Warren Buffett, the legendary capital allocator who has headed up Berkshire Hathaway for decades, helped popularize value investing. This strategy involves buying companies at a discount to their intrinsic worth, with the hope that the market will bid up their shares over time.
Even in today’s market environment, in which valuations are at historically high levels, there are still opportunities to follow the Oracle of Omaha’s successful investment philosophy. You just have to know where to look.
Here’s one insanely cheap value stock that investors should consider buying with $500 right now.
PayPal‘s (NASDAQ: PYPL) growth soared during the pandemic’s worst days as digital payment activity soared and a larger share of people’s shopping took place online. But the subsequent normalization of macro forces and consumer behavior has brought the business back down to Earth. Its slower growth has left investors less enthusiastic. PayPal’s share price is currently 77% below the record high it touched in July 2021.
A new CEO, Alex Chriss, was brought aboard in September 2023 to orchestrate a turnaround. He didn’t waste time making changes. Some notable product and strategic updates have been introduced following Chriss’ arrival. Fastlane (one-click checkout), CashPass (cash-back rewards), and Smart Receipts (AI-powered merchant recommendations) are some examples that improve consumers’ buying experience.
PayPal is also focused on its other key customer group: merchants. Last month, the business revealed PayPal Open, a platform for merchants of all sizes that not only facilitates payments, but allows these customers to access value-added services to promote growth.
In addition, PayPal is flexing its pricing power, adopting what’s called a price-to-value strategy. The goal is to emphasize profitability over growth while being able to make money based on the value it provides customers. “This is a new PayPal,” Chriss said during its investor day presentation last month. “We are transforming from a payments company into a commerce platform.”
These innovations all sound good — and they’re exactly the kinds of moves one would want to see from a new leadership team that’s trying to right the ship. At the end of the day, though, investors should care about how these changes will impact PayPal’s financial performance over time.
On that front, the management team provided another reason to be upbeat. By boosting transaction margin dollars, controlling operating costs, and buying back shares, the overarching goal over the long term is to lift non-GAAP earnings per share growth to at least 20% per year.
