My 5 Favorite Stocks to Buy Right Now

Key Points

• Investors aren’t fully appreciating -- or pricing in -- the work that PepsiCo and Pfizer have been doing to rekindle growth.

• Meanwhile, Lyft and MercadoLibre are solid growth companies even if the market is choosing to look past their recently impressive quarterly reports.

• Upstart shares are volatile, but its business is proving to be increasingly marketable.

• 10 stocks we like better than PepsiCo ›

Is your portfolio getting thinned out by all the profit-taking that tends to materialize when the market reaches record highs? That's OK. While "forever" may be Warren Buffett's favorite holding period, we non-billionaires have to be a bit more strategically minded, locking in gains when it certainly seems smart to do so.

Just don't let too much cash sit idle for too long. The biggest risk to long-term investors still remains not being in the market.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

With that as the backdrop, here's a closer look at five stocks, any or all of which might make for smart additions to your portfolio while each is a bit undervalued. In no particular order:

Image source: Getty Images.

PepsiCo

I get it. Coca-Cola is the more popular brand name as well as the more popular stock. Coca-Cola's also been able to sidestep most of the inflationary problems that have plagued PepsiCo's (NASDAQ: PEP) profitability since 2023. That's the big reason Coca-Cola shares have been able to continue climbing while PepsiCo stock is still down more than 20% from its mid-2023 peak.

Credit the two companies' different corporate structures, mostly. Coke is only a beverage outfit, and outsources most of its expensive production work to third-party bottlers. PepsiCo is not only its own bottler, but also owns snack chip company Frito-Lay and Quaker Oats, both of which have struggled against an inflation-riddled backdrop.

The bears, however, have arguably overshot their target while ignoring everything PepsiCo's done to turn itself around. This includes the use of artificial intelligence technology to more efficiently manage its distribution efforts or even handle certain customer service tasks. The company's also adding healthier snacking options to its mix, better meeting today's ever-changing consumer preferences.

The stock's rally from June's multiyear low suggests some investors are starting to see a light at the end of the tunnel. But there's still time to get on board.

There's certainly good reason to as well. PepsiCo stock's forward-looking dividend yield currently stands at 3.8%, which would be tough to beat with most other tickers of comparable long-term quality.

MercadoLibre

MercadoLibre (NASDAQ: MELI) shares have gone nowhere since the early August second-quarter report, although understandably so. While revenue was up 34% year over year, per-share earnings of $10.31 fell well short of the $11.93 analysts were expecting.

Most of the market, however, is missing the bigger picture. Operating income was still up nearly 14% year over year, with the bulk of the earnings shortfall stemming from the company's decision to offer free shipping to more of Brazil's online shoppers.

See, MercadoLibre is an e-commerce platform strictly serving the South American market. It's often referred to as the Amazon of Latin America, in fact, by seemingly becoming there what Amazon has become here. That's the dominant name in online shopping.

If MercadoLibre is going to mirror Amazon's domestic success, though, it has to do what Amazon did -- suffer a little short-term pain to secure its position as a long-term market leader. The company's willing to do so, even though it looks like investors aren't quite on board with the plan just yet. They'll get there.

This might help: Research outfit Payments and Commerce Market Intelligence believes Latin America's e-commerce industry will double in size between 2023 and 2027, when it will be worth an estimated $1 trillion. This growth should be led by Brazil, Mexico, Argentina, and Colombia, too, where MercadoLibre already does most of its business.

Upstart

Credit bureaus like Equifax, Experian, and TransUnion played their parts well enough when there was no feasible alternative to figuring out if someone was creditworthy. But, lenders and consumers alike had to know something better would eventually come along. Upstart (NASDAQ: UPST) is filling that role.

Simply put, Upstart uses artificial intelligence to determine how much credit risk an individual actually poses. And it does so measurably better than the more common means being used. Looking at more than 1,600 different data points per person, Upstart's approach allows for 43% more loan approvals without any additional defaults compared to credit bureaus' decision-making guidance. That's why more than 100 banks (and counting) subscribe to Upstart's solution, more than doubling its second-quarter revenue.

The company's results are still a bit erratic and unpredictable, as is its profitability. The stock tends to follow suit.

The business premise is strong and clearly marketable, though, making the stock's pullback from July's high a buying opportunity for investors that can stomach the volatility. The analyst community is on board anyway. Their consensus target of $79.14 is more than 20% above this ticker's present price.

Pfizer

There's no denying that pharmaceutical giant Pfizer (NYSE: PFE) just hasn't been the same since the wind-down of the COVID-19 pandemic. In 2021, its Comirnaty vaccine accounted for nearly half of its revenue, while well over half of 2022's top line -- when Paxlovid became an approved treatment for COVID infections -- was linked to the coronavirus contagion. Since its revenue peak of just over $100 billion in 2022, though, sales have tanked. Last year's sales were a mere $63.6 billion. Nothing seems to be able to replace its coronavirus business, and the stock has paid the price.

As the old adage goes, though, expect it when you least expect it. While it's got nothing to show for it yet, over the course of the past couple of years, this iconic pharmaceutical outfit has set itself up for some significant success down the road. As of the most recent look at its pipeline, Pfizer says it's got several oncology drugs that could each be billion-dollar producers as soon as 2030. In fact, all told, recent acquisitions and continued R&D could add an additional $20 billion in revenue by then, with even more being possible beyond that. Meanwhile, simple cost-cutting could add more than $7 billion back to the bottom line by 2027.

None of this seems to be priced into Pfizer stock yet, which, by the way, currently sports a forward-looking dividend yield of 6.8%. And that's based on dividend payments that are far more protected than the stock's recent action would suggest.

Lyft

Finally, I'm adding ride-hailing name Lyft (NASDAQ: LYFT) to my list of five favorite stocks to buy now.

Yes, I know Uber Technologies is the leader of the North American ride-hailing industry, which it largely helped develop. Bloomberg says it controls roughly three-fourths of the all-important U.S. market, in fact. Uber's also been profitable for far longer than Lyft, and is still growing its bottom line in step with industrywide growth. Last quarter's year-over-year revenue growth of 18% improved per-share profits from $0.47 in Q2 of last year to $0.63 per share this time around, extending well-established trends on both fronts.

Uber's stock is also pretty darn expensive right now, though, thanks to what's been more than a 300% run-up from 2022's low to its recently hit record high.

Lyft shares, conversely, haven't budged since crashing in 2022 despite the company's swing to what should be sustained and improving profitability. Lyft's top line is expected to grow at an average of about 13% per year at least through 2027, when its yearly earnings are expected to reach $0.78 per share. The stock's current price is only about 20 times that amount, which is a bargain for a growth stock making as much profit progress as this one is now. The market's going to connect these dots sooner or later, and probably sooner than later.

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James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Amazon, Equifax, MercadoLibre, Pfizer, Uber Technologies, and Upstart. The Motley Fool recommends Experian Plc and Lyft. The Motley Fool has a disclosure policy.