The stock market appears poised for another year of impressive returns, likely extending into 2025. However, concerns about high valuations persist. To gain insight into this, Aswath Damodaran, professor of finance at NYU Stern School of Business, recently joined CNBC’s ‘Closing Bell’ on December 14. Damodaran recognized that it’s tough to keep up after two years of returns over 25%. He mentioned that if the market stays stable until the end of the year, it would be similar to the high points seen in the 1950s and mid-1970s. However, he was doubtful about being able to keep this strong performance going, as it’s challenging to continue rising after such big gains.
When asked if the market is overvalued, Damodaran said that while prices are high, they haven’t reached the level of a bubble yet. He compared the current situation to the late 1990s but clarified that he doesn’t plan to sell all his investments. Instead, he is hesitant to invest cash right away because staying in cash might mean losing out on potential gains. He also mentioned that while there may be limited growth in price-to-earnings ratios in 2025, there could still be good returns due to better-than-expected earnings growth from new government policies. Damodaran believes that a return of 8% to 10% would be satisfactory for him, as he prioritizes preserving wealth over aiming for very high returns.
The US stock market currently presents a mixed valuation picture. According to Morningstar, Large growth stocks have experienced significant price appreciation. However, their current valuations may not fully reflect the inherent risks associated with high growth expectations and potential competition. Consumer defensive stocks tend to be less volatile during economic downturns, but the current valuations may be inflated due to a perceived safe-haven status. Utilities may be currently overvalued relative to their historical performance and future earnings potential as interest rates rise. The industrial sector may be overvalued due to concerns about potential economic slowdowns and rising input costs, although some sub-sectors may offer value.
Conversely, the communication services sector may present attractive opportunities for investors. While facing challenges such as increased competition and regulatory scrutiny, certain companies within this sector may be undervalued relative to their long-term growth prospects. The energy sector has experienced significant volatility in recent years. However, with increasing global energy demand and ongoing geopolitical uncertainties, certain segments of the energy sector may be undervalued at current prices.
Markets are constantly evolving, influenced by various factors such as economic growth, interest rates, and geopolitical events. Damodaran’s insights reflect a cautious view of market prospects heading into 2025, emphasizing careful investment strategies amid high valuations. In that context, we’re here with a list of the 10 cheap NYSE stocks to invest in now.
Methodology
We sifted through the Finviz stock screener to compile a list of the top NYSE-listed stocks. We then selected the 10 stocks with a forward P/E ratio under 15 that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 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 Cheap NYSE Stocks To Invest In Now
10. Wells Fargo & Co. (NYSE:WFC)
Current Forward P/E as of December 16: 12.8
Number of Hedge Fund Holders: 72
Wells Fargo & Co. (NYSE:WFC) is a multinational financial services company. It’s one of the largest banks in the US and its extensive network includes numerous branches and ATMs across the country. It operates across various segments, including consumer banking, commercial banking, wealth management, and investment banking.
In Q3 2024, the company reported a revenue of $20.4 billion, driven in part by its credit card business, which demonstrated consistent strength, with balances increasing for 13 consecutive quarters. The company has focused on expanding its credit card offerings, which include the recent launch of new co-branded cards with Expedia and a multi-year agreement with Volkswagen Financial Services. These partnerships have expanded customer reach and increased new credit card accounts to ~2 million this year.
While revenue declined by 2% year-over-year, the company remains optimistic about its future. Wells Fargo & Co. (NYSE:WFC) has strategically adjusted its business focus by investing in key growth areas and divesting from less profitable segments.
9. Goldman Sachs Group Inc. (NYSE:GS)
Current Forward P/E as of December 16: 14.24
Number of Hedge Fund Holders: 72
Goldman Sachs Group Inc. (NYSE:GS) is a global financial services firm that offers a range of services to a diverse client base. Its key business segments include investment banking, institutional client services, investing and lending, and investment management. It’s known for its expertise in complex financial transactions and its significant influence on global financial markets.
