10 Most Undervalued Mid Cap Stocks to Buy According to Hedge Funds

7. Mohawk Industries Inc. (NYSE:MHK)

Forward P/E Ratio as of March 5: 11.83

Number of Hedge Fund Holders: 49

Mohawk Industries Inc. (NYSE:MHK) is a global flooring giant that offers a vast array of flooring solutions, from ceramic tile and natural stone to carpets and wood flooring. It caters to both residential and commercial needs across diverse markets worldwide.

The company’s Global Ceramic segment generated over $1 billion in sales during the Q4 2024, which was driven by a favorable product mix and additional shipping days, despite pricing pressures and foreign exchange headwinds. This segment encompasses the manufacturing and distribution of ceramic tiles and related products across international markets. It makes up a significant portion of the company’s income and growth through its international reach and product innovation.

The Global Ceramic segment is now focusing on strategies like elevating product offerings through advanced technologies, expanding distribution channels in the US and Europe, and integrating recent acquisitions in Mexico and Brazil. Mohawk Industries Inc. (NYSE:MHK) is also implementing cost containment initiatives, which include product reengineering and process improvements. It’s also restructuring its Mexican ceramic operations, which is expected to yield ~$20 million in annual savings.

Ariel Fund is positive on Mohawk Industries Inc. (NYSE:MHK) due to its strong earnings, improved guidance, share repurchases, and a belief that the company is well-positioned for long-term growth. It stated the following regarding the company in its Q3 2024 investor letter:

“Several stocks in the portfolio had strong returns in the quarter. Manufacturer and distributor of floorcovering products, Mohawk Industries, Inc. (NYSE:MHK) advanced following solid earnings results and a subsequent increase in near-term guidance. Although sales volumes remain low and pricing headwinds continue, improved productivity and lower material costs drove margin expansion. Management also repurchased shares signaling increased confidence that the trough in earnings may be behind the company. In our view, MHK’s healthy balance sheet and progress managing through economic cycles position the company to benefit from long-term growth in residential remodeling, new home construction and commercial projects.”