Identifying undervalued stocks in an uncertain market environment is both a challenge and an opportunity for investors. Market cycles, economic sentiment, and valuation distortions often create conditions where fundamentally strong companies trade below their intrinsic value, which is generally termed as undervaluation. Understanding these trends and distinguishing between temporary market corrections and broader economic slowdowns is crucial for investors seeking long-term gains.
In an interview with CNBC on March 11, Chris Grisanti, MAI Capital Management chief market strategist, highlighted the importance of recognizing market signals and valuations to navigate the investment landscape effectively. He stressed that entry price is a critical factor in investing, especially as valuation distortions have grown in recent years with growth stocks significantly outperforming value stocks. Chris pointed to a shift in market trends, noting that past corrections were often led by tech stocks dragging the market down, resulting in what he viewed as natural and healthy pullbacks. However, this time, the decline is being led by economically sensitive sectors such as banks, airlines, and consumer discretionary stocks, signalling a potential economic slowdown. He cautioned that even irrational fears could become self-fulfilling, as businesses may delay spending and hiring, further exacerbating economic weakness.
Examining recent market movements, Chris noted that while tech stocks have continued to struggle, other sectors that previously showed strength, such as banking and airlines, are now also facing pressure. This broad-based decline has raised concerns about a deeper economic downturn. When asked about potential buying opportunities, he acknowledged that while airlines appear undervalued, their susceptibility to economic downturns makes them a riskier bet.
For investors seeking to capitalize on undervalued stocks, the key lies in identifying companies with strong fundamentals, stable cash flows, and a proven ability to withstand economic downturns. Companies with pricing power, consistent earnings growth, and strong balance sheets may provide attractive investment opportunities despite broader market headwinds. Additionally, sectors that have been disproportionately punished due to short-term sentiment rather than fundamental weaknesses may offer long-term value for patient investors.
While uncertainty remains in the market, periods of heightened volatility often create compelling opportunities for value-oriented investors. A disciplined approach that considers valuation metrics, industry trends, and company-specific strengths can help investors uncover undervalued stocks with significant upside potential.
With that, let’s look at our selection of the 10 best undervalued stocks to buy according to billionaires.
A close-up of a financial chart jumping as the large-capitalization value sector changes.
Our Methodology
To determine the 10 undervalued stocks to buy according to billionaires, we scanned Finviz and shortlisted the top 10 stocks that are trading at a forward price-to-earnings (P/E) below 15 and are also most favoured by billionaire investors. For the relevant data on billionaires, we leveraged Insider Monkey’s database on billionaire holdings. We then arranged the shortlisted stocks in ascending order based on the number of billionaire investors holding stakes in each company as of Q4 2024. Additionally, we provided insights into hedge fund sentiment surrounding these stocks, using data from Insider Monkey’s Q4 2024 database of hedge funds.
Note: All pricing data is as of market close on March 14.
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 Undervalued Stocks to Buy According to Billionaires
10. Alibaba Group Holding Ltd. (NYSE:BABA)
Number of Billionaire Investors: 17; Holdings: $2.6 Billion
Number of Hedge Fund Holders: 107
Forward P/E: 14.4
Alibaba Group Holding Ltd. (NYSE:BABA) is a prominent Chinese multinational technology company with strong market positions in e-commerce, cloud computing, and digital payments. Its main operations include platforms such as Alibaba, Taobao, Tmall, and Alibaba Cloud, which together cater to millions of businesses and consumers worldwide. The company’s ecosystem also extends into areas like logistics, entertainment, and enterprise solutions.
Baron Funds, an investment management firm, shared its “Baron Emerging Markets Fund” Q4 2024 investor letter, maintaining a positive view on Alibaba despite its underperformance in the last quarter of 2024. They commented:
“We retain conviction that Alibaba is well positioned to benefit from China’s ongoing growth in online commerce and cloud in China, though competitive market concerns remain.”
Alibaba Group Holding Ltd. (NYSE:BABA) has recently committed over $53 billion towards developing AI and cloud computing infrastructure, including data centers, over the next three years. Moreover, the company introduced its open-source AI model, QwQ-32B, reflecting its aim to lead in artificial intelligence. As China’s economy stabilizes, Alibaba is forecasted to regain growth momentum, especially in international e-commerce and cloud computing, driven by these substantial investments.
The stock has a consensus Buy rating, with a 1-year median price target of $165.7, suggesting an approximate 18% potential upside.
9. The Cigna Group (NYSE:CI)
Number of Billionaire Investors: 17; Holdings: $2.3 Billion
Number of Hedge Fund Holders: 72
Forward P/E: 10.6
The Cigna Group (NYSE:CI) is a leading global health services company offering insurance and healthcare solutions for individuals, employers, and government organizations. Cigna’s operations span medical, dental, disability, life, and pharmacy benefits, with a strong emphasis on managed care and cost-effective healthcare delivery. Through its Evernorth subsidiary, the company is expanding into health services, pharmacy benefit management, and digital health solutions.
In his January 31 report, Jefferies analyst David Windley maintained a Buy rating on The Cigna Group (NYSE:CI), citing a positive outlook. He noted that the company’s 2025 guidance appears conservative, especially if certain costs and investments are not fully realized. Additionally, relatively mild pharmacy benefit management regulations could provide further upside in the next six months. The analyst also highlighted that the company’s projected earnings per share growth for 2026 exceeds its long-term plan, with a 14% increase driven by core earnings growth and share buybacks. Despite challenges in the stop-loss market (coverage to protect against extremely high claims), management’s approach suggests potential for recovery and repricing, supporting high single-digit organic growth in 2025.
