In this article, we will discuss the 10 Most Undervalued Long Term Stocks to Buy Now.
The stocks showcased initial enthusiasm post Trump’s election, as the S&P 500 saw an increase of 2.5% on the day after the November vote, says U.S. Bank. The broader markets, as measured by the S&P 500, are up less than 4% since November 5, 2024, and have seen significant volatility. The index reached fresh highs near January’s end, and again on February 19. However, it then retraced in both instances due to the increasing uncertainty related to the economic implications of the Trump administration policies. Among other factors, the most critical was Trump’s implemented and proposed tariff hikes that can influence the US and global businesses.
Rates and Inflation Under Trump’s Administration
As per the U.S. Bank, one critical consideration is how Trump’s policies might affect inflation and how soon interest rates, which are elevated, can decline. There can be a temporary inflation uptick, says Rob Haworth, senior investment strategy director with U.S. Bank Asset Management. With higher inflation, the US Fed might become reluctant about adding to the 3 interest rate cuts the markets saw late last year. As per Haworth, markets don’t expect the US Fed to cut rates more than one or two times in 2025 considering the current inflation concerns.
Elsewhere, Nomura believes that economic fundamentals are strong, thanks to healthy private sector balance sheets and easy financial conditions. The firm expects growth to slow in 2025, but it sees the broader economy in a good position to tackle the drag resulting from uncertain trade policy.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What’s Next for Capital Markets?
As per Morgan Stanley, the capital markets activity, for M&As and capital expenditures spending, is well-placed for a resurgence in 2025. The current economic backdrop—reduced interest rates, subdued inflation, and modest but positive GDP growth— hints at a rebound in strategic investments and capital raising throughout debt and equity. In 2025, strategic deals and private equity M&A are anticipated to witness growth. With inflation and interest rates moderating, companies have been gaining an appetite to fund their strategic events with the help of debt and equity capital markets.
Russell Investments believes that the new U.S. administration’s focus on deregulation and tariff-based policies is expected to reduce market concentration. Furthermore, the firm and its active managers remain focused on the sectors in which AI adoption has been accelerating.
With such trends, let us now have a look at the 10 Most Undervalued Long Term Stocks to Buy Now.
A financial planner carefully scrutinizing company’s investment portfolio.
Our Methodology
To list the 10 Most Undervalued Long Term Stocks to Buy Now, we used a screener to shortlist stocks that trade at a forward P/E of less than ~20x and have a 10-year revenue growth of at least 7%. Next, we mentioned the hedge fund sentiment around each stock, as of Q4 2024. Finally, the stocks are arranged in ascending order of their hedge fund sentiment.
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 Most Undervalued Long Term Stocks to Buy Now
10. Chubb Limited (NYSE:CB)
Forward P/E as on February 28: ~13.2x
10-Year Sales Growth: ~11.4%
Number of Hedge Fund Holders: 53
Chubb Limited (NYSE:CB) offers insurance and reinsurance products. JMP Securities reiterated the “Market Outperform” rating on the company’s stock with a price target of $325.00. The firm’s analysts lauded the company’s strong presence in global markets as a critical factor for the potential superior growth prospects. They believe that emerging markets such as Asia and Latin America are the regions that are expected to surpass the growth of more developed areas like the US and Europe. The analysts highlighted the company’s partnership with Nubank in Brazil to roll out a fully digital life insurance product, which was mentioned as a move that can contribute to Chubb Limited (NYSE:CB)’s expansion in the digital insurance space.
