Deep value investing is a more extreme form of value investing, focusing on stocks that are not just undervalued but significantly mispriced relative to their intrinsic worth. As a contrarian strategy, it seeks companies trading at substantial discounts, often due to temporary setbacks or market inefficiencies. Considered a subset of value investing, deep value investing was pioneered by Benjamin Graham and later refined by Warren Buffett. It targets stocks with extremely low valuations, such as low price-to-earnings (P/E) multiples, low price-to-book (P/B) ratios, and sometimes distressed financial conditions. Given the current macroeconomic landscape—characterized by rising interest rates, inflationary pressures, and increased market volatility—deep value investing has gained renewed relevance as investors search for overlooked opportunities in an increasingly expensive market.
Warren Buffett’s famous mantra, “Be fearful when others are greedy, and greedy when others are fearful,” perfectly encapsulates the essence of deep value investing. This strategy thrives on market inefficiencies, focusing on companies that may be experiencing temporary setbacks due to economic cycles, regulatory challenges, or investor sentiment but have strong potential for long-term recovery. Investors seek businesses with solid fundamentals, strategic shifts, or macroeconomic tailwinds that could serve as catalysts for revaluation.
The Case for Deep Value Investing Today
In a mid-2024 article, GMO LLC’s Asset Allocation Team reaffirmed their conviction in deep value investing, highlighting it as their top long-only investment idea. Rather than relying on traditional labels of “growth” or “value,” they define deep value stocks as those trading significantly below their fundamental worth. While low valuation multiples such as P/E ratios can be indicative of undervaluation, GMO emphasizes that not all low P/E stocks are true bargains—some may be structurally weak—while certain high P/E stocks may still justify their premiums.
GMO’s deep value strategy focuses on the cheapest 20% of stocks relative to intrinsic value, carefully filtering out cyclical traps and low-quality businesses. Their research suggests that in an environment where investor optimism has propelled many stocks to record highs, numerous overlooked deep value opportunities remain. Despite requiring patience, these undervalued stocks present strong potential for absolute and relative returns.
Portfolio managers at the Heartland Mid Cap Value Fund recently cautioned against investing in speculative stocks with inflated valuations, arguing that current market trends of extreme valuation growth and diminished risk aversion are unsustainable. Despite short-term underperformance, they remained confident that disciplined value investing would deliver superior long-term returns.
In today’s relatively expensive market, deep value stocks stand out as attractive opportunities amid widespread over-valuation. Many fundamentally strong businesses have been unfairly punished due to temporary headwinds, making them attractive investments for long-term value seekers. However, deep value investing is not without its challenges—investors must exercise patience and conduct thorough due diligence to distinguish between genuine value opportunities and structurally declining companies.
For those willing to navigate short-term volatility in pursuit of long-term gains, deep value investing offers a promising path. With that in mind, let’s explore our selection of the 10 deep value stocks to buy now.
A financial analyst looking through a microscope at stocks to determine their market value.
Our Methodology
To identify the 10 deep value stocks to buy now, we started by screening U.S.-listed companies with a market capitalization over $2 billion. We then applied three key deep-value criteria: a forward price-to-earnings (P/E) ratio of 10 or lower; return on equity of at least 10%; and a dividend yield of at least 1%. Of the shortlisted stocks, we then ranked the top 10 stocks based on their forward P/E ratio, placing those with the lowest P/E at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on March 10.
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 Deep Value Stocks to Buy Now
10. Harley-Davidson Inc. (NYSE:HOG)
Fwd. P/E: 8.7
Dividend Yield: 2.8%
Number of Hedge Fund Holders: 23
Harley-Davidson Inc. (NYSE:HOG) is an iconic American motorcycle brand, renowned for its heavyweight bikes built for cruising and long-distance touring. With a rich legacy and a fiercely loyal customer base, the company offers an extensive lineup of motorcycles, parts, accessories, and branded apparel.
However, Harley-Davidson hit a rough patch in Q4 2024, as it reported weaker sales amid ongoing cyclical challenges in the discretionary goods sector. In its February 5 earnings release, the company disclosed that global motorcycle shipments fell 53% year-over-year to 14,010 units, largely due to dealer inventory reductions and tough market conditions. For the full year, total shipments declined 17%. Revenue for the quarter plunged 35% to $688 million, and the company posted a net loss of $0.93 per share— a stark reversal from the previous year’s profit of $0.18 per share. The one bright spot was Harley’s financial services division, which managed a 4% revenue increase thanks to higher interest income.
