In this article, we will discuss the 10 Best Undervalued Stocks to Buy Right Now.
As per Evercore, the equity market rally is expected to further accelerate under the Donald Trump presidency. The S&P 500 is expected to touch 6,600 by June end. This growth in the index is expected to stem from Trump’s deregulatory agency, which should fuel corporate profits. Trump is expected to act fast to enact his policies.
The investment firm went on to add that measures such as deregulation and corporate tax cuts are expected to fuel business activity and unlock significant rally in stocks. The bull market’s 2-year run stemmed from healthy growth from mega-cap technology stocks, and high valuations are expected to further rise. Evercore hinted at data demonstrating that the average bull market witnessed an increase of 152% over 50 months, while the current market saw a run-up of only 65% over the previous 25 months.
Trump’s Next Presidency- How Will It Affect US Economy?
After Donald Trump’s win, economists and market strategists have been assessing how his economic policies might affect the broader US economy and equity markets. While the initial reaction was positive, some experts opine that Trump’s plans might fuel inflation, which will hurt consumers hoping to get some respite from it. Trump’s tax plan revolves around extending the provisions in the TCJA. The provisions are yet to expire at 2025 end. These provisions consist of lowered tax brackets and expanded standard deduction.
Trump’s campaign proposed lowering the corporate tax rate to 15% from the current rate of 21%. What will be the impact on the economy? Well, the economy might initially grow moderately under Trump’s plans. That being said, the impact might fade over time, mainly because of the effect of deporting millions of immigrants, as per Oxford Economics. As per the chief U.S. economist at Oxford Economics, the real GDP might grow 0.3 percentage points higher in 2026 as compared to the situation if existing policies continue. However, in 2028, the GDP growth might eventually fall to 0.6 percentage points lower in 2028 as compared to earlier projections as a result of deportations and increased tariffs.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Inflation Under Trump’s Presidency
Consumers tend to rank inflation among their biggest economic concerns. Global economists and market strategists believe that Trump’s Presidency can reignite inflation worries. According to investing legend, Jim Rogers, Trump’s tariffs might increase domestic inflation. As a result, the US Fed will be forced to keep the interest rates high. He further added that higher tariffs on goods, commodities, and products will lead to increased global inflation.
Moreover, Trump has plans to deport millions of immigrants. This can also fuel inflation as employers will experience labor crunch, resulting in higher wages.
While there are some uncertainties regarding the potential impacts of Trump’s economic policies, market experts believe that investors can go long on stocks that remain undervalued despite the recent rally.
Amidst all these trends, let us now have a look at the 10 Best Undervalued Stocks to Buy Right Now.
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Our Methodology
To list the 10 Best Undervalued Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the list of stocks trading at a forward P/E multiple of less than 15. Next, we selected the stocks which were popular among hedge funds. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, as of Q2 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Undervalued Stocks to Buy Right Now
10) Bank of Montreal (NYSE:BMO)
Forward P/E Ratio as of 8 November: 11.89x
Number of Hedge Fund Holders: 13
Bank of Montreal (NYSE:BMO) offers diversified financial services primarily in North America.
Amidst the credit quality concerns, the Bank of Montreal (NYSE:BMO) has been maintaining a strong position in the Canadian mortgage market. The broader Canadian residential mortgage sector demonstrated resilience. The rate cuts are expected to stimulate mortgage growth and potentially boost the Bank of Montreal (NYSE:BMO)’s loan portfolio. Lower rates might also result in improved credit performance as borrowers find it easier to service debts.
Bank of Montreal (NYSE:BMO)’s strong presence in the Canadian mortgage market places it well to capitalize on any upturn in housing activity. Overall, the healthy presence in the Canadian mortgage market, diversified operations, and proactive approach to credit risk management are expected to act as critical tailwinds.
Wall Street believes that good cost discipline and the sustained strength of its operating performance should continue to help its growth trajectory. Given Bank of Montreal (NYSE:BMO)’s strategic goals, a strong balance sheet, and healthy capital and liquidity, the company appears to be well-positioned to post sustainable returns to its shareholders.
9) Royal Bank of Canada (NYSE:RY)
Forward P/E Ratio as of 8 November: 13.3x
Number of Hedge Fund Holders: 21
Royal Bank of Canada (NYSE:RY) carries out operations as a diversified financial service company.
Wall Street analysts believe that a significant development for Royal Bank of Canada (NYSE:RY) was the acquisition of HSBC Canada, which should help it achieve healthy growth moving forward. The company continues to maintain a leadership position in Canadian banking, capitalizing on its strong domestic network and global reach. Royal Bank of Canada (NYSE:RY)’s Wealth Management segment remains well-endowed with high-net-worth and ultra-high-net-worth clients, offering a stable revenue stream and growth opportunities.