The company’s Asset and Wealth Management (AWM) division is growing significantly. Under AWM, assets under supervision reached a record high of $3.1 trillion, driven by consistent long-term net inflows of $29 billion, marking the 27th consecutive quarter of positive long-term net inflows. Management and other fees, along with private banking and lending revenues, combined to reach a record $3.4 billion, representing a 9% year-over-year increase. It also raised over $50 billion in alternative assets year-to-date, exceeding expectations.
The AWM division’s financial performance is reflected in its improving profitability. Pre-tax margins have increased meaningfully and are currently in line with the company’s mid-20s target. This demonstrates Goldman Sachs Group Inc.’s (NYSE:GS) commitment to investing in future growth initiatives.
Ariel Appreciation Fund stated the following regarding The Goldman Sachs Group, Inc. (NYSE:GS) in its Q2 2024 investor letter:
“Shares of global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), also rose in the period following solid earnings results, highlighted by strength in fixed income, currencies 1 Sindreu, Jon. “The Second Quarter Split the Market.” The Wall Street Journal, July 1, 2024, p. B9. and commodities (FICC) as well as equities trading and better-than-expected investment banking fees. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and working to improve profitability in Platform Solutions by 2025. With the possibility of increased capital requirements from its regulators, GS plans to reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
8. Pfizer Inc. (NYSE:PFE)
Current Forward P/E as of December 16: 8.58
Number of Hedge Fund Holders: 80
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company engaged in the research, development, manufacturing, and commercialization of healthcare products, including medicines and vaccines. It boasts an international portfolio of 100+ drugs with a focus on oncology, primary care, and specialty care.
Its oncology business is a key growth driver, with revenue growing 31% year-over-year in the third quarter of 2024. This success is attributed to both legacy Seagen and Pfizer products. Seagen was acquired by Pfizer Inc. (NYSE:PFE) last year. One of its products, TALZENNA, a prescription medication used to treat certain types of cancer, demonstrated a 77% increase in the quarter. This was supported by the release of promising overall survival data from the TALAPRO study, which investigated the combination of TALZENNA with XTANDI (for the treatment of prostate cancer) in patients with metastatic castration-resistant prostate cancer (mCRPC). The results of this combination showed improved survival in patients.
The company’s robust oncology pipeline strengthens its position, underscoring Pfizer Inc.’s (NYSE:PFE) commitment to delivering breakthroughs that change patients’ lives and positions the company for continued growth in this area.
Parnassus Value Equity Fund stated the following regarding Pfizer Inc. (NYSE:PFE) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer Inc. (NYSE:PFE), NICE and Charter Communications. We purchased Pfizer to capture the potential upside from any turnaround following the COVID-induced boom-bust cycle of the last few years. Pfizer’s stock price sank by more than 40% in 2023 as COVID-19 vaccine revenues rolled off, providing an attractive entry point for us. The company completed its acquisition of Seagen, which should strengthen Pfizer’s pipeline in antibody-drug conjugates (ADC). Pfizer also offers an attractive dividend yield.”
7. Johnson & Johnson (NYSE:JNJ)
Current Forward P/E as of December 16: 13.79
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) is a diversified global healthcare leader with a presence across pharmaceuticals, medical devices, and consumer health. Its extensive product portfolio spans from everyday essentials like Band-Aids and Tylenol to advanced medical technologies and innovative prescription medications.
Its Innovative Medicine segment, focused on developing and delivering new medicines, demonstrated strong growth in Q3 2024, exceeding $14 billion in revenue for the second consecutive quarter. This was driven by the performance of 11 key brands that achieved double-digit growth. DARZALEX, a medication used to treat multiple myeloma by targeting a protein on cancer cells, became the first product in the company’s history to reach $3 billion in sales within a single quarter.
The segment’s success was also supported by a robust pipeline, with 5 major US and European approvals obtained during the quarter. These approvals included FDA approval of RYBREVANT plus LAZCLUZE for first-line treatment of EGFR-mutated advanced lung cancer and FDA approval of TREMFYA for active ulcerative colitis. With several innovative medicines currently in the filing and review process, each with the potential to generate $5 billion in peak-year sales, Johnson & Johnson (NYSE:JNJ) is confident in its near- and long-term growth trajectory.
