Have $500? Pick These 3 Absurdly Cheap Stocks for Long-Term Growth

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  Published in Stocks and Investing on Tuesday, December 23rd 2025 at 12:06 GMT by The Motley Fool
      Locale: UNITED STATES

Have $500? Pick These 3 Absurdly Cheap Stocks for Long‑Term Growth
Motley Fool, December 23, 2025

In a fast‑moving market where high‑profile names often trade at lofty valuations, The Motley Fool’s latest “Have $500” article turns the tables: it shows how a small, disciplined investor can use a tiny budget to buy three fundamentally sound companies that are priced “absurdly cheap” relative to their intrinsic value. The piece is not a simple buy‑and‑hold playbook; it’s a short‑guide on how to spot value, evaluate risk, and decide which of the three picks fits a particular investment horizon.

1. What Does “Absurdly Cheap” Mean?

The article opens with a quick refresher on what the Fool calls “absurdly cheap.” Cheapness is measured in a number of metrics that signal a margin of safety—a lower price relative to a company’s earnings, book value, or free cash flow. The writer reminds readers that a low price alone is insufficient; a cheap stock can also be a bad stock if the underlying fundamentals are weak. The three key “cheap” ratios highlighted are:

The article cites the “Margin of Safety” principle from Benjamin Graham: buy a stock for less than its intrinsic worth so that even if your estimate is off, you still have a buffer.

2. Why Cheap Stocks Work for Long‑Term Investors

The writer points out that a small amount of capital—$500 in this case—doesn’t have to buy a huge portfolio. Instead, it can buy a handful of low‑priced shares that, if the company’s fundamentals stay strong, will appreciate over time. The article offers four reasons cheap stocks are often great for long‑term growth:

1. Compound Interest – The lower entry price means the same percentage gain converts into a larger dollar amount.
2. Higher Dividend Income – Many undervalued firms pay robust dividends, which can be reinvested.
3. Less Volatility – Companies that are fundamentally solid often have smoother earnings streams.
4. Potential for Market Overreaction – The market may be short‑term negative for a reason; long‑term investors can ride the rebound.

A link to the Fool’s deeper dive, “Why Cheap Stocks Are Great for Long‑Term Investors,” is embedded, encouraging readers to review the mechanics of value investing and dividend compounding.

3. The Three Absurdly Cheap Picks

Below the explanatory preface, the article zeroes in on the three specific stocks. Each pick is accompanied by a one‑paragraph rationale, a summary of financial health, and a snapshot of growth prospects. The three names (and their ticker symbols) are:

AT&T is highlighted as a dividend‑queen that is currently priced too low after a strategic shift away from legacy wireless assets to focus on 5G and media. Ford is presented as a turnaround story, with a clean balance sheet and a future‑focused electric vehicle (EV) strategy that is expected to drive long‑term earnings growth. Coca‑Cola is framed as a defensive stalwart that offers both a low price‑to‑earnings ratio and a strong cash‑generation history—essential for the “cheap but safe” investor.

Each pick is accompanied by a short “How to Buy” section, pointing out that the ticker can be traded on the NYSE or via a brokerage that offers fractional shares—critical for a $500 budget.

4. Risk Management and What to Watch

No investment is risk‑free, and the article devotes a paragraph to pitfalls of cheap stocks:

• Company‑specific risk: A low valuation may reflect underlying problems—declining demand, regulatory risk, or a changing competitive landscape.
• Sector risk: A particular industry might face headwinds (e.g., telecom’s aging network).
• Market risk: In a bearish environment, even fundamentally strong firms can see prices fall.

The writer advises regular monitoring of quarterly reports and staying alert to macro events such as interest‑rate hikes, which can disproportionately affect high‑dividend, high‑P/B companies. The article includes a link to “How to Monitor Your Investments,” a step‑by‑step guide to tracking performance and adjusting holdings.

5. How to Build a Portfolio with $500

Finally, the article outlines a practical build‑out:

1. Allocate $200 each to AT&T and Ford to maintain diversification across telecom and automotive.
2. Invest $100 in Coca‑Cola for defensive stability.
3. Hold cash for 5–10% of the portfolio to capture other opportunistic trades.

Because the article stresses long‑term horizons, it also recommends setting a “buy‑and‑hold” rule: hold at least five years unless a major catalyst (e.g., a bankruptcy filing or a dramatic price drop due to macro conditions) emerges.

6. Takeaway

In short, the “Have $500” feature showcases a classic value‑investing approach: identify three companies that trade at a steep discount to their fundamentals, combine that with a robust dividend and strong cash flow, and then hold for the long haul. It’s a realistic, bite‑size strategy for the budget‑conscious investor who wants to stay in the game while building wealth over time. The article’s link to the broader “Cheap Stocks” series encourages readers to dig deeper into the methodology, ensuring they’re not just buying low, but buying wisely.