In this article we will take a look at the 10 best undervalued stocks to buy now. You can skip our detailed analysis of these stocks and go directly to 5 Best Undervalued Stocks to Buy Now.
The COVID-19 pandemic has brought about an unexpected turn of events with many equities now trading at a lower price than their intrinsic value. Many investors see this as a chance to acquire and hold equities until the market recovers and creates profit. However, investing in undervalued stocks might be challenging. Before investing in a firm, it is critical to take note of the company’s fundamentals to assess its future growth potential.
Many undervalued stocks have the potential to deliver huge profits. Billionaire Warren Buffett is one of the notable investors that believe in investing in companies based on their true value. One of the stocks that Warren Buffett is bullish on is General Motors Company (NYSE:GM). General Motors Company (NYSE:GM) is an American multinational conglomerate that provides and finances industrial products. The stock is seeing a positive hedge fund sentiment. As of the end of the first quarter, 86 hedge funds tracked by Insider Monkey held stakes in the company, compared to 70 funds a quarter earlier. Shares of General Motors Company (NYSE:GM) jumped 118% over the last twelve months.
How To Spot Undervalued Stocks?
There are various ways to gauge whether a stock is undervalued. In this article we took into account P/E ratios, fundamentals, analysts’ comments and hedge fund sentiment to pick some of the most undervalued stocks in the market.
But choosing undervalued stocks is not easy. Analysts rarely have a consensus on how to choose undervalued stocks, especially in the case of companies like Alphabet Inc Class A (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL) and Amazon.com, Inc. (NASDAQ: AMZN). These companies are working on high-growth products and services and it’s hard for analysts to quantify their actual value.
For example, while many believe Apple Inc (NASDAQ: AAPL) is overvalued, earlier this year, Evercore ISI analyst Amit Daryanani said in his detailed report that Apple Inc (NASDAQ: AAPL) is still cheap as the company is positioned to sustain mid-single digit sales and mid-teens total return over the next “several years.” This is despite the $2 trillion market cap and a PE ratio of close to 30.
Despite explosive growth over the last few years, many analysts believe Amazon.com, Inc. (NASDAQ: AMZN) is still undervalued. Recently, Baird analyst Colin Sebastian said in a report that he believes Amazon.com, Inc. (NASDAQ: AMZN) is “significantly undervalued” on the back of “robust fundamental trends” in e-commerce and Cloud.
Similarly, many analysts believe Alphabet Inc Class A (NASDAQ: GOOGL) is still cheap because the company is working on AI, robotics, healthcare technologies, along with growing its core business. These factors will buoy the stock even further in the long-term future.
Some notable stocks that are undervalued and have huge upside potential that is worth checking out are Hovnanian Enterprises, Inc. (NYSE:HOV), Dynex Capital, Inc. (NYSE:DX), Enova International, Inc. (NYSE:ENVA) and Community Health Systems, Inc. (NYSE:CYH).
Hovnanian Enterprises, Inc. (NYSE:HOV) is one of the leading real estate companies in the United States. The company’s revenue came in at $574.7 million in the first quarter of 2021, a 16.3% increase from $574.7 million from the same period in 2020. HOV shares currently trade for $88.69 and have a P/E of 1.01. The 52-week price range of Hovnanian Enterprises, Inc. (NYSE:HOV) is $19.07-146.34. Shares of HOV jumped 271% over the last twelve months.
Dynex Capital, Inc. (NYSE:DX) is another undervalued stock that has upside potential. Dynex Capital, Inc. is a Virginia-based real estate investment trust formed in 1988. The company’s current market cap is $627.7 million. DX shares currently trade for $20.33 and have a P/E of 1.29. The 52-week price range of Dynex Capital, Inc. (NYSE:DX) is $13.25-20.51. Shares of DX jumped 41% over the last twelve months. On February 5, JonesTrading maintained a Buy rating on Dynex Capital, Inc. and raised the price target to $19.
Enova International, Inc. (NYSE:ENVA) is a financial technology service that offers its services to over 7 million customers. Last year, the company purchased the online lending platform On Deck Capital Inc. in a $122 million transaction. The acquisition provided the company with leverage to offer a broad range of products in the consumer and small business market sectors. The company’s revenue came in at $259 million in the first quarter of 2021, a modest decrease from $362 million from the same period in 2020. ENVA shares currently trade for $35.05 and have a P/E of 1.84. The 52-week price range of Enova International, Inc. (NYSE:ENVA) is $13.29-41.06. Shares of ENVA jumped 132% over the last twelve months.
