Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Don't let the rallying market stop you from finding market bargains. There are still plenty of seemingly cheap stocks out there. I want to talk about a couple of them, and it doesn't take a lot to get started in either position with both stocks currently trading in the $20s.

Sirius XM Holdings (NASDAQ: SIRI) and Carnival Corp. (NYSE: CCL) (NYSE: CUK) are absurdly cheap right now. Even a $500 investment can go a long way right now if investors wake up to the value in the shares. Let's take a closer look.

1. Sirius XM

Warren Buffett warmed up to one of this year's biggest losers last week, adding to his already substantial stake in Sirius XM. Berkshire Hathaway now owns nearly a third of its shares outstanding.

The only game in town when it comes to satellite radio in this country, Sirius XM has fallen on hard times. Its subscriber base may have peaked last year, after back-to-back quarters of sequential declines. Organic revenue growth has meandered in the single digits for the past decade, but now it has turned negative.

There are some good reasons why new car buyers aren't paying up for satellite radio. Most cars make it easy to stream audio apps they already access on their phones through their car speakers. Folks aren't driving as much on this end of the pandemic. There are also some sound reasons for the stock itself being out of favor after executing a reverse stock split following the consolidation of its tracking shares. Sirius XM has felt the pinch, and so have its shareholders. Despite moving higher this month on the Buffett share purchase, Sirius XM stock has been cut in half this year.

Image source: Getty Images.

Sirius XM isn't half the company that it used to be. The reverse split is now fading in the rearview mirror. There's also no longer shareholder confusion about tracking shares that traded at a deep discount to the common stock. Fundamentally speaking, Sirius XM is also in the driver's seat. Companies are calling people back to the office. Gas prices are now near three-year lows. The Federal Reserve orchestrating a cut in interest rates should make it easier for new car owners to get behind the wheel in a ride with factory-installed satellite radio.

The stock is also now historically cheap. Sirius XM is trading for less than 10 times earnings. Its high dividend yield of 3.9% is going to look even better as interest rates keep heading lower. Analysts also see a return to top- and bottom-line growth next year. It's time to shift into drive here with this surprisingly cheap media stock that's generating a ton of free cash flow and earnings even during this challenging stretch.

2. Carnival

Unlike Sirius XM, Carnival is an industry that has cruised back into market fancy. The shares have soared 55% since bottoming out two months ago, up 166% since the start of last year. It doesn't mean that the world's largest cruise line operator isn't cheap.

Carnival is stronger now than it ever was before the pandemic. Customer deposits for future sailings have never been stronger than they have ever been at this point in the year. Revenue and adjusted earnings per share rose 15% and 62%, respectively, in its latest quarter. Customer deposits hit another high for this time of the year, a good sign that the next few quarters will also be strong.

Carnival is trading for just 16 times what it expects to earn for the fiscal year that ends next month. It's trading for less than 13 times analyst profit targets for fiscal 2025, and Wall Street pros have been caught on the short end for some time. Carnival has topped analyst estimates for more than two years, coming through with double-digit percentage beats in each of the last five reports.

Debt was a problem for the industry, having to finance the operating lull for more than a year after the pandemic suspended sailings. It's using its newfound profitability to tackle those demons. Carnival has repaid $7.3 billion of its debt since the start of last year. If the economy is able to score a soft landing, the waters should be just as inviting for the cruise lines.

Rick Munarriz has positions in Carnival Corp. and Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.