In this piece, we will look at the 10 Best Falling Stocks to Invest in Right Now.
The overall stock market has been in an uptrend, as depicted by major indices trading near all-time highs. The rally has come at the back of several key factors, including artificial intelligence frenzy and optimism about accommodative monetary policies, with the Federal Reserve cutting interest rates.
After two years of consecutive gains, valuations have gotten out of hand, with some stocks trading at levels and multiples not seen in years. The eye-watering valuations are raising concerns among value investors, constantly on the hunt for bargains. Morgan Stanley Wealth Management analysts have also fired warning shots about valuations that have gotten out of hand.
According to analysts’ expectations of earnings growth are too ambitious at a time when it is still unclear what President Donald Trump will do. “Policy uncertainty from the new administration appears underpriced. 2025 is not at all like 2017, and we view the risks as much higher,” said Lisa Shalett, chief investment officer and head of the wealth management unit’s global investment office. According to Shalett, investors are better off diversifying their portfolio by pairing investments in domestic stocks and bonds with equities outside the US.
READ ALSO: Billionaire Howard Marks’ Top 10 Stock Picks and 10 Cheap Value Stocks to Invest In, According To Seth Klarman.
While the rally in the equity markets has come on growing expectations that the US Fed will cut interest rates aggressively, it could stall as President Trump swings into action. According to UBS CEO Sergio Ermotti, the expected decline in interest rates could be stalled should Trump impose tariffs on allies.
“Something that I’ve been saying for a while, inflation is much stickier than we have been saying. The [truth] of the matter is that we need to see also how tariffs will play a role in inflation. Tariffs will probably not really help inflation to come down. And therefore I don’t see rates coming down as fast as people believe,” Ermotti said at the World Economic Forum in Davos, Switzerland.
Most stocks trading at all-time highs are enjoying premium valuations on investors betting on them amid expectations of lower interest rates. Amid the blockbuster gains, some stocks have gone the opposite way, tanking to levels not seen in years. The selloff that has come into play has given rise to undervalued stocks trading close to their 52-week lows. While the prospects of the selloff persist, stocks are also showing signs of bottoming out. Consequently, the best-falling stocks to invest in are companies backed by solid underlying fundamentals affirming their long-term prospects.
For good reason, economists are upbeat about the US economy and stock market. In the United States, GDP growth has been steady, interest rates are predicted to decline, and the incoming president is firmly pro-business. That presents a perfect environment for fallen stocks with solid fundamentals to bounce back. Since value stocks are already priced at or below their intrinsic value, they should theoretically have a lower downside risk.
A businessman in a boardroom, monitoring the stock performance of the company.
Our Methodology
To make our list of the best falling stocks to invest in right now, we scanned the US stock market for stocks that have fallen significantly and are trading close to their 52-week lows (0-10% above). We then settled on the top ten fallen stocks that have the potential to bounce back. We finally ranked these stocks based on their upside potential.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Falling Stocks to Invest in Right Now
10. Adobe Inc. (NASDAQ:ADBE)
52 Week Range: $403.75 – $638.25
Current Share Price: $437.32
Number of Hedge Fund Holders: 123
Stock Upside Potential: 33.20%
Adobe Inc. (NASDAQ:ADBE) is a diversified software company that offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content. While it might come as a surprise that the stock is trading close to its 52-week low, it boasts tremendous upside potential.
Nevertheless, Adobe Inc. (NASDAQ:ADBE) has shown it continues to fire from all angles amid the AI revolution. For starters, the company continues to innovate and expand its addressable market with the launch of a suite of AI-driven tools under its Firefly brand. The tools offer AI capabilities for images, text effects, and video.
Adobe Inc. (NASDAQ:ADBE) also boasts a solid 89% gross margin and 36.6% free cash flow margin. Its 13% year-over-year growth in digital media average recurring revenue underlines its ability to continue generating long-term value. Adobe has a big chance to increase the price of its AI apps to bolster its revenue base further. However, given that management is attempting to promote the use of the solutions, it needs to find a balance that draws in more revenues while not scaring customers.
9. Vale S.A. (NYSE:VALE)
52 Week Range: $8.38 – $14.27
Current Share Price: $8.87
Number of Hedge Fund Holders: 41
Stock Upside Potential: 33.52%
Vale S.A. (NYSE:VALE) is a basic materials company that produces and sells iron ore, iron ore pellets, nickel, and copper. It was one of the hardest hit companies as the Chinese economy slowed in 2024, resulting in a slump in iron prices. Consequently, the stock fell by about 34%, close to 52-week lows. Amid the slump, the company’s long-term outlook is looking increasingly positive.
According to analysts at Citi, the supply of iron ore from other countries in China has declined significantly, affirming reduced supplies. Given that supplies have fallen by about 130 million tonnes, prices are expected to spike significantly in 2025. A spike in iron ore prices would greatly benefit Vale S.A. (NYSE:VALE) as it would help strengthen its revenue base.
The Chinese real estate sector’s recovery after years of slowdown is another factor expected to cause some tailwinds to Vale stock. The recovery would trigger increased demand for Iron ore, of which Vale S.A. (NYSE:VALE) is one of the biggest suppliers. The electric vehicle revolution is another factor expected to benefit Vale as it continues to fuel demand for Nickel, therefore driving prices higher.
Here is what White Falcon Capital Management said about Vale S.A. (NYSE:VALE) in its Q4 2024 investor letter:
“While this uncertainty in Brazil has prompted many investors to offload Brazilian stocks, we’ve taken advantage of this environment to establish a position in Vale S.A. (NYSE:VALE). Vale is among the world’s largest and lowest-cost iron ore producers and boasts a growing portfolio of high-demand copper and nickel assets. It is currently trading at a P/E of 5.3x with a 8% dividend yield.”
