We recently published a list of 11 Ridiculously Cheap Stocks to Invest in. In this article, we are going to take a look at where Invesco Mortgage Capital Inc. (NYSE:IVR) stands against other ridiculously cheap stocks to invest in.

Just as we hunt for bargains in the commodity market—comparing relative prices, identifying discounted products, and getting the product most valued for our money—investing in the financial market isn’t any different. In both investments, price matters.

In a world of overpriced stocks, spotting the hidden gem is what differentiates a smart investor from an impulsive investor. One who realizes that value isn’t just about what you buy rather it’s more about what you pay, is the one who is likely to identify an overlooked but full of value stock.

Let’s first understand what a cheap stock actually implies. There are two most common interpretations of such a stock. First, a stock may be regarded as a cheap stock if it has a low share price. Second, an undervalued stock is more commonly known as a cheap stock. Our analysis resonates with the second interpretation, that a cheap stock is a stock that is trading below its intrinsic value based on factors like earnings, revenue, or assets. Thus, in the market, investors say it’s “cheap” relative to its true potential, making it a compelling investment.

One such measure to spot a cheap stock is through the forward price-to-earnings ratio. This is a measure used by investors to actually see how much they are paying for each dollar of a company’s earnings. A low P/E can signal an undervalued stock when compared to its competitors, historical average, and broader market average.

A report by Hoover Capital Management (HCM) analyzes the historical performance of value versus growth stocks through the French High Minus Low (HML) factor. The results from 97 years of data, from July 1926 to December 2023, strongly support value investing. The cumulative return of value stocks surpassed growth stocks by an impressive 3,000%. In other words, value investing has delivered a 30 times higher return on growth than growth investing. It can be further reinforced through the research by Economist Victoria Galsband, according to which cheap stocks outperformed growth stocks from 1975 to 2010 in every single G7 country, including Canada, the U.S., Japan, and the leading European countries.

Another report that analyzed the impact of additions or removals of companies from the S&P index on their valuations indicated that, as removals are associated with the undervaluation of the stock and vice versa, many companies removed from the index outperformed the market. A study by Research Affiliates highlighted that stocks taken out of the S&P between 1990 and 2022 outperformed those that were added by more than 5% annually. This provides a compelling case for our view that undervalued stocks, translated to cheap stocks, have a greater probability of yielding higher returns.

Our Methodology

We have compiled a list of 11 ridiculously cheap stocks through the Finviz screener. In doing so, stocks have been selected that have a lower than 5 price-to-earnings (P/E) ratio. These stocks cover a range of industries, from consumer products to natural resources exploration. These companies are then listed according to their P/E ratios, from highest to lowest.

At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A wide angled view of a large office building owned by the REIT-Mortgage company, highlighting their commercial real estate investments.

Invesco Mortgage Capital Inc. (NYSE:IVR)

Forward P/E as of April 17: 4.39

Invesco Mortgage Capital Inc. (NYSE:IVR) is a Georgia-based real estate investment trust that engages in investing, financing, and managing mortgage-backed securities and such other assets. Incorporated in 2008, the company considers itself on a mission to deliver attractive risk-adjusted returns to its stockholders, mainly through dividends and capital appreciation. It is among the best cheap stocks to monitor.

The 18% dividend yield of Invesco Mortgage Capital Inc. (NYSE:IVR) is what seeks an investor’s attention, coupled with a sound balance sheet and stable earnings coverage. Although in the past few months, the company, like all the mREITs, was vulnerable to risks like commercial tariff impositions, high inflation expectations, and higher interest rate volatilities, IVR’s recent focus shift from Agency residential mortgage-backed securities (Agency RMBS) to Agency commercial mortgage-backed securities (Agency CMBS) made it a big strategic game.

The relative transition to Agency CMBS can be considered opportunistic, as the spread of Agency CMBS to Treasuries is now more exposed to Treasuries than in the past, due to lower investor confidence towards the CMBS market. Thus, the risk premium has dropped in the last few months, owing to the demand for stable cash flows and income-generating assets amid interest rate fluctuations, further reinforcing that the strategy adopted by Invesco Mortgage Capital Inc. (NYSE:IVR) was certainly the right one.

The company has reverted back to its initial model with relatively higher exposure to Agency RMBS, as with volatility now declining, this segment is now more robust. Brian Norris, the Chief Investment Officer, made the following comment:

“We continue to selectively capitalize on historically attractive Agency RMBS spreads, and believe the sector is poised to perform well as interest rate volatility continues to moderate. Our liquidity position provides a substantial cushion for further potential market stress, while also providing capital to deploy into our target assets as the investment environment improves.”

The shifting in the spreads just reflects the company’s ability to capitalize on the evolving market trends. For investors seeking higher yields and lower valuations in the mREIT sector, Invesco Mortgage Capital Inc. (NYSE:IVR) is just the right cheap stock.

Overall, IVR ranks 9th on our list of ridiculously cheap stocks to invest in. While we acknowledge the potential of cheap stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than IVR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.