On a down day for major market averages, Paul Hickey, co-founder of Bespoke Investment Group, and Phil Camporeale, portfolio manager at JP Morgan Asset Management, discussed the ongoing volatility. They both appeared on CNBC’s ‘Closing Bell Overtime’ on March 5 to talk about how tariff policy raises uncertainty around growth and earnings outlook.
Camporeale highlighted the difficulty of navigating the rapid pace of headlines surrounding trade discussions out of Washington. Entering the year with a 10% equity overweight, JP Morgan has since reduced this to 5%, reallocating some exposure to US, developed non-US, and emerging markets. Camporeale noted that while policy uncertainty raises questions about growth and earnings outlooks, the US economy remains strong, with a 4% unemployment rate, 3% GDP growth, and solid corporate balance sheets. He said that despite short-term market turbulence, recession risks remain low, and their portfolio maintains an equity overweight alongside high-yield exposure. He also pointed out that it is still early in President Trump’s second term and too soon to draw definitive conclusions about its impact. He believes that lower interest rates could pave the way for positive fiscal and deregulation policies that have yet to fully materialize. Despite current market fears, he remains optimistic about the economy’s strength and low recession probability.
Hickey weighed in on the uncertainty dominating markets, emphasizing that no one can predict the full impact of tariffs. He referenced Target CEO Brian Cornell’s comments earlier in the day about the lack of certainty regarding tariffs, taxes, rates, and the economy. Hickey remarked that this stew of uncertainty is keeping investors cautious. He noted that intraday rallies, such as the one seen earlier in the day after bouncing off the 200-day moving average, are often short-lived due to unpredictable policy developments. For instance, Trump’s speeches have recently been followed by market declines, adding to investor hesitancy. He also highlighted historical context for pullbacks like the current one: since World War II, there have been 64 instances of a 5% drop from all-time highs in the S&P 500. While not uncommon, he advised caution in the short term due to unpredictable market reactions.
Both experts agreed that uncertainty around tariffs and other policies will continue influencing market behavior in the near term. However, they emphasized different aspects, Camporeale focused on economic strength and strategic positioning within portfolios, while Hickey stressed caution amid ongoing unpredictability in policy-driven market movements.
Given this context, we’re here with a list of the 10 most undervalued US stocks to buy according to hedge funds.
Methodology
We used the Finviz stock screener to compile a list of the top US stocks that had a forward P/E ratio under 15. We then selected the 10 stocks 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 Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
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 US Stocks to Buy According to Hedge Funds
10. Western Digital Corp. (NASDAQ:WDC)
Forward P/E Ratio as of March 6: 5.97
Number of Hedge Fund Holders: 85
Western Digital Corp. (NASDAQ:WDC) is a data storage company that provides a portfolio of devices and solutions that span client, enterprise, and consumer markets. Under its Western Digital, SanDisk, and WD brands, it offers traditional hard disk drives, cutting-edge solid state drives, advanced flash-based embedded storage and data platforms, among other products.
The company’s HDD (hard disk drive) business is growing due to the data storage demands of AI and autonomous driving. FQ2 2025 sales in this segment were the highest they’ve been in the past 12 quarters. Data center revenue reached an all-time high and made up 55% of the company’s total revenue in FQ2. The average price per HDD unit increased 5% sequentially to $172. The HDD gross margin was 38.6%, up 13.8% year-over-year. The company anticipates that gross margins will continue to improve as they increase adoption of its UltraSMR product line. This product line is the company’s advanced hard drive technology that increases storage capacity by overlapping data tracks on the disk platters.
On February 12, Wells Fargo analyst Aaron Rakers maintained a Buy rating and $85 price target for Western Digital Corp. (NASDAQ:WDC). This was due to the company’s projected revenue growth from data storage demands fueled by AI and autonomous driving, with the total addressable market expanding from $65 billion in 2024 to $100 billion by 2030.
9. ConocoPhillips (NYSE:COP)
Forward P/E Ratio as of March 6: 10.01
Number of Hedge Fund Holders: 86
ConocoPhillips (NYSE:COP) is an exploration and production company that discovers, extracts, and distributes a range of energy resources. These include crude oil, natural gas, and LNG, with operations that are positioned across six distinct segments that span North America, Europe, Asia, and beyond.
Its Lower 48 operations are a major revenue driver and achieved 5% production growth in 2024. The Lower 48 operations refer to oil and gas production activities within the 48 contiguous US states, excluding Alaska and Hawaii. This contributed to the company’s overall 4% growth. In Q4 2024, Lower 48 production reached 1,308,000 barrels of oil equivalent per day.
