5 Good Cheap Stocks For 2015

One of the hallmarks of improved investor sentiment is when folks are willing to pay ever greater premiums for equities in expectation of future profit growth. And since the market started rallying from its early March lows, it's clear that sentiment seems to be improving, at least in certain corners of the market.

One indicator of improved sentiment is the rise in forward price-to-earnings multiples. Forward P/E is derived by dividing a company's share price by analysts' average estimate for future earnings per share; for the 500 stocks in the Standard & Poor's 500 Index ($INX), this ratio has risen to 16 from 13 in March, according to The Wall Street Journal Market Data Group.

Such growth is a clear indication that investors are starting to shake off the shock of last year's meltdown and have regained some appetite for risk, says Hank Smith, the chief investment officer of equity at Haverford Investments in Haverford, Pa.

 

As risk appetite grows, Smith says, many bigger, "safer" shares have been left in the dust; that's keeping a lid on the Dow Jones Industrial Average ($INDU). The forward P/E on this bastion of the bluest of blue-chip stocks is less than 14, down from nearly 18 in March, according to Dow Jones Indexes. In other words, as the broader market has gotten more expensive, the Dow has become cheaper.

Such low valuations could lead one to believe that the Dow is just chock-full of blue-chip bargains. In some cases, that's true. But sometimes cheap stocks are a steal, and sometimes they're cheap for a reason.

Here is a look at the Dow's cheapest stocks, as measured by forward P/E, including an assessment as to whether these inexpensive bets are likely to become investor darlings or dogs in the next 12 to 18 months.

5 Good Cheap Stocks For 2015:NetSol Technologies Inc. (NTWK)

 Netsol Technologies, Inc. designs, develops, and markets software products for the automobile finance and leasing, banking, healthcare, and financial services industries worldwide. It offers NetSol Financial Suite, which is an end-to-end solution that covers the leasing and finance cycle. The NetSol Financial Suite consist of software applications comprising Point of Sale, a front office processing system for the finance sector; Credit Application Processing System to handle the incoming credit applications from dealers, agents, brokers, and the direct sales force; Contract Management System to manage and maintain a contract; Wholesale Finance System to automate and manage the floor plan/bailment activities of dealerships; and Fleet Management System to handle fleet management needs. The NetSol Financial Suite also includes LeasePak that develops Web-enabled and Web-based tools for the leasing technology industry. In addition, the company offers LeaseSoft Portals and Modules; enterprise wide information systems, such as LRMIS, MTMIS, and Hospital Management Systems; accounting outsourcing services; and career and technology programs. Further, it provides portfolio management systems for the financial services industry; and consulting, custom development, systems integration, and technical services for the healthcare, insurance, real estate, and technology markets. Additionally, the company offers business intelligence, independent system review, information security, and software process improvement consulting services; maintenance and support, and project management services; and solutions for the defense and military forces. It serves Fortune 500 manufacturers, automakers, financial institutions, utilities, technology providers, and government agencies. The company was formerly known as NetSol International, Inc. and changed its name to NetSol Technologies, Inc. in March 2002. NetSol Technologies, Inc. was founded in 1997 and is based in Calabasas, California.

5 Good Cheap Stocks For 2015:Resource Capital Corp. (RSO)

 Resource Capital Corp. operates as a specialty finance company that focuses primarily on commercial real estate and commercial finance in the United States. The company?s commercial real estate-related investments include first mortgage loans, first priority interests in first mortgage real estate loans, subordinate interests in first mortgage real estate loans, mezzanine loans, and commercial mortgage-backed securities. It also invests in commercial finance assets, including senior secured corporate loans, other asset-backed securities, equipment leases and notes, trust preferred securities, and debt tranches of collateralized debt and loan obligations. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it is not subject to federal corporate income tax to the extent that it distributes 90% of its REIT taxable income. The company was founded in 2005 and is based in New York, New York.

5 Good Cheap Stocks For 2015:Standard Register Company (The) (SR)

 The Standard Register Company provides communications management and execution solutions to healthcare, industrial, financial services, and commercial business markets. It operates through four segments: Healthcare, Financial Services, Commercial Markets, and Industrial. The Healthcare segment offers documents, such as administrative and clinical forms, wristbands and labels, marketing solutions, secure prescriptions, patient communications, and patient information solutions. This segment?s primary customers include acute care hospitals, integrated delivery networks, long-term care providers, and managed care organizations. The Financial Services segment provides documents, such as specialized prints, marketing solutions, customer communications, and digital print solutions. This segment serves the document management needs of retail banks, insurance carriers, credit agencies, security dealers, insurance agents or brokers, and holding companies. The Commercial Markets segment provides documents, including specialized prints, marketing solutions, labels, customer communication solutions, and digital print solutions. This segment serves business-to-business or commercial markets focusing primarily on large diverse retailers, state governments, overnight delivery carriers, business service providers, and wholesale companies. The Industrial segment primarily provides printed production parts to the industrial manufacturing market. This segment?s products and services include functional and decorative labels, in-mold labeling, decorating and printed technical literature, and other documents. The company sells its products directly, as well as through inside-sales and telesales channels, business development groups, a technology sales group, e-commerce Websites, and associates. The Standard Register Company was founded in 1912 and is based in Dayton, Ohio.

5 Good Cheap Stocks For 2015:Synergetics USA Inc. (SURG)

 Synergetics USA, Inc., a medical device company, engages in the design, manufacture, and marketing of microsurgical instruments and consumables primarily for ophthalmology and neurosurgery markets in the United States and internationally. The company?s product lines focus upon precision engineered, microsurgical, handheld devices, and the microscopic delivery of laser energy, ultrasound, electrosurgery, aspiration, illumination and irrigation that are delivered in multiple combinations. It offers retinal surgical items, including handheld disposable and reusable forceps and scissors, fiberoptics for illumination and photocoagulation, cannulas, scrapers, and other reusable and disposable surgical devices. The company also provides bipolar electrosurgical generators; lesion generators used for minimally invasive pain treatment; and directional laser probes, as well as offers gauge instrumentation to the vitreoretinal surgical market. It sells its products through direct sales employees, distributors, and independent sales representatives. The company was founded in 1991 and is headquartered in O?Fallon, Missouri.

5 Good Cheap Stocks For 2015:Giga-tronics Incorporated (GIGA)

 Giga-tronics Incorporated designs, manufactures, and markets various test and measurement equipment used in the development, test, and maintenance of wireless communications products and systems, flight navigational equipment, electronic defense systems, and automatic testing systems worldwide. Its products are primarily used in the design, production, repair, and maintenance of commercial telecommunications, radar, and electronic warfare equipment. The company operates in two segments, Giga-tronics Division and Microsource. The Giga-tronics Division segment produces signal sources, generators and sweepers, and power measurement instruments for use in the microwave and radio frequency range of 10 kilohertz to 50 gigahertz. This segment also manufactures switch modules and interface adapters that operate with a bandwidth from direct current to optical frequencies for defense, aeronautics, communications, satellite, electronic warfare, commercial aviation, and semiconductor markets. The Microsource segment develops and manufactures a line of Yttrium, Iron, and Garnet tuned oscillators, filters, and microwave synthesizers, which are used in various microwave instruments or devices. The company markets its products through various independent distributors and representatives to commercial and government customers. Giga-tronics Incorporated was founded in 1980 and is based in San Ramon, California.