In Capital Markets, Royal Bank of Canada (NYSE:RY) established prominence in North America and gained global recognition. This diversified business model enables it to benefit from numerous revenue streams and mitigate risks associated with individual market segments.
Market experts believe that the Royal Bank of Canada (NYSE:RY) is expected to benefit from moderating expense growth and better pre-tax pre-provision earnings growth. The elimination of Dividend Reinvestment Plan (DRIP) discounts should also help earnings growth and provide support in recapturing some lost Return on Assets (ROA) and ROE.
The acquisition of HSBC Canada offers numerous growth opportunities for the Royal Bank of Canada (NYSE:RY). Over the long term, the acquisition should strengthen its position in key markets and customer segments. Notably, HSBC Canada’s robust presence in international banking services can improve the company’s capabilities in serving multinational clients and allow cross-border transactions.
8) Manulife Financial Corporation (NYSE:MFC)
Forward P/E Ratio as of 8 November: 11.00x
Number of Hedge Fund Holders: 22
Manulife Financial Corporation (NYSE:MFC) offers financial products and services in the US, Canada, Asia, and internationally.
Market analysts are quite optimistic about Manulife Financial Corporation (NYSE:MFC)’s EPS growth trajectory given the growth potential in Manulife’s Asia and Global Wealth and Asset Management (GWAM) segments. Manulife Financial Corporation (NYSE:MFC) continues to pursue strategic initiatives in a bid to enhance shareholder value and optimize its business portfolio. A critical development was the company’s progress in reducing its exposure to legacy risks and Alternative Long-Duration Assets (ALDA).
Given Manulife Financial Corporation (NYSE:MFC)’s capital position, analysts believe that it is well-placed to pursue strategic growth opportunities, like acquisitions or investments in high-growth markets, mainly in Asia. Such investments are expected to drive long-term revenue growth and market share expansion, resulting in increased shareholder value. In Asia, Manulife Financial Corporation (NYSE:MFC) can capitalize on the region’s expanding middle class, higher life expectancy, and improved demand for insurance and wealth management products. Its established presence in key Asian markets places it well to capture a larger share of this growth potential.
Manulife Financial Corporation (NYSE:MFC) has maintained its focus on pivoting to a business model with lower risk and higher ROE. Moreover, it continues to emphasize the quality and productivity of agents in Asia. The company has been expanding its customer reach with the help of strategic partnerships and new product offerings. In Global WAM, Manulife Financial Corporation (NYSE:MFC) completed the acquisition of CQS, which is a U.K.-based multi-sector alternative credit manager.
7) LyondellBasell Industries N.V. (NYSE:LYB)
Forward P/E Ratio as of 8 November: 9.48x
Number of Hedge Fund Holders: 41
LyondellBasell Industries N.V. (NYSE:LYB) operates as a chemical company in the US, Germany, Mexico, Italy, and internationally.
LyondellBasell Industries N.V. (NYSE:LYB)’s strategy continues to focus on disciplined capital allocation and optimizing operations in a bid to ensure long-term value and competitive advantages. The company expects that the full acquisition of APK is expected to enhance the renewable and circular solutions portfolio. LyondellBasell Industries N.V. (NYSE:LYB)’s focus on growth consists of significant investments in recycling and low-carbon solutions, as demonstrated by the construction of MoReTec-1 facility and the acquisition of APK.
In Q3, LyondellBasell Industries N.V. (NYSE:LYB) started construction on the first commercial-scale plant to use its proprietary and differentiated advanced catalytic recycling technology, MoReTec-1. The facility should commence operations in 2026 and achieve high plastic-to-plastic yields, supporting the goal of producing and marketing at least 2 million metric tons of recycled and renewable polymers annually by 2030.
With a modular investment strategy, LyondellBasell Industries N.V. (NYSE:LYB) has been positioning itself for a future in which renewable solutions have elevated demand levels. The company was able to generate $670 million in cash from operating activities in Q3 2024 and achieved ~80% cash conversion over the previous 12 months. It continues to take a disciplined approach to capital allocation, with $368 million invested in capital expenditures and $479 million returned to shareholders via dividends and share repurchases.
As per Wall Street analysts, the shares of LyondellBasell Industries N.V. (NYSE:LYB) have an average price target of $101.91.
6) Comcast Corporation (NASDAQ:CMCSA)
Forward P/E Ratio as of 8 November: 9.93x
Number of Hedge Fund Holders: 61
Comcast Corporation (NASDAQ:CMCSA) carries out operations as a media and technology company.
Wall Street analysts are optimistic about Comcast Corporation (NASDAQ:CMCSA)’s diverse portfolio, which includes cable networks, NBCUniversal, and Sky. The portfolio offers significant opportunities for growth in both content and connectivity. Its investment in proprietary content, together with the expansion of its network infrastructure, is expected to fuel subscriber growth and strengthen its competitive edge in the evolving media landscape. Experts believe that Comcast Corporation (NASDAQ:CMCSA) is well-positioned to capitalize on emerging trends including 5G, IoT, and AI.
