Finding Value in 2026: Best Cheap Stocks With Strong Fundamentals

When markets reach their fourth consecutive bull-run year, seasoned investors know to look beyond the headlines. While most attention flows toward momentum plays, there’s a quieter opportunity developing in undervalued sectors—particularly in energy infrastructure and telecommunications. If you’re deploying $1,000 into the market, two stocks merit serious consideration not just for their depressed valuations, but for the structural catalysts quietly building beneath the surface.

Energy Transfer: Capitalizing on AI-Driven Infrastructure Demand

The midstream energy sector tells an interesting story right now. Energy Transfer (NYSE: ET), valued at an enterprise value-to-EBITDA multiple of just 7.5 (based on 2026 analyst estimates), sits among the cheapest operators in the space. For context, the master limited partnership sector averaged a 13.7 multiple between 2011 and 2016. Yet this extreme discount masks what may be a structural mispricing.

Here’s where the disconnect matters: AI infrastructure buildout is driving unprecedented demand for electricity and natural gas. Data centers, once concentrated in specific regions, are expanding rapidly, and they need massive quantities of natural gas for both power generation and cooling. Energy Transfer is arguably the best-positioned midstream player to capitalize on this shift.

The company’s strategic advantage lies in its Permian Basin holdings. The Permian isn’t just America’s most prolific oil field—it’s also the cheapest natural gas source in the country. That cost advantage becomes critical when competing to supply energy-hungry data centers. Energy Transfer is channeling this gas toward high-demand markets through two major projects:

• Hugh Brinson Pipeline: Routing Permian natural gas to Texas markets
• Desert Southwest Pipeline: Delivering supply to Arizona and New Mexico

Demand is so robust that management recently announced capacity increases on the Desert Southwest Pipeline. More tellingly, the company has signed offtake agreements directly with data center operators and builders—Oracle, Cloud Burst, and Fermi—rather than relying solely on traditional utility customers.

The financial picture strengthens the case. Energy Transfer’s balance sheet remains healthy, and the company has committed to growing its distribution by 3-5% annually. This combination of a depressed entry valuation, an 8.1% current yield, and exposure to secular infrastructure tailwinds creates an interesting asymmetric risk-reward scenario.

Verizon Communications: A Turnaround Candidate With Near-Term Catalysts

Verizon Communications (NYSE: VZ) presents a different value thesis. Trading at a forward P/E ratio of 8.5 with a 6.8% yield, it’s notably cheaper than rival AT&T, which commands a forward multiple above 11 despite growing revenue at a comparable rate.

The real catalyst, however, emerges in 2026: the Frontier Communications (NASDAQ: FYBR) acquisition closes in Q1. This isn’t just another merger—it fundamentally reshapes Verizon’s bundling economics.

Verizon has acknowledged that its market share in Frontier territories underperforms company averages. This creates a compelling cross-sell opportunity. Once integrated, Verizon can aggressively bundle wireless and broadband services, effectively pricing its competitors out of overlapping markets and boosting both customer lifetime value and retention rates.

Management strategy is shifting tangibly. New CEO Daniel Schulman signaled a departure from the previous “technology leader” positioning that prioritized price increases over subscriber growth. The company lost wireless market share during this period—a key reason why AT&T has outpaced Verizon recently. The new playbook emphasizes customer value and experience, with bundling as a centerpiece.

Beyond the Frontier deal, Verizon is executing aggressive cost discipline. The company announced 13,000-plus layoffs (a 20% reduction in non-union workforce) and is converting 200 company-owned stores to franchise operations. These moves should meaningfully compress the cost structure moving forward.

There’s also a secondary growth angle: Verizon recently agreed to build high-capacity, low-latency fiber networks connecting Amazon’s AWS data centers. This taps into AI infrastructure demand, creating an additional revenue stream and strategic partnership benefit.

The convergence of factors creates a compelling opportunity: The market is pricing in near-term challenges (subscriber losses, competitive pressure) but undervaluing the structural improvements ahead (bundling economics, cost cuts, infrastructure partnerships, and management’s renewed focus on value). A 8.5 P/E ratio isn’t justified if these initiatives execute as planned.

The Timing Question

Both stocks share a common characteristic: they’re trading at significant discounts to historical averages, yet positioned to benefit from transformative industry trends. Energy Transfer rides an AI-driven energy infrastructure wave. Verizon is completing a strategic reset while executing cost discipline.

In a market where valuations have extended for multiple years, identifying sectors where the consensus seems to have missed the structural story becomes increasingly valuable. These two opportunities represent exactly that dynamic.