Despite near-term headwinds, Harley-Davidson is executing a strategic transformation under its ‘The Hardwire’ plan, focusing on product innovation, automation, cost efficiency, and productivity enhancements. The company remains committed to driving profitable growth while maintaining dividends and opportunistically repurchasing shares. Designed to fuel long-term success, The Hardwire plan aims to reinforce Harley’s position as the most sought-after motorcycle brand in the world—keeping the spirit of the open road alive for generations to come.
9. Ford Motor Company (NYSE:F)
Fwd. P/E: 7.2
Dividend Yield: 7.6%
Number of Hedge Fund Holders: 45
Ford Motor Company (NYSE:F) is one of the world’s largest automakers, offering a diverse lineup of internal combustion, hybrid, and electric vehicles under its flagship Ford and luxury Lincoln brands.
The company is in the midst of a major transformation, doubling down on electric vehicles (EVs), autonomous technology, and software-driven services. Under its ‘Ford+’ strategy, Ford is aggressively scaling up EV production, with popular models like the F-150 Lightning and Mustang Mach-E seeing strong demand.
As part of its expansion efforts, Vice-Chair John Lawler recently reaffirmed Ford’s commitment to strengthening its European operations. According to a March 12 report, the automaker plans to invest up to €4.4 billion in its struggling German subsidiary, Ford-Werke. Additionally, Ford has taken cost-cutting measures, including job reductions and vehicle lineup adjustments, to improve efficiency. Looking ahead, the company plans to launch a new EV platform in 2027, designed to lower production costs and boost profitability.
Financially, Ford remains in a strong position. The company offers an impressive dividend yield of over 7.5%, generated $6.7 billion in adjusted free cash flow in FY 2024, and holds $28 billion in cash, with total liquidity reaching nearly $47 billion. With a growing EV portfolio and a focus on operational efficiency, Ford is positioning itself for long-term success in the evolving automotive landscape.
8. Delta Air Lines Inc. (NYSE:DAL)
Fwd. P/E: 7.1
Dividend Yield: 1.1%
Number of Hedge Fund Holders: 84
Delta Air Lines Inc. (NYSE:DAL) is a global airline that offers passenger and cargo services across six continents. The company maintains an extensive domestic and international route network and has established strategic alliances and joint ventures with other carriers.
On March 10, Delta Air Lines Inc. (NYSE:DAL) revised its Q1 2025 revenue growth forecast, lowering it to 3%-4% year-over-year from its previous guidance of 7%-9% issued in January. The company also reduced its profit margin and EPS projections to 4%-5% and $0.30-$0.50, respectively, down from the earlier estimates of 6%-8% and $0.70-$1.00. This adjustment was primarily attributed to weaker consumer and corporate travel demand in the U.S. amid macroeconomic uncertainties. Following the announcement, the stock indicated a decline of as much as 11% in the after-market hours, and is already down 17% year-to-date.
Although the airline industry remains highly volatile with significant near-term risks, Delta Air Lines Inc. (NYSE:DAL) continues to drive revenue growth through investments in fleet modernization, operational efficiency, and enhancements to its loyalty program. Furthermore, its emphasis on high-margin international routes and strategic collaborations with global carriers provide a competitive edge. Despite the downward revision, Barclays analyst Brandon Oglenski reaffirmed his Buy rating on the stock, maintaining a price target of $80.
7. American Eagle Outfitters Inc. (NYSE:AEO)
Fwd. P/E: 6.9
Dividend Yield: 3.9%
Number of Hedge Fund Holders: 33
American Eagle Outfitters Inc. (NYSE:AEO) is a specialty retailer offering casual apparel, accessories, and personal care products, primarily catering to young consumers through its American Eagle and Aerie brands. The company operates its own stores, ships to approximately 80 countries via its websites, and licenses its merchandise in international markets.
On January 13, American Eagle Outfitters Inc. (NYSE:AEO) announced that comparable sales for the fourth quarter-to-date (as of January 4) had grown in the low single digits, surpassing its earlier guidance of a 1% increase. Both the American Eagle and Aerie brands saw continued sales momentum. As a result, the company raised its fourth-quarter outlook, now projecting an operating profit of approximately $135 million, an improvement from its prior estimate of $125 million to $130 million. This revision reflects a 2% increase in comparable sales, building on the 8% growth achieved in the previous year. However, despite the positive outlook adjustment, the company had previously indicated that total revenue is expected to decline by approximately 5% due to an unfavorable retail calendar impact. In total, the company has returned $231 million to shareholders year-to-date through a combination of dividends and share repurchases. It has a dividend yield of nearly 4%.
American Eagle Outfitters Inc. (NYSE:AEO) continues to strengthen its market position through its dual-brand strategy, capitalizing on the success of both American Eagle and Aerie. Its focus on digital expansion and omnichannel retailing has enhanced customer engagement and driven sales growth. Additionally, supply chain optimization and inventory management initiatives are contributing to improved margins and overall profitability.