Through leveraging technological capabilities, the company can introduce innovative products and services. This will enhance customer experience and create new revenue streams for Comcast Corporation (NASDAQ:CMCSA). Despite increased competition, the company remains confident in its strategic initiatives, which include the expansion of broadband and wireless services, and the development of the Epic Universe theme park.
Comcast Corporation (NASDAQ:CMCSA) remains focused on its investments toward growth initiatives like broadband upgrades and the Epic Universe theme park. Additionally, it has been exploring potential partnerships in the streaming space and continues to evaluate its portfolio of cable networks. The company remains focused on retention strategies and innovative offerings in a bid to maintain low churn rates.
Benchmark restated a “Buy” rating on the company’s shares, setting a $55.00 price objective on 30th October.
5) Chevron Corporation (NYSE:CVX)
Forward P/E Ratio as of 8 November: 12.9x
Number of Hedge Fund Holders: 64
Chevron Corporation (NYSE:CVX) is engaged in integrated energy and chemicals operations in the US and internationally.
Wall Street analysts are optimistic about Chevron Corporation (NYSE:CVX)’s long-term growth prospects. This optimism stems from its strong operational execution throughout its upstream portfolio, which includes the Permian Basin, the DJ Basin, the Tengizchevroil (TCO) project, and the Gulf of Mexico (GOM). Experts believe that these assets are being advanced toward FCF generation. Apart from the Permian progress, the TCO project remains on schedule to start operations in H1 2025, which should enhance Chevron Corporation (NYSE:CVX)’s cash contributions.
Chevron Corporation (NYSE:CVX) has been implementing several strategic initiatives, which are targeted at improving its competitive position. For example, the company’s shift towards “Free Cash Flow (FCF) harvesting mode” throughout its core assets should act as a tailwind. This pivot focuses on structural cost savings and spending rationalization. Therefore, analysts expect Chevron Corporation (NYSE:CVX)’s financial flexibility to enhance, which can potentially lead to higher returns for shareholders.
Furthermore, the company is well-placed to ramp up its exploration activities, with a notable well in Guyana anticipated to begin operations in early 2025. This expansion of exploration efforts reflects Chevron Corporation (NYSE:CVX)’s commitment to long-term growth and confidence in tapping new resource opportunities.
Analysts at Barclays upped their target price on the shares of Chevron Corporation (NYSE:CVX) from $168.00 to $174.00, giving it an “Overweight” rating on 4th November. Carillon Tower Advisers, an investment management company, released its Q4 2023 investor letter. Here is what the fund said:
“Chevron Corporation (NYSE:CVX) traded lower, along with oil prices, and issued a disappointing earnings announcement due to overseas refining losses. Separately, the company announced an agreement to buy another energy company with operations offshore of Guyana, as well as in North Dakota, the Gulf of Mexico, and the Gulf of Thailand. This is a strategic acquisition for very little takeout premium.”
4) Verizon Communications Inc. (NYSE:VZ)
Forward P/E Ratio as of 8 November: 8.55x
Number of Hedge Fund Holders: 67
Verizon Communications Inc. (NYSE:VZ) is engaged in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities.
Verizon Communications Inc. (NYSE:VZ) continues to pursue several strategic initiatives in a bid to strengthen its market position and fuel future growth. For example, Wall Street remains optimistic about the company’s potential acquisition of Frontier Communications. This acquisition should expand Verizon Communications Inc. (NYSE:VZ)’s fiber access footprint and potentially improve its competitive position in the convergence space. Furthermore, its focus on Fixed Wireless Access (FWA) offerings should translate into a key driver of future revenue growth.
Talking about Verizon Communications Inc. (NYSE:VZ)’s broadband strategy, the company plans to double its fixed wireless subscribers to 8 million – 9 million by 2028 and further expand its fiber network to 35-40 million passings. Furthermore, the company continues to focus on increasing its Fios builds and plans to integrate Frontier’s fiber network into its operations. This will further enhance broadband access and coverage.
Verizon Communications Inc. (NYSE:VZ)’s ambitious fiber expansion strategy possesses the potential to enable significant long-term growth for the company. Wall Street believes that fiber infrastructure offers a competitive advantage in providing high-speed internet services, that are essential for both residential and business customers. This expansion is expected to result in increased revenue streams, improvement in customer retention, and opportunities for bundling services.
Moreover, a strong fiber network lays the groundwork for future technologies and services. This will open up new markets and revenue opportunities across areas including smart cities, IoT, and edge computing. Third Point Management, a New York-based investment advisor, released its Q3 2024 investor letter. Here is what the fund said:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
3) AT&T Inc. (NYSE:T)
Forward P/E Ratio as of 8 November: 9.87x
Number of Hedge Fund Holders: 71
AT&T Inc. (NYSE:T) offers telecommunications and technology services worldwide.