The analysts’ reiterated price target stems from the confidence in the company’s strategic direction and its potential to capitalize on the opportunities available in the global insurance industry. Chubb Limited (NYSE:CB) remains optimistic about its ability to continue growing operating earnings and EPS at a double-digit rate, courtesy of its 3 major sources: P&C underwriting, investment income, and life income. The London Company, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
Initiated: Chubb Limited (NYSE:CB) – CB engages in the provision of commercial and personal property and casualty insurance, personal accident and health (A&H), reinsurance, and life insurance. While the company is headquartered outside the U.S., roughly 2/3 of its profits are generated in the U.S. with Asian markets representing another 20% of earnings. CB has a portfolio of top-performing, multibillion-dollar businesses that have substantial scale and yet potential for growth. CB has a culture of superior underwriting discipline, and management has a strong track record of expense control. CB also has a well-balanced mix of business by customer and product, with extensive distribution channels. We are attracted to CB’s globally diversified business model, superior underwriting and expense management, consistent and best-in-class profitability, upside potential from growth in Asia, and the potential to benefit from higher interest rates in its investment portfolio.
9. AstraZeneca PLC (NASDAQ:AZN)
Forward P/E as on February 28: ~17.2x
10-Year Sales Growth: ~7.4%
Number of Hedge Fund Holders: 55
AstraZeneca PLC (NASDAQ:AZN) is a biopharmaceutical company, which is focused on the discovery, development, manufacture, and commercialization of prescription medicines. Leerink Partners analyst Andrew Berens maintained a bullish stance on the company’s stock, providing a “Buy” rating on February 10. The analyst’s rating is backed by a combination of factors affecting the company’s strategic position and market potential. As per the analyst, the acquisition of FibroGen China by AstraZeneca PLC (NASDAQ:AZN) is critical, enabling it to secure full ownership of roxadustat in China.
The move consolidates AstraZeneca PLC (NASDAQ:AZN)’s market dominance in China and aligns with its global expansion strategy. Apart from this, the deal is projected to offer it with a significant revenue stream. Therefore, a range of strategic initiatives continue to support AstraZeneca PLC (NASDAQ:AZN)’s focus on strengthening market leadership and maximizing shareholder value, added the analyst. Elsewhere, Bank of America Securities analyst Sachin Jain maintained a “Buy” rating on the company’s stock. The positive high-level results from a planned interim analysis of the SERENA-6 Phase III trial showed that AstraZeneca PLC (NASDAQ:AZN)’s camizestrant in combination with a cyclin-dependent kinase (CDK) 4/6 inhibitor (palbociclib, ribociclib or abemaciclib) showcased a highly statistically significant and clinically meaningful improvement in the primary endpoint of progression-free survival (PFS).
Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Poor performance from AstraZeneca PLC (NASDAQ:AZN) also factored into the underperformance in pharmaceuticals. The company is currently dealing with several ongoing investigations into employees in its China business. We believe shares are undervalued relative to what remains an attractive long-term growth outlook driven by indication expansion for current products (Tagrisso and Enhertu) as well as a range of pipeline assets.”
8. The Cigna Group (NYSE:CI)
Forward P/E as on February 28: ~10.4x
10-Year Sales Growth: ~21.6%
Number of Hedge Fund Holders: 72
The Cigna Group (NYSE:CI) offers insurance and related products and services. Erin Wright, an analyst from Morgan Stanley, gave a “Buy” rating on the company’s stock with a price target of $379.00. The rating is supported by a combination of factors highlighting the potential growth and resilience in its operations. The expectation of a margin improvement in Cigna Healthcare, mainly expected in 2026 with some advances in 2025, aids the analyst’s rating. Furthermore, the analyst also highlighted The Cigna Group (NYSE:CI)’s projected EPS growth and the strategic divestment of Medicare businesses, which can contribute positively to the company’s financial health. Collectively, such factors exhibit a strong potential for long-term value creation, justifying the optimistic outlook.
The Cigna Group (NYSE:CI)’s robust presence in the pharmacy benefit management (PBM) and specialty drug segments places it well for future growth. With healthcare costs continuing to rise, PBMs continue to play a critical role in managing drug spending for employers and health plans. The company’s Evernorth segment, which includes its PBM services, has been reflecting strength and can act as a critical driver of revenue and profit growth. The specialty drug market continues to witness rapid expansion as a result of advancements in biotechnology and treatment of complex conditions. Therefore, The Cigna Group (NYSE:CI)’s expertise in this area can enable it to capitalize on the trend toward personalized and increased-cost therapies.
