Carnival is demonstrating robust performance, but it still has a large debt.
Lululemon is addressing its issues in the U.S. and doing phenomenally in China.
Pagaya Technologies’ AI capabilities aim to change the lending space.
10 stocks we like better than Carnival Corp. ›
A bargain stock can be a great opportunity if you subscribe to the value approach to investing. If a stock is trading at a cheap price, but the company has strong business fundamentals and solid market opportunities, its stock price is likely to rise over time.
You always have to be wary of a value trap, where a low price indicates market pessimism for a good reason. But buying amazing stocks at dirt-cheap prices is one of the best methods of investing.
Consider how billionaire investor Warren Buffett pounces on great values, like his recent purchase of struggling healthcare giant UnitedHealth Group. It may take some time to see the fruits of your investment with these kinds of stories, but great investing nearly always requires a good dose of patience.
If you’re looking for excellent bargains today and you have $500 available to invest, consider Carnival (NYSE: CCL)(NYSE: CUK), Lululemon Athletica (NASDAQ: LULU), and Pagaya Technologies (NASDAQ: PGY).
Image source: Getty Images.
Carnival was a reliable market-beating stock for years before the pandemic, and it’s made an almost complete recovery from cruise closures. In some ways, the stock is doing even better than it did before, because it had plunged so low — it’s up 190% over the past three years. However, it’s still 57% off its all-time highs, despite its top performance, because of the part of its recovery that isn’t complete: its debt.
Why should investors take a chance on it? Several factors are converging right now that make Carnival look like an opportunity rather than a value trap. The first is how strong demand is. People want to go on cruises, and demand remains at historical highs. That speaks to the company’s strong brand and product. Cruises aren’t a fad or trend, and cruise-goers are paying top dollar to experience this luxury.
Carnival has been the industry leader for a long time, and it’s drawing consumer engagement, both from new and repeat customers. It’s investing in new ships and destinations to stay fresh and generate higher sales.
Next is how well it’s managing the debt. The company continues to prepay and refinance at better rates, saving millions in interest payments. Finally, interest rates are coming down, making it even easier to pay down the debt.
However, the debt piece is keeping the market from fully embracing Carnival stock, and it’s trading at a price-to-sales ratio of 1.6 and a forward 1-year P/E ratio of 14. That’s cheap enough to buy, if you have a long time horizon and some appetite for risk.
Lululemon has achieved the status of being one of the most sought-after brands in athletic wear and athleisure, having had an unlikely rise to the top to challenge the top names in the industry. However, a combination of missteps, competition, and a tough economy has been weighing on its performance and stock price. Lululemon stock is down 51% over the past three years.
Its performance has been sluggish, but the stock looks oversold at this price. Here’s what happened in its fiscal 2025’s second quarter (ended Aug. 3): Sales increased 7% year over year, with a 1% increase in the Americas and a 22% increase in international. Comparable sales were up only 1%, with a 4% decrease in the Americas and a 15% increase in international. China has been an incredible growth driver, up 25% in the quarter.
Gross margin, operating margin, and earnings per share were all down slightly from last year, but they were still strong. It’s understandable that this report further disappointed the market. Management explained that tariffs were responsible for some of the slips in the U.S. business, and the pressured economy adds to that.
However, it feels that Lululemon has relied on core franchises for too long and hasn’t been responsive to new trends or driving them. Management says that customers are grabbing some of its newer products as it moves to refresh its offerings and undertake more product launches.
At the current price, Lululemon stock trades at a forward, 1-year P/E ratio of only 12, and a price-to-sales ratio of 1.8. Lululemon is still a fan favorite, and it’s likely to recover and reward shareholders over time.
Pagaya stock is up 220% over the past year, but it still trades at a bargain price of 13 times forward, 1-year earnings and 2.8 times trailing-12-month sales. It’s probably the riskiest stock on this list, but there are reasons to be confident about its future.
It operates what it calls an artificial intelligence (AI) lending network, using AI and machine learning to approve more loans, and then selling the loans to institutional lenders as asset-backed securities (ABS).
Pagaya has partners on both sides of the deal, working with companies like Visa and Klarna for high-tech underwriting prowess, and making deals to have upfront funding to buy the loans as ABS arrangements. It just announced its most recent deal, for $600 million of funding, bringing the 2025 total to $4 billion.
Results have been stellar, and Pagaya recently became profitable. In the 2025 second quarter, revenue increased 30% year over year, and network volume was up 14%. Net income was $17 million, up $91 million from last year.
It continues to bring new, high-profile partners onto the platform all the time, including U.S. Bank, the fifth-largest bank in the country by assets, and it’s in discussion with 80% of the top 25 U.S. banks. Its plan is to add two to four high-profile names annually to its current 31 partners.
Pagaya’s youth and exposure to interest rates add risk to the investing thesis, but over time, it should keep climbing and rewarding investors.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Visa. The Motley Fool recommends Carnival Corp., Pagaya Technologies, and UnitedHealth Group. The Motley Fool has a disclosure policy.
3 Dirt Cheap Stocks to Buy With $500 Right Now was originally published by The Motley Fool
