.e., >33x) multiples is lower versus end-2024, the share trading between 20x and 33x is now almost 40%.
Sounds like a brewing catalyst for a dealer-driven gamma-hedging right-side risk on rally! 23x forward earnings may just be a bargain. Or maybe global fiat is losing buying power even for DM shares
Does a portfolio of dividend stocks paying 8 1/2 % dividends sound too expensive? I pay attention more to the yield than the current price, which is an opinion.
Looking at PEs is pedestrian. Cash flows and free cash flows (future), growth rates, balance sheets, etc are most important in calculating an “Intrinsic Value”. Free Cash flows have gone down for some but will that investment translate to higher future growth or is it to defend against current cash flows?
Yes, it takes assumptions about an uncertain future, an uncertain discount rate, etc.
What is “cheap”? a 20% disc to IV? A 40%? Definitely has changed over the years.
“Cheap” stocks are not extinct (though they are NOT as cheap as they could be years ago), they pop in and out but they tend to be able to be found with some diligence. Some of the “cheap” stocks of a year ago look more expensive now and some expensive stocks a year ago look, dare I say, even “cheap”. I wouldn’t be invested if I didn’t find attractive risk/rewards. But as always, we shall see…………………………………………………….