For 2025, ConocoPhillips (NYSE:COP) plans to reduce Lower 48 capital spending by $1.4 billion, which is a 15% reduction. Despite this, it projects low single-digit production growth, using $1 billion in run-rate synergies from the Marathon acquisition by the end of 2025, with over half already factored into capital guidance. This acquisition added substantial high-quality and low-cost oil and gas assets to the company’s portfolio. Total 2025 capital expenditure is projected at $12.9 billion.
8. United Airlines Holdings Inc. (NASDAQ:UAL)
Forward P/E Ratio as of March 6: 7.1
Number of Hedge Fund Holders: 86
United Airlines Holdings Inc. (NASDAQ:UAL) delivers comprehensive air transportation services across a vast global network. It connects passengers and cargo throughout North America, Asia, Europe, and beyond, while also offering essential support services like ground handling and maintenance.
In Q4 2024, the company’s international flights were more profitable than its US flights. Flights to Asia were making 4.1% more money per seat than the year before (Pacific PRASM/Passenger Revenue per Available Seat Mile), which is a shift from the 15.7% decline in Q3. It also added 31% more seats to Asia in 2024, restoring pre-pandemic levels. Flights across the Atlantic Ocean also earned 7.1% more money per seat, without the addition of more seats. United Airlines Holdings Inc. (NASDAQ:UAL) is the largest US carrier on Atlantic routes and anticipates a record-breaking Q1 2025 in this sector.
In 2025, the company will fly smaller 737 planes from Japan to other Asian cities. It will use its base in Guam to make it easier for people to travel between the US and Asia. It will make current international flights more efficient by trying to fill more seats on each flight. The company expects strong international performance to continue due to limited wide-body jet deliveries.
Patient Capital Management highlighted the company’s strong Q4 2024 performance which was driven by robust travel demand, a new buyback program, improved customer service, and its leading profitability in the industry. It stated the following in its Q4 2024 investor letter:
“United Airlines Holdings, Inc. (NASDAQ:UAL) had a strong fourth quarter, gaining 70.2% in the period. The company benefitted from continued strong demand that surprised the market as well as the initiation of a buyback program, the first since COVID. There continues to be strong travel demand from both retail and business travelers. According to the International Air Transport Association (IATA), global air passenger travel is still below the pre-COVID implied trend path despite reaching a new all-time high this year. United’s focus on the customer over the last few years has led to strong improvement in net promoter scores (NPS) which should continue to flow through the model via better TRASM (total revenue per available seat mile) and higher cash flows and earnings. As of today, United alone accounts for ~30% of the overall industry’s profits. We expect this market share to grow and be defensible as we transition to an environment where customer service becomes the differentiating factor, and scale provides unparalleled ability to reinvest in the customer experience.”
7. Capital One Financial Corp. (NYSE:COF)
Forward P/E Ratio as of March 6: 11.68
Number of Hedge Fund Holders: 89
Capital One Financial Corp. (NYSE:COF) is a financial services holding company that provides a spectrum of banking and credit products to consumers, small businesses, and commercial clients across the US, Canada, and the UK. It delivers through a multi-channel approach that includes digital platforms, branches, and cafes.
Its Domestic Card segment is a major revenue contributor. In Q4 2024, customers spent 7% more using their cards year-over-year. The total amount of money loaned out on these cards also increased by 5%. This growth in spending and loans led to a 9% year-over-year increase in the revenue earned from this segment. The profit margin on these credit cards went up by 0.55%, reaching 18.6%. The percentage of loans that were written off as uncollectible (the charge-off rate) was 6.06%. This figure includes a 0.40% increase due to the end of a previous agreement with Walmart. Without that agreement, the charge-off rate would have been 5.66%, which is still a 0.31% increase.
Domestic Card expenses rose by 13% compared to Q4 2023. This was because the company spent more on everyday operations and advertising. Capital One Financial Corp. (NYSE:COF) spent a total of $1.4 billion on marketing, which is 10% more than before, and most of that extra money went towards promoting the credit cards. The company is spending more on advertising and improving customer perks to keep growing its business.