Another undervalued stock worth checking out is Community Health Systems, Inc. (NYSE:CYH). Community Health Systems, Inc. was founded in 1985 and is one of the largest non-urban healthcare providers with around 70 hospitals in the United States. The company’s net operating revenue came in at $3.013 billion in the first quarter of 2021, a 4% decrease from $2.025 billion from the same period in 2020. CYH shares currently trade for $15.57 and have a P/E of 4.32. The 52-week price range of Community Health Systems, Inc. (NYSE:CYH) is $2.68-17.04. Shares of CYH jumped 374% over the last twelve months. On June 10, RBC Capital upgraded Community Health Systems, Inc. to an Outperform rating and raised the price target to $21.
Spotting undervalued stocks is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of the 10 best undervalued stocks to buy now.
Best Undervalued Stocks to Buy Now
10. B. Riley Financial, Inc. (NASDAQ: RILY)
P/E Ratio as of June 14: 3.25
Number of Hedge Fund Holders: 25
We start our list of the 10 best undervalued stocks to buy now with B. Riley Financial, Inc. (NASDAQ:RILY). The California-based investment company provides financial solutions such as corporate finance research, sales, and trading. Earlier this year, the company completed its merger with National Holdings Corporation (NASDAQ:NHLD). The transaction added 700 registered representatives and $20 billion in assets to B. Riley Financial, Inc. (NASDAQ:RILY).
B. Riley Financial, Inc. (NASDAQ:RILY)’s operating revenue came in at $207.9 million in the first quarter of 2021, a 118% increase from $95.5 million from the same period in 2020. RILY shares currently trade for $65.48 and have a P/E of 3.25. The 52-week price range of B. Riley Financial, Inc. (NASDAQ:RILY) is $19.91-78.95. Shares of RILY jumped 197% over the last twelve months.
Like Alphabet Inc Class A (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Quest Diagnostics Incorporated (NYSE:DGX), Magnachip Semiconductor Corporation (NYSE:MX) and Amazon.com, Inc. (NASDAQ: AMZN), B. Riley Financial, Inc. (NASDAQ:RILY) is undervalued according to several analysts.
There were 25 hedge funds that reported owning stakes in B. Riley Financial, Inc. (NASDAQ:RILY) at the end of the first quarter, up from 16 funds a quarter earlier. The total value of these stakes at the end of Q1 is $189 million.
9. Magnachip Semiconductor Corporation (NYSE: MX)
P/E Ratio as of June 14: 3.38
Number of Hedge Fund Holders: 30
Ranking 9th in our list of 10 best undervalued stocks to buy now is Magnachip Semiconductor Corporation (NYSE:MX). The South Korea-based analog and semiconductor designer and manufacturer was founded in 2004. The company offers various product solutions such as power solutions, display solutions, and imaging solutions. On February 18, Roth Capital maintained a Buy rating on Magnachip Semiconductor Corporation (NYSE:MX) and raised the price target to $30.
Magnachip Semiconductor Corporation (NYSE:MX) posted its revenue of $123.02 million in the first quarter of 2021, up 2.11% year-over-year. MX shares currently trade for $25.91 and have a P/E of 3.38. The 52-week price range of Magnachip Semiconductor Corporation (NYSE:MX) is $9.93-26.98. Shares of MX jumped 132% over the last twelve months.
There were 30 hedge funds that reported owning stakes in Magnachip Semiconductor Corporation (NYSE:MX) at the end of the first quarter, up from 28 funds a quarter earlier. The total value of these stakes at the end of Q1 is $344 million.
Wasatch Global Investors mentioned Magnachip Semiconductor Corporation (NYSE:MX) in its Q1 2021 investor letter:
“Magnachip Semiconductor Corp. (MX) also contributed to Fund performance. The company designs, develops and manufactures mixed-signal and digital multimedia semiconductors. We think Magnachip is a classic “growth at a reasonable price” (GARP) company. The stock was a laggard in 2020, but our belief was that Wall Street underappreciated the company’s earnings and that the P/E ratio would exceed expectations going forward. In the first quarter, we think Magnachip benefited from the realization that the company is a steady—if not spectacular—grower as there was a rotation in preference away from higher-priced growth stocks and toward lower-priced growth stocks. The stock also benefited from news that the company has agreed to be acquired.”
8. Unum Group (NYSE: UNM)
P/E Ratio as of June 14: 7.91
Number of Hedge Fund Holders: 33
Ranking 8th in our list of 10 best undervalued stocks to buy now is Unum Group (NYSE:UNM). The comprehensive financial insurance provider was founded in 1848 and offers various services such as Disability Insurance, Accident Insurance, Life Insurance, and Hospital Insurance, among others. On May 19, Morgan Stanley maintained an Equal-Weight rating on Unum Group (NYSE:UNM) and raised the price target to $30.
Unum Group (NYSE:UNM) posted its total operating revenue of $3 billion in the first quarter of 2021, down 1% year-over-year. UNM shares currently trade for $30.43 and have a P/E of 7.91. The current dividend yield is 3.94%. The 52-week price range of Unum Group (NYSE:UNM) is $15.21-31.98. Shares of Unum Group (NYSE:UNM) jumped 78% over the last twelve months.