6. Matador Resources Company (NYSE:MTDR)
Fwd. P/E: 6.6
Dividend Yield: 2.8%
Number of Hedge Fund Holders: 38
Matador Resources Company (NYSE:MTDR) is an energy firm focused on oil and natural gas exploration, development, and production in the U.S. with an emphasis on oil and natural gas shale and other unconventional plays. Its primary operations are in the Delaware Basin, with additional assets in the Eagle Ford and Haynesville Shale plays. The company also provides midstream services, including natural gas processing, oil transportation, and water management.
For FY 2024, the company reported 75% YoY increase in adjusted free cash flow which came in at $807 with adjusted EBITDA of over $2.3 billion (+24% YoY). Its production also increased over 30% with around 200,000 barrels of oil and natural gas equivalent (BOE) produced per day at end of 2024. The company projects adjusted free cash flow to reach $1 billion in 2025. The company benefits from its integrated midstream assets, which provide cost advantages, and its efficient production and low-cost structure provide resilience in uncertain oil market conditions.
The company’s disciplined capital allocation and operational efficiencies have enabled it to generate strong free cash flow, supporting shareholder returns through dividends and share buybacks. The company has increased its dividend six times in the last four years with the current dividend yield standing at around 3%.
A Raymond James analyst maintained an Outperform rating on the stock but cut the price target from $77 to $67 due to weaker oil prices. The analyst also noted that the company’s 2025 production, oil output, and spending plans matched earlier expectations.
5. Macy’s Inc. (NYSE:M)
Fwd. P/E: 6.4
Dividend Yield: 5.2%
Number of Hedge Fund Holders: 42
Macy’s Inc. (NYSE:M) is a leading U.S. department store operator with a nationwide presence through its Macy’s, Bloomingdale’s, and Bluemercury brands. The company offers a wide range of apparel, accessories, beauty products, and home goods.
On March 9, a Morgan Stanley analyst reduced the price target on Macy’s Inc. (NYSE:M) from $15 to $14, citing concerns over the company’s outlook despite better-than-expected Q4 earnings. The analyst noted that guidance fell short of expectations and cautioned that even these projections may not fully account for potential risks. Given Macy’s ongoing fundamental weaknesses, a challenging retail environment, and volatile quarterly performance, the analyst believes that a clearer path to a turnaround may not emerge until late 2025. He reiterated an Equal Weight rating on the shares.
While the street is currently quite cautious due to its various operational issues, Macy’s Inc. (NYSE:M) is hoping for a turnaround of its business with a focus on transforming its business. It has made substantial progress in the last 3-4 years through its Polaris strategy (announced in 2020), which includes digital expansion, store optimization, and increased private label offerings. It also benefits from its loyalty program and omnichannel capabilities, positioning itself for incremental growth in a competitive and challenging retail landscape.
4. Lincoln National Corp. (NYSE:LNC)
Fwd. P/E: 4.6; P/B: 0.8
Dividend Yield: 5.1%
Number of Hedge Fund Holders: 41
Lincoln National Corp. (NYSE:LNC) is a holding company that operates a diverse portfolio of insurance and retirement businesses through its subsidiaries. The company offers a broad range of products and solutions focused on wealth accumulation, wealth protection, group protection, and retirement income.
Lincoln National Corp. (NYSE:LNC) demonstrated strong performance in its Q4 2024 earnings, reported on February 6. Adjusted operating earnings for the quarter reached $1.91 per share, reflecting a 30% year-over-year increase and surpassing the consensus estimate of approximately $1.83. The company attributed this growth to the successful execution of its market segment and product mix strategies. Additionally, its ongoing strategic initiatives aimed at enhancing profitability continue to drive robust earnings growth. Lincoln National remains focused on optimizing its annuities and wealth protection businesses to create long-term value for shareholders.
In a February 28 report, a Morgan Stanley analyst pointed out that life insurers are thriving in a stronger operating environment, a factor that has largely gone unnoticed. Upgrading the industry outlook to ‘Attractive’, the analyst emphasized that life insurers today boast stronger capital reserves, higher-quality products, and greater earnings power than they did before the 2008 financial crisis. However, despite this bullish industry stance, the analyst remained neutral on Lincoln National (NYSE:LNC), maintaining an Equal Weight rating on the stock. That said, he raised the price target from $39 to $42, reflecting a more optimistic view on the company’s prospects.