AT&T Inc. (NYSE:T) has been quite active in exploring new avenues for growth. During the Q3 2024 earnings call, it hinted at potential expansion in its home fiber network, which includes wholesale and infrastructure opportunities. This strategic pivot is expected to result in new revenue streams and strengthen AT&T Inc. (NYSE:T)’s market position amidst the evolving telecommunications sector. Its emphasis on fiber network expansion aligns with the elevated demand for high-speed internet services.
Wall Street experts opine that the telecommunications industry has been evolving rapidly as a result of technological advancements and changing consumer behaviors. AT&T Inc. (NYSE:T)’s strategic focus on fiber network expansion is expected to support it in navigating the competitive landscape. With elevated demand for high-speed internet, as a result of remote work, streaming services, and smart home technologies, AT&T Inc. (NYSE:T)’s fiber offerings are expected to attract new customers and increase average revenue per user.
The company continues to explore secondary market opportunities for spectrum acquisition. Also, its investments are focused on sustaining EBITDA growth and improving profit margins, mainly in the Consumer broadband segment. AT&T Inc. (NYSE:T)’s pivot towards a connectivity-based business model and the divestiture of DIRECTV demonstrates its commitment to 5G and fiber connectivity.
Analysts at JPMorgan Chase & Co. upped their target price on the shares of AT&T Inc. (NYSE:T) from $21.00 to $24.00, giving an “Overweight” rating on 25th July.
2) Exxon Mobil Corporation (NYSE:XOM)
Forward P/E Ratio as of 8 November: 13.5x
Number of Hedge Fund Holders: 92
Exxon Mobil Corporation (NYSE:XOM) is engaged in the exploration and production of crude oil and natural gas in the US and internationally.
Wall Street analysts are optimistic about Exxon Mobil Corporation (NYSE:XOM)’s recent acquisition of Pioneer Natural Resources. This has further expanded its footprint in the US shale oil sector, mainly in the Permian Basin. The successful merger supports its ability to execute large-scale acquisitions effectively and might significantly contribute to future earnings growth. Exxon Mobil Corporation (NYSE:XOM)’s strong emphasis on organic growth with the help of its existing asset base and new project startups highlights a balanced approach to expansion.
The company plans to leverage its competitive advantages in resource development and operational efficiency in a bid to drive long-term value creation. Through controlling every aspect of the value chain, starting from upstream activities (like oil and gas exploration and production) to downstream operations (such as refining and marketing), Exxon Mobil Corporation (NYSE:XOM) achieved significant cost efficiencies, which provides it with a competitive edge.
Exxon Mobil Corporation (NYSE:XOM)’s expertise in deepwater drilling, unconventional resources, and liquefied natural gas projects allows it to go for a wide range of high-potential developments. Analysts at Wolfe Research upped their target price from $137.00 to $138.00 on 31st October.
Madison Investments, an investment advisor, released its Q1 2024 investor letter. Here is what the fund said:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
1) Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio as of 8 November: 12.3x
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) offers banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide.
Market experts believe that Bank of America Corporation (NYSE:BAC)’s focus on technological innovation and strong investments in technology should continue to act as a growth catalyst. Its commitment to innovation resulted in a 94% increase in AI and ML-granted patents and pending patent applications since 2022. Bank of America Corporation (NYSE:BAC) has ~1,100 AI and ML patents and pending applications in its portfolio, with over half having already been granted. The company spends more than $12 billion annually on technology. Of this, ~$4 billion will be focused on new technology initiatives in 2024.
Wall Street believes that its strong, low-cost deposit base, together with a diversified business model throughout retail, commercial, and investment banking, are some of its key strengths. Bank of America Corporation (NYSE:BAC)’s strategic positioning stems from its ability to garner deposits and leverage this growth with loans, which should fuel stronger long-term earnings growth.
Furthermore, the company’s strong deposit franchise enables it to enhance its market share. This can result in increased deposit growth, offering additional low-cost funding for loan growth or securities investments, further enhancing Bank of America Corporation (NYSE:BAC)’s earnings potential. The bank’s healthy position in capital markets and wealth management provides significant upside potential. As and when there is an improvement in market conditions, Bank of America Corporation (NYSE:BAC) might see significant growth in investment banking fees, trading revenues, and asset management income.
Barclays increased its price target on the company’s shares from $49.00 to $53.00, giving an “Overweight” rating on 16th October. Diamond Hill Capital, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Other top contributors in Q2 included Bank of America Corporation (NYSE:BAC) and Extra Space Storage. Shares of financial services company Bank of America rose in the quarter as it looks increasingly likely net interest income will inflect and begin growing again in 2024’s back half and into 2025.”
While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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