With the markets rebounding slightly from 2022’s poor performance, finding the best bargain stocks isn’t easy. There aren’t as many bargains as in mid-October when the S&P 500 traded at a 52-week low. 

Also, the best bargain stocks can seem like arbitrary picks. One person’s bargain is another one’s overpriced waste of money. As Warren Buffett says, “The price is what you pay; the value is what you get.”

When looking at non-financials, I’m typically focused on businesses with healthy free cash flow growth and a reasonably high free cash flow yield, preferably something higher than 8%.

In a September 2022 article I wrote about small-cap stocks, I selected companies from the holdings of the Pacer Small Cap Cash Cows 100 ETF (BATS:CALF). Pacer ETFs have eight different ETFs focused on free cash flow yield. As a result, they’re always a wonderful resource for finding the best bargain stocks. 

Since we’re focusing on value, I’d say that the Pacer US Cash Cows 100 ETF (BATS:COWZ), which tracks the performance of the Pacer US Cash Cows 100 Index, a collection of the 100 highest free cash flow yielding stocks in the Russell 1000 Index.  

My three selections of the best bargain stocks are from COWZ’s top 1o holdings.

Nucor (NUE)

Nucor (NYSE:NUE) has a trailing 12-month free cash flow of $8.12 billion [cash flow section], an enterprise value of $45.49 billion and a free cash flow yield of 17.5%. It is the second-largest holding in the COWZ ETF with a 2.30% weighting.

The steel maker’s stock stumbled in mid-September after announcing its Q3 2022 results wouldn’t be as good as analysts expected. While analysts had a third-quarter earnings per share estimate of $9.67, Nucor’s outlook called for $6.35 at the midpoint of its guidance. 

Its shares fell from $144 on Sept. 9 to a 52-week low of $100.13 on Sept. 26. In two weeks, NUE lost 33% of its value.  

Fortunately for anyone who bought in early September, it’s regained all of those losses and then some. As a result, it’s up 68% since the end of September. 

Nucor’s fourth-quarter results beat analyst estimates on the top and bottom lines. It earned $4.89 a share, down 39% from a year earlier, but beat the Zacks Consensus Estimate by 71 cents. On the top line, it generated $8.72 billion in revenue, 16% lower than a year earlier but 10% higher than the analyst estimate. 

I’m a glass-half-full person. The fact that it generated a record annual profit of $28.79 a share in 2022, 24% higher than its previous record set in 2021, suggests the company continues to operate at a high level of productivity. 

Its current enterprise value of $44.1 billion is 3.83x its earnings before interest, taxes, depreciation and amortization (EBITDA). That’s considerably lower than its five-year average of 6.29x.    

Altria Group (MO)

Altria Group (NYSE:MO) has a trailing 12-month free cash flow of $8.05 billion [cash flow section], an enterprise value of $106.11 billion, and a free cash flow yield of 7.6%. It is the 10th-largest holding in the COWZ ETF with a 2.06% weighting.

The cigarette maker returned to the e-cigarette horse on March 6, announcing that it would buy NJOY, an e-cigarette startup, for $2.75 billion. Although the company’s original move into the e-cigarette market went horribly wrong — it invested $12.8 billion in Juul Labs in 2018 — it recently swapped its stake in Juul for some of the company’s intellectual property for some of its heated tobacco prototypes. So that officially ends the Juul debacle. 

NJOY has six products that have gotten the green light from the U.S. Food and Drug Administration (FDA). The NJOY ACE is the only pod-based e-vapor product approved by the FDA. Altria looks like it learned its lesson from Juul. 

“As a result of this Transaction, Altria’s enhanced smoke-free portfolio will include full global ownership of products and technologies across the three largest smoke-free categories and a joint venture with JT Group for the U.S. commercialization of heated tobacco stick products,” said Olivier Houpert, Altria’s Chief Innovation and Product Officer. 

In a related matter, Altria will likely explore selling its 9% stake in Anheuser-Busch InBev (NYSE:BUD) shortly. That’s because the Juul swap crystallizes its tax loss on its $12.8 billion investment. As a result, it can only offset those losses against capital gains, not regular income. The 9% stake is currently worth approximately $11 billion. That money would come in handy for growing its smoke-free products, including NJOY. 

Altria remains a dividend darling with an 8.0% yield.

Marathon Petroleum (MPC)

Marathon Petroleum (NYSE:MPC) has a trailing 12-month free cash flow of $13.94 billion [cash flow section], an enterprise value of $73.34 billion, and a free cash flow yield of 19.0%. It is the 3rd-largest holding in the COWZ ETF with a 2.29% weighting.

Nineteen analysts cover the owner of downstream refining and gas station assets. They currently give it an “Overweight” rating with an average target price of $146.59, 14% higher than where it’s currently trading. On March 9, UBS started covering MPC stock with a “Buy” rating and a $165 target, the highest of the 19 analysts. 

On March 8, MPC announced it had taken a 49.9% interest in LF Bioenergy for $50 million. LF is an emerging producer of renewable natural gas (RNG). 

The deal includes an additional $50 million for reaching certain milestones. LF’s expects its first dairy farm-based RNG project to be operating by June. It expects to produce 6,500 MMBtu (Metric Million British Thermal Units) daily by 2026. 

Marathon generated $16.4 billion in net cash from its operating activities in 2022. It used $11.9 billion for share repurchases and $1.3 billion for dividends. 

Because of its strong showing, the company added $5 billion to its share repurchase program. As a result, it now has $7.6 billion available to buy back its stock. 

In 2023, Marathon intends to spend $1.3 billion on its capital plan and another $950 million for MPLX LP (NYSE:MPLX), its majority-owned operator of midstream energy infrastructure.   

Year-to-date, MPC is up more than 15%. Yet, it trades for just 6.5x its 2023 estimated earnings per share of $19.76.     

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.