In our recent publication, we presented an intriguing list titled "11 Ridiculously Cheap Stocks to Invest In". Among them, ACCO Brands Corporation (NYSE:ACCO) has piqued the interest of many investors. In this article, we will explore how ACCO compares to other similarly categorized inexpensive stocks, while shedding light on the broader implications of investing in such financial opportunities.

Investors often seek bargains in various markets, whether it's commodities or stocks. Just as savvy shoppers compare prices to ensure they get the best value for their money, investors must also compare relative prices and identify undervalued assets in the financial landscape. In both realms, the price of an asset is a critical factor that can influence profitability.

In the often tumultuous world of finance, distinguishing between a smart investor and an impulsive one can hinge on their ability to identify hidden gems among overpriced stocks. An astute investor comprehends that true value is not solely about the assets they purchase; it is primarily concerned with the price they pay. This understanding is crucial for spotting potential investments that may be overlooked but are rich in value.

To properly define what constitutes a "cheap" stock, it is important to consider two prevalent interpretations. The first is that a stock might be labeled as cheap purely due to its low share price. However, a more widely accepted view regards an undervalued stock as synonymous with a cheap stock. This perspective holds that a cheap stock is one that trades below its intrinsic value, which can be evaluated through various metrics like earnings, revenue, or total assets. Consequently, investors often perceive these stocks as "cheap" in relation to their actual potential, presenting an attractive investment opportunity.

A commonly used metric to identify cheap stocks is the forward price-to-earnings (P/E) ratio. This ratio allows investors to gauge how much they are essentially paying for each dollar of a companys earnings. A low P/E ratio can indicate an undervalued stock, particularly when assessed against its competitors, historical benchmarks, and the broader market averages.

Supporting the premise of value over growth investing is a comprehensive report from Hoover Capital Management (HCM), which analyzed the historical performance of value versus growth stocks through the French High Minus Low (HML) factor. Over an extensive period of 97 years, from July 1926 to December 2023, the findings strongly advocate for value investing. The cumulative return on value stocks outstripped growth stocks by an astonishing 3,000%. To put that in context, value investing yielded returns 30 times higher than its growth counterparts. This notion is further backed by research conducted by economist Victoria Galsband, which indicates that from 1975 to 2010, cheap stocks consistently outperformed growth stocks across all G7 countries, including major economies like Canada, the United States, Japan, and significant European nations.

Moreover, additional research has examined the effects of adding or removing companies from the S&P 500 index on their valuations. Findings suggest a pattern where removals are often correlated with undervaluation, and intriguingly, many companies that have been removed from the index have outperformed the market thereafter. A study by Research Affiliates indicated that stocks excluded from the S&P between 1990 and 2022 outperformed those included by over 5% annually. This data provides a compelling argument for the view that undervalued stocks, or cheap stocks, are more likely to yield substantial returns in the long run.