In this article, we will discuss the 10 Best Bargain Stocks to Buy in May.
While increasing tariffs and a hard sell-off have resulted in uncertainty, Neuberger Berman, an investment manager, expects that negotiations can bring some relief to initial tariff proposals. Furthermore, the firm anticipates a sharply slower growth than a US recession. Also, it believes that stimulus in Europe and China can rejuvenate global industrial activity, and the firm recommends styles, sectors, and regions that are most geared to it.
Investment Style- Where Do Opportunities Lie?
Given that a significant amount of tariff shock has now been priced in, Neuberger Berman is constructive on global equities for the remainder of the year. The firm expects that an ongoing recovery in the global industrial economy might be dampened but not derailed. The underlying momentum in the goods economy is expected to support equities that are most levered to it. Furthermore, the firm prefers value over growth (which is relatively expensive) and small caps over large caps. While an overdose of growth-inhibiting policy can impact the relatively healthy economy and push it into recession, the investment management firm believes that the US hasn’t yet reached that point. As per the firm, performance during the decline demonstrates relative strength in some of the more cyclical economic sectors in the US and around the world. The goods-oriented sectors, regions, and styles continue to outperform amidst the recent sell-off.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Lies Ahead?
S&P Global expects inflation to remain closer to 3.0% in 2025 as tariffs raise the prices along the domestic supply chain as well as for the end consumers. For 2026, the firm expects growth to pick up after a slow start. This is because of the abatement of uncertainty associated with the structure of tariffs and the further easing of the policy rate by the Federal Reserve. Also, the growth is expected to be aided partly because of a more favorable growth backdrop in the eurozone, which can help expand US exports.
Neuberger Berman opines that a combination of improving fundamentals and stabilizing risks increased the optimism in the energy sector. As per the firm, increased global industrial activity is expected to continue to buoy oil demand and keep prices aloft. Furthermore, energy seems to be the most undervalued sector in the S&P 500 relative to the current and expected earnings growth. The investment management firm believes that much of the negative news, including regulatory concerns and geopolitical risks, seem to be factored in. This suggests that energy stocks can increase as the sentiment improves.
Amidst such trends, let us now have a look at the 10 Best Bargain Stocks to Buy in May.
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Our Methodology
To list the 10 Best Bargain Stocks to Buy in May, we used a screener to shortlist the companies that trade at a forward P/E of less than ~20.0x. Next, we chose the ones that analysts see upside to, as of April 11. We also mentioned hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in the ascending order of their hedge fund sentiments.
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).
10 Best Bargain Stocks to Buy in May
10. Union Pacific Corporation (NYSE:UNP)
Forward P/E as of April 11: ~18.2x
Average Upside Potential: ~19.1%
Number of Hedge Fund Holders: 93
Union Pacific Corporation (NYSE:UNP) is a rail transportation company. Citi upped the company’s stock to “Buy” from “Neutral.” As per the firm, the transports were already setting up for a difficult Q1. Adding tariffs to the mix makes the future uncertain through the remainder of 2025 and beyond. Despite the uncertainty, the significant selloff made the transport stocks more attractive on both an absolute and relative basis, says the firm. Notably, a downturn in freight demand is expected to catalyze the carrier exits and rationalize excess capacity, says Citi. The growth in international intermodal volumes offers a strong opportunity for Union Pacific Corporation (NYSE:UNP) to offset declines in other areas.
Intermodal transportation remains a critical growth area in the logistics industry, thanks to e-commerce and global trade patterns. Union Pacific Corporation (NYSE:UNP)’s strong network and strategic positioning offer it a competitive advantage in capturing growth opportunities. Furthermore, its pricing power, aided by operational improvements and service reliability, enables the company to optimize its revenue per unit. By its focus on high-value intermodal corridors and use of the pricing strategies, the company is expected to fuel revenue growth and drive profitability. Union Pacific Corporation (NYSE:UNP)’s service-led growth approach, together with its healthy market position, can help it capitalise on the opportunities and surpass the market expectations for earnings growth.
9. Exxon Mobil Corporation (NYSE:XOM)
Forward P/E as of April 11: ~13.4x
Average Upside Potential: ~22.1%
Number of Hedge Fund Holders: 104
Exxon Mobil Corporation (NYSE:XOM) is engaged in the exploration and production of crude oil and natural gas. Jason Gabelman, an analyst from TD Cowen, remains optimistic about the company’s stock, given its focus on maintaining a reasonable near-term valuation. This, together with the clear pathway to FCF growth, continues to support the analyst’s optimism. Furthermore, Exxon Mobil Corporation (NYSE:XOM)’s strategic efforts in upgrading the portfolio while, at the same time, managing its capital expenditures effectively with the help of technology-driven efficiencies and a healthy project organization cement its financial health. Given the structural cost reductions achieved over the past few years and a commitment to value creation, the company exhibits potential for sustainable growth, says the analyst.
Exxon Mobil Corporation (NYSE:XOM)’s expansion into the low-carbon power sector offers strong growth potential. With the global energy markets pivoting towards cleaner sources, its investments in this area can place it well as a leader in the energy transition. Furthermore, the diversification can result in the opening up of new revenue streams, which can attract environmentally-conscious investors and can potentially offset the risks related to the future regulations on fossil fuels. Exxon Mobil Corporation (NYSE:XOM) remains focused on positioning itself for future growth via strategic initiatives. It is expected to leverage synergies from its Pioneer Natural Resources acquisition.
8. Cisco Systems, Inc. (NASDAQ:CSCO)
Forward P/E as of April 11: ~14.5x
Average Upside Potential: ~25.5%
Number of Hedge Fund Holders: 84
Cisco Systems, Inc. (NASDAQ:CSCO) is engaged in designing, manufacturing, and selling Internet Protocol-based networking and other products related to the communications and information technology industry. Citi analysts maintained a positive stance on the company’s stock. The firm’s analysts highlighted its recent collaboration with Nvidia, which is expected to contribute to its AI order outlook. The firm’s optimism stems from the expected growth in the AI sector. Furthermore, Cisco Systems, Inc. (NASDAQ:CSCO)’s strategic moves and partnerships, mainly in the AI domain, can strengthen its position in the market.
Cisco Systems, Inc. (NASDAQ:CSCO)’s AI-driven growth strategy is expected to deliver favorable results. Given the expansion of the enterprise data center market and its critical role in it, Cisco Systems, Inc. (NASDAQ:CSCO) is well-placed to capitalize on the opportunities offered by the elevated demand for advanced AI applications and services. On February 25, the company announced plans for an expanded partnership with NVIDIA to offer AI technology solutions to enterprises. Cisco Systems, Inc. (NASDAQ:CSCO)’s expertise in networking, along with the investments in AI-specific products and services, can result in strong revenue growth. Its capability to provide end-to-end solutions for AI infrastructure can offer a competitive edge and create new market opportunities. Since enterprises continue to adopt AI workloads, they might need strong networking capabilities to aid the data-intensive applications.
