5 Cheap Stocks I'm Thinking About Buying in December

It's been rough the past few months. Since peaking in the summer, the Dow Jones Industrial Average (INDEX: ^DJI) is down more than 10%, and some previous highflyers have had their wings clipped.

But fear not, dear Fool! For without such market swoons, we wouldn't be able to complete the "buy low" part of the "buy low, sell high" mantra.

I'm going to review five stocks that are trading dirt cheap. I'm backing up my pick by making CAPScalls on my profile for all five of these stocks, and I'll be picking one to add to my Roth IRA next week.

Travelzoo (NAS: TZOO)
I've been pounding on the table for a while now with this stock. The thesis is pretty easy to understand: Travelzoo has a core business of creating travel deals that can't be beat -- just this week, it offered a seven-night cruise to the Bahamas with a $200 credit for just $599.

But the story that investors are really focused on is the company's foray into the local-deals space. Travelzoo differentiates itself from LivingSocial and Groupon (NAS: GRPN) by shooting for just two deals per city per week, and those deals are usually on the high end.

Travelzoo was punished for missing estimates earlier this year, but I think the company just needs time to put its plan in action. I think you'll agree that with a forward P/E of 16, a price to free-cash-flow ratio of just under 27, and expected earnings growth of 24.6% going forward, Travelzoo is cheap.

Apple (NAS: AAPL)
A company that I already own shares of, Apple is a stock everyone knows about. I probably don't need to tell you that the iEmpire has slowly been changing the way we use just about everything electronic.

What you may not know, however, is that the stock is down more than 13% from its October highs. Our tech specialist Eric Bleeker did a great job summarizing the culprit: rumors of a slowdown from Asian companies that supply Apple. Eric's conclusion: "Focus [your] attention ... on the long-term areas that'll drive Apple, like the news that 21% of Chinese consumers are now planning on buying a Mac computer and that Apple is now the most desirable computer brand in the country."

Even if those rumors are true, the shares are still cheap. Apple trades at 13.5 times trailing earnings, less than 10 times forward estimates, and around 10.2 times free cash flow -- and with expected EPS growth of nearly 25% in fiscal 2012, Apple's valuations are simply mouthwatering.

  • Add Apple to My Watchlist.

Intel (NAS: INTC)
There's no doubt about it: Intel kind of missed the boat when mobile broke out. But that doesn't mean the company can't catch up. Sure, you could look at ARM Holdings' 95% penetration into the mobile market and think the game is over ... or you could say, "That leaves a lot of room for growth for Intel!"

Furthermore, Intel still has a dominant footprint in desktops, laptops, and servers, and contrary to popular opinion, I don't think those markets are going anywhere anytime soon. Throw in a 3.6% dividend that has a low 32% payout ratio, and you have an income investor's dream. And taking into account less than 10 times trailing earnings and 9 times forward earnings, even somewhat slow expected EPS growth of 9% combines for an attractive valuation.

  • Add Intel to My Watchlist.

Berkshire Hathaway (NYS: BRK.B)
I'm not going to go too deep into what Warren Buffett's investment vehicle does, as that would require more space than I have. Suffice is to say that it's a motley collection of solid companies that produce gobs of cash.

Buffett gave the ultimate buy signal earlier this year, when he authorized the unthinkable: stock buybacks. And because I can't give a standard valuation for Berkshire, check out its changing price-to-book value over the past decade.


Source: S&P Capital IQ.

In fact, with today's price-to-book value of just 1.15, shares of Berkshire are at a significant discount to their normal value.

Energy Solutions (NYS: ES)
Energy Solutions is in the business of disposing of waste from nuclear power plants. It's had a tough ride lately, with poor earnings results, changes in the executive suite, and a poorly managed debt situation that nearly led to its breaking its debt covenants.

The bottom line is that this company has a huge moat over the competition. It disposes of waste for nuclear power plants, and even though plants are holding on to the material right now, they can't do it forever. Furthermore, with the company's recent assignment to decommission Exelon's Zion nuclear reactor, a new avenue for revenue could be opening up.

With its forward P/E of less than 10 and expected earnings-per-share growth of nearly 80%, you'll see even more reason to add this company to your watchlist.

What'll my decision be?
You'll have to tune in on Tuesday to find out which one of these five I pick, but really, I don't think you could go wrong with any of these stocks. In the meantime, I'm willing to offer you access to one of our special free reports with five more ideas for you: "5 Stocks The Motley Fool Owns -- and You Should, Too." Inside, you'll get the names of these five companies and the thinking behind each purchase. Get your copy today, absolutely free!

At the time thisarticle was published Fool contributorBrian Stoffelowns shares of Travelzoo, Apple, Intel and Berkshire Hathaway. You can follow him on Twitter at@TMFStoffel.The Motley Fool owns shares of Apple, EnergySolutions, Intel, and Berkshire Hathaway and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of Exelon, Travelzoo, Berkshire Hathaway, Apple, and Intel; as well as creating bull call spread positions on Intel and Apple and writing a covered strangle position on Exelon. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.