3. SM Energy Company (NYSE:SM)
Fwd. P/E: 4.1
Dividend Yield: 2.9%
Number of Hedge Fund Holders: 38
SM Energy Company (NYSE:SM) is an oil and gas exploration and production company with operations in the Permian Basin and the South Texas Eagle Ford region.
The company’s long-term strategy is centered on generating free cash flow and returning capital to shareholders through debt reduction and share repurchases. Additionally, it focuses on high-margin production growth and cost-efficient resource development. In its Q4 2024 earnings report, SM Energy Company (NYSE:SM) posted strong production results, with Q4 production volumes reaching 208 thousand barrels of oil equivalent per day (MBoe/d), marking a 22% sequential increase. For the full year 2024, production rose 12% compared to 2023, and the company generated $485 million in adjusted free cash flow. Looking ahead, management has provided guidance for net production volumes to range between 200-215 MBoe/d.
Although Q4 results were solid, the outlook was not as strong, according to Raymond James analyst John Freeman. In his March 10 report, he projected weaker oil prices in the near term, leading him to lower his price target on SM Energy Company (NYSE:SM) from $59 to $40. However, he maintained an Outperform rating on the stock. Conversely, in late February, Roth MKM analyst Leo Mariani reiterated a Buy rating on the shares, setting a price target of $50, representing a potential upside of 72%.
2. Organon & Co. (NYSE:OGN)
Fwd. P/E: 4.0
Dividend Yield: 7.3%
Number of Hedge Fund Holders: 28
Organon & Co. (NYSE:OGN) is a global healthcare company with a strong focus on women’s health, biosimilars, and established brands. With a diverse portfolio of over 70 medicines and products, it serves a broad market, including drug wholesalers, retailers, hospitals, government agencies, and managed healthcare providers.
Originally spun off from Merck & Co. Inc. (NYSE:MRK) in 2021, Organon & Co. (NYSE:OGN) has been expanding its global presence while leveraging its growing biosimilars business to drive revenue diversification. However, the company is currently navigating some headwinds, including the loss of exclusivity (LOE) for Atozet in Europe, pricing pressures, and foreign exchange fluctuations. To counter these challenges, the company is aggressively implementing cost-saving initiatives, targeting $200 million in operating savings for 2025. At the same time, it is looking to offset Atozet’s LOE impact with strong growth from key products like Vtama, Emgality for fertility, and Nexplanon.
Despite these hurdles, Organon & Co. (NYSE:OGN) continues to generate robust cash flows, with 2024 free cash flow (before one-time costs) coming in at $967 million. The stock is currently trading near its 52-week lows, making it an intriguing opportunity for value investors. Adding to its appeal, Organon offers a hefty dividend yield of over 7.0%, making it an income-focused play in the healthcare sector.
1. Civitas Resources Inc. (NYSE:CIVI)
Fwd. P/E: 3.9
Dividend Yield: 12.5%
Number of Hedge Fund Holders: 47
Civitas Resources Inc. (NYSE:CIVI) is an independent oil and gas exploration and production company with operations concentrated in Colorado’s DJ Basin and the Permian Basin across Texas and New Mexico.
2024 has been brutal for Civitas Resources Inc. (NYSE:CIVI) shareholders, with the stock losing over 50% of its value since the start of the year. As of March 10, shares trade near a 52-week low of $31.70, levels not seen since mid-2021. Investor sentiment has been weighed down by underwhelming financial performance, a trend that persisted in Q4 2024. While revenue met expectations, higher-than-anticipated operating costs—stemming from winterization efforts, maintenance, and workover activities—dented earnings, leading to a lower-than-expected EPS. In response, the company trimmed its 2025 capital expenditure (capex) by 5% compared to 2024.
Adding to the pressure, KeyBanc downgraded the stock from Overweight to Sector Weight, citing weak 2025 guidance and heightened uncertainty. The lack of management commentary on a possible Denver-Julesburg Basin divestiture has raised investor concerns, while the sudden departure of the chief operating officer after just 22 months has fueled speculation beyond simple cost-cutting. Moreover, Civitas’ 2025 forecast projects a 4% decline in oil production, which could weigh on the stock further.
Despite these headwinds, Civitas Resources Inc. (NYSE:CIVI) still has significant cash flow potential. The company is targeting an adjusted free cash flow (AFCF) of $1.1 billion in 2025, with an AFCF yield of 22%, assuming oil prices stay around $70 per barrel. Backed by a high-quality asset base and low-breakeven inventory, Civitas has historically been a strong cash generator. In 2023 and 2024, the company delivered $796 million and $1.3 billion in AFCF, respectively, returning 92% of those cash flows to shareholders through dividends and stock buybacks.
While we acknowledge the potential of CIVI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CIVI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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