6. Exxon Mobil Corp. (NYSE:XOM)
Current Forward P/E as of December 16: 12.5
Number of Hedge Fund Holders: 86
Exxon Mobil Corp. (NYSE:XOM) is a global leader in the oil and gas industry. It focuses on upstream operations, which encompass the exploration and production of crude oil and natural gas. It is also a major producer of a variety of advanced plastics, including polypropylene and polyethylene.
Its third-quarter 2024 earnings of $8.6 billion were driven in part by the successful integration of Pioneer Natural Resources, a major independent oil and gas exploration and production company in the US which is primarily focused on the Permian Basin in Texas. Exxon Mobil Corp.’s (NYSE:XOM) Upstream segment’s year-to-date 2024 earnings doubled compared to 2019 to reach $10.00 per oil-equivalent barrel. This is attributed to the acquisition of Pioneer, which added 770,000 barrels of oil equivalent per day of high-quality production to the company’s portfolio.
Exxon Mobil Corp. (NYSE:XOM) leverages its technology and Pioneer’s Permian Basin acreage for efficiency gains. Industry-leading laterals (including a recent 18,250-foot well and planned 20,000-foot well) reduce well counts, minimize surface impact, and improve capital efficiency. This drives Upstream success and strong shareholder returns.
5. Merck & Co. Inc. (NYSE:MRK)
Current Forward P/E as of December 16: 10.53
Number of Hedge Fund Holders: 86
Merck & Co. Inc. (NYSE:MRK) is a global pharmaceutical leader dedicated to the discovery, development, and commercialization of innovative medicines, vaccines, and animal health products. It focuses on addressing serious health challenges, including cancer, cardiovascular diseases, and infectious diseases.
The company has achieved a nearly threefold increase in its Phase 3 pipeline over the past 3 years, now exceeding 20 unique assets. It anticipates launching numerous new products in the next 5 years, potentially surpassing the number launched in the past decade. This is fueled by internal research efforts and value-creating business development transactions such as the recent acquisition of Curon, a clinical-stage biopharmaceutical company.
Merck & Co. Inc. (NYSE:MRK) has made clinical progress across different therapeutic areas. A key example of this is KEYTRUDA, a type of immunotherapy for cancer. Its sales grew 21% year-over-year to $7.4 billion in Q3 2024. Ongoing clinical successes and expanding indications for KEYTRUDA solidify its position as a key driver of the company’s growth.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”
4. Citigroup Inc. (NYSE:C)
Current Forward P/E as of December 16: 9.63
Number of Hedge Fund Holders: 88
Citigroup Inc. (NYSE:C) is a financial services company that provides a range of products and services, including retail banking, commercial banking, investment banking, securities brokerage, and wealth management. It has a global client base and is one of the largest banks in the US by assets.
Its Wealth Management division saw a 9% year-over-year revenue increase in Q3 2024, fueled by a 15% surge in non-interest revenue. This division fosters long-term relationships with high-net-worth individuals, providing a stable and recurring revenue stream. The growth is also attributed to a 24% increase in client investment assets, with contributions from the Asia market and the Citigold segment, which caters to high-net-worth individuals.
Citigroup Inc. (NYSE:C) has signed an agreement to exit trust administration and fiduciary services, which encompasses the management and oversight of assets held within a trust, to focus on core Wealth Management activities. Continued focus on client investments, attracting top talent, and streamlining operations are expected to drive further growth and enhance the profitability of this key segment.
Diamond Hill Capital Long-Short Fund stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Other top Q1 contributors included Meta Platforms, Citigroup Inc. (NYSE:C) and Walt Disney. Banking and financial services company Citigroup’s restructuring efforts are ongoing, and it continues remediating regulatory issues and building capital in anticipation of increased requirements. The company expects to see expenses fall meaningfully in the second half of 2024, bolstering the outlook from here.”