Like General Motors Company (NYSE:GM), Alphabet Inc Class A (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Quest Diagnostics Incorporated (NYSE:DGX), Magnachip Semiconductor Corporation (NYSE:MX) and Amazon.com, Inc. (NASDAQ: AMZN), Unum Group (NYSE:UNM) is undervalued according to several analysts.
There were 33 hedge funds that reported owning stakes in Unum Group (NYSE:UNM) at the end of the first quarter, up from 25 funds a quarter earlier. The total value of these stakes at the end of Q1 is $283 million.
7. Quest Diagnostics Incorporated (NYSE: DGX)
P/E Ratio as of June 14: 9.66
Number of Hedge Fund Holders: 34
New Jersey-based clinical laboratory Quest Diagnostics Incorporated (NYSE:DGX) ranks 7th in our list of 10 best undervalued stocks to buy now. The company was founded in 1967 and has over 6,847 locations in the United States alone. In 2020, the company made one of its biggest acquisitions with Mid America Clinical Laboratories. The acquisition allowed the company to extend its services to Indiana including a greater cover of innovative clinical laboratory and pathology services.
Quest Diagnostics Incorporated (NYSE:DGX) has a market cap of $15.4 billion. The company’s revenue in the first quarter of 2021 came in at $2.7 billion, a 49.3% increase from 2020. DGX shares currently trade for $127.29 and have a P/E of 9.66. The current dividend yield is 1.95%. The 52-week price range of Quest Diagnostics Incorporated (NYSE:DGX) is $103.26-142.80. Shares of DGX jumped 15% in the last twelve months. On May 5, UBS maintained a Neutral rating on Quest Diagnostics Incorporated and raised the price target to $111.
There were 34 hedge funds that reported owning stakes in Quest Diagnostics Incorporated (NYSE:DGX) at the end of the first quarter, down from 45 funds a quarter earlier. The total value of these stakes at the end of Q1 is $485 million.
Like General Motors Company (NYSE:GM), Alphabet Inc Class A (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Magnachip Semiconductor Corporation (NYSE:MX) and Amazon.com, Inc. (NASDAQ: AMZN), Quest Diagnostics Incorporated (NYSE:DGX) is undervalued according to several analysts.
Davis Funds mentioned Quest Diagnostics Incorporated (NYSE: DGX) in its Q4 2020 investor letter. Here is what the fund said:
“Within healthcare, our largest position is Quest Diagnostics Incorporated (NYSE: DGX), a leader in independent lab testing and diagnostics. Quest offers its lab services at a fraction of the cost of hospital labs, which constitutes a strong cost-savings value proposition to new and existing customers. It is not surprising that by virtue of the value Quest Diagnostics Incorporated (NYSE: DGX) creates, the company is increasingly serving as an outsource partner to hospitals and healthcare networks across the U.S. We believe Quest’s market is very sticky and only getting larger. The cost savings accruing to Quest’s customers should bode well for the long-term success of the business.”
6. AFLAC Incorporated (NYSE: AFL)
P/E Ratio as of June 14: 7.23
Number of Hedge Fund Holders: 36
Ranking 6th in our list of the 10 best undervalued stocks to buy now is AFLAC Incorporated (NYSE:AFL). The Georgia-based insurance company was founded in 1955 and offers supplemental insurance to clients in the United States. Last year, the company announced plans to acquire Zurich North America’s U.S. Corporate Life and Pensions (Group Benefits). The strategic deal leverages the company as one of the leading providers of benefit solutions.
AFLAC Incorporated (NYSE:AFL) posted its revenue of $5.9 billion in the first quarter of 2021, up from $5.2 billion in the same period of 2020. AFL shares currently trade for $56.25 and have a P/E of 7.23. The current dividend yield is 2.35%. The 52-week price range of AFLAC Incorporated (NYSE:AFL) is $33.37-57.57. Shares of AFL jumped 53% in the last twelve months. On May 19, Morgan Stanley maintained an Overweight rating on AFLAC Incorporated and raised the price target to $61.
Like General Motors Company (NYSE:GM), B. Riley Financial, Inc. (NASDAQ:RILY), Alphabet Inc Class A (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Quest Diagnostics Incorporated (NYSE:DGX), Magnachip Semiconductor Corporation (NYSE:MX) and Amazon.com, Inc. (NASDAQ: AMZN), AFLAC Incorporated (NYSE:AFL) is undervalued according to several analysts.
There were 36 hedge funds that reported owning stakes in AFLAC Incorporated (NYSE:AFL) at the end of the first quarter. The total value of these stakes at the end of Q1 is $343 million.
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Disclosure: None. 10 Best Undervalued Stocks To Buy Now is originally published on Insider Monkey.