3. Bank of America Corp. (NYSE:BAC)
Current Forward P/E as of December 16: 12.44
Number of Hedge Fund Holders: 98
Bank of America Corp. (NYSE:BAC) is a financial services provider that offers a range of solutions to individuals, institutions, and governments. These services include banking, investing, asset management, and risk management. Its subsidiaries include Merrill, BofA Securities, and Bank of America Private Bank.
Its recent success is attributed to its Consumer Banking segment. The bank added 360,000 net new checking accounts during Q3 2024, marking 23 consecutive quarters of such growth. The segment showcased impressive customer engagement, with 48 million active digital users logging in over 3.6 billion times in Q3. This translated into 54% of consumer sales originating through digital channels.
Investment balances for consumer clients in this segment also surged 28% year-over-year to a record $497 billion, driven by strong inflows of $29 billion over the past 12 months. These factors have together emerged as the key drivers of Bank of America Corp.’s (NYSE:BAC) success.
Diamond Hill Capital stated the following regarding Bank of America Corporation (NYSE:BAC) in its Q2 2024 investor letter:
“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.”
2. JPMorgan Chase & Co. (NYSE:JPM)
Current Forward P/E as of December 16: 14.33
Number of Hedge Fund Holders: 105
JPMorgan Chase & Co. (NYSE:JPM) is a global financial services firm that provides a comprehensive suite of banking, investment, and asset management solutions to a diverse client base, including individuals, corporations, and governments. Recently, the bank solidified its position as the largest US retail deposit bank for the fourth consecutive year.
The company’s Asset and Wealth Management (AWM) division generated $1.4 billion in net income with a pre-tax margin of 33% in the third quarter of 2024. This performance was underpinned by a 9% year-over-year revenue increase to $5.4 billion. This growth came as AWM attracted $72 billion in net inflows, with fixed income and equities leading the way. At the same time, higher average market levels positively impacted investment valuations and management fees. A rise in brokerage activity further enhanced AWM’s revenue stream.
The division experienced substantial growth in assets under management, reaching $3.9 trillion, a 23% year-over-year increase. This significant AUM growth was a direct result of both market appreciation and sustained client inflows, solidifying AWM’s position as a key driver of JPMorgan Chase & Co.’s (NYSE:JPM) overall success.
Carillon Eagle Growth & Income Fund stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its first quarter 2024 investor letter:
“JPMorgan Chase & Co. (NYSE:JPM) contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
1. Alibaba Group Holding Ltd. (NYSE:BABA)
Current Forward P/E as of December 16: 9.08
Number of Hedge Fund Holders: 115
Alibaba Group Holding Ltd. (NYSE:BABA) is a technology company with a dominant presence in e-commerce, serving both consumers and businesses. Its diverse portfolio extends beyond e-commerce and includes cloud computing, logistics, digital media, and entertainment.
In the FQ2 2025, the Cloud Intelligence Group’s revenue reached RMB 29.6 billion ($4.2 billion), which was a 7% year-over-year increase. The Cloud Intelligence Group focuses on cloud computing and AI services. The AI-related products here achieved triple-digit year-over-year growth for the fifth consecutive quarter. Overall revenue, excluding Alibaba consolidated subsidiaries, also grew by 7%, driven by a double-digit expansion in public cloud revenue.
The company plans to continue investing heavily in AI infrastructure to capitalize on the growing demand for AI-driven cloud services. This aims to solidify Alibaba Group Holding Ltd.’s (NYSE:BABA) position as a leading provider of AI-powered cloud solutions and drive further growth in the future.
Oakmark International Fund stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2024 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) was the top contributor during the quarter. The China-headquartered consumer discretionary company’s stock price rallied following the announcement of a multipronged stimulus package by the Chinese government. Despite the stock’s strong performance for the quarter, we continue to believe there is upside in the name and that the market is not fully pricing in the turnaround potential for the e-commerce business or other optionality the company possesses.”
While we acknowledge the growth potential of Alibaba Group Holding Ltd. (NYSE:BABA), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