Ariel Global Fund sees the company’s strong performance, which is driven by the potential Discover Financial Services acquisition. It is expected to yield long-term earnings growth through network leverage and enhanced technology focus, alongside favorable industry trends. It stated the following regarding Capital One Financial Corp. (NYSE:COF) in its Q4 2024 investor letter:
“Global financial services company, Capital One Financial Corporation (NYSE:COF) was another top performer during the period. Shares rallied following the U.S. election as investors believe the potential Discover Financial Services (DFS) acquisition is more likely to close. The new administration is expected to be more accommodative of bank mergers and acquisitions. In our view, the deal would produce significant long-term earnings accretion. COF will be able to leverage DFS’ proprietary payments network, enabling direct interaction with merchants and consumers. This closed loop dynamic should lead to higher volumes of credit card conversions boosting its shares. At current levels, we view the long-term outlook to be attractive, given favorable business trends, stabilizing delinquency rates within the credit card industry, upside from the DFS acquisition and COF’s enhanced focus on technology.”
6. Merck & Co Inc. (NYSE:MRK)
Forward P/E Ratio as of March 6: 10.34
Number of Hedge Fund Holders: 91
Merck & Co Inc. (NYSE:MRK) is a global healthcare leader that operates through its Pharmaceutical and Animal Health segments and delivers innovative therapies and solutions. These include oncology treatments, vaccines, and veterinary products, which are driven by established brands and strategic collaborations.
The company’s oncology segment, which is led by KEYTRUDA, is a primary revenue source. In Q4 2024, KEYTRUDA sales surged 21% to $7.8 billion, driven by global demand in both metastatic and earlier-stage cancers. US growth spanned various tumor types, with increased adoption in combinations for urothelial and endometrial cancers, and as a standalone for lung and breast cancers. International growth mirrored this trend, particularly in early-stage breast cancer. Regulatory approvals for KEYTRUDA-based regimens were secured in China, Japan, and the US.
At upcoming medical meetings, the company will present detailed findings from oncology studies, which include subcutaneous pembrolizumab and KEYTRUDA in head and neck cancer. It’s also progressing sac-TMT through multiple Phase 3 trials. Sac-TMT is an investigational antibody-drug conjugate (ADC) being developed by Merck & Co Inc. (NYSE:MRK) in collaboration with Kelun-Biotech.
GreensKeeper Asset Management stated the following regarding Merck & Co Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
5. Pfizer Inc. (NYSE:PFE)
Forward P/E Ratio as of March 6: 8.76
Number of Hedge Fund Holders: 92
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical leader that discovers, develops, and delivers a portfolio of innovative medicines and vaccines across a range of therapeutic areas. These include cardiovascular, infectious diseases, and oncology. It serves patients worldwide through its extensive distribution network and strategic collaborations.
The company’s oncology segment is supported by the Seagen acquisition. This acquisition brought Pfizer Inc. (NYSE:PFE) a portfolio of antibody-drug conjugates (ADCs) and expanded its oncology pipeline and capabilities. Padcev plus pembrolizumab is the leading first-line treatment for advanced urothelial cancer in the US, with potential to triple its patient reach. As of Q4 2024, Braftovi/Mektovi saw a 27% year-over-year global growth, and recent data showed survival improvements in colorectal cancer. Lorbrena became a standard treatment for lung cancer and grew 37% globally.
The company is actively expanding its oncology pipeline. Phase 3 studies are ongoing for sigvotatug vedotin in lung cancer, and new studies are planned for first-line lung cancer and head and neck cancer with Candida. A Phase 3 readout for multiple myeloma is expected, which will potentially triple its patient base. In 2025, Pfizer Inc. (NYSE:PFE) will focus on R&D productivity, with several potential regulatory approvals and Phase 3 readouts.
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.”
4. Micron Technology Inc. (NASDAQ:MU)
Forward P/E Ratio as of March 6: 12.85
Number of Hedge Fund Holders: 94
Micron Technology Inc. (NASDAQ:MU) is a memory and storage solutions company that designs, develops, and manufactures a portfolio of DRAM, NAND, and NOR memory and storage products under the Micron and Crucial brands. It serves markets like data centers, mobile devices, and automotive industries through a robust global sales and distribution network.
The company’s High Bandwidth Memory (HBM) segment drives its growth. It’s ramping up production to achieve market share in the low-20s by H2 2025. This is based on an expected HBM Total Addressable Market exceeding $30 billion in 2025. The company is experiencing a robust HBM ramp, with 8-high HBM3E exceeding initial expectations and plans to transition to 12-high stacks. Capacity is being added incrementally across various dimensions, which includes equipment installation and qualification. This has led to gradual week-over-week growth. This expansion is necessary as the company started from a low base in HBM3 and HBM2E.
The company anticipates continued solid HBM revenue growth sequentially through FY25 and calendar 2025, driven by the increasing adoption of 12-high HBM3E. Morgan Stanley analyst Joseph Moore recently reduced Micron Technology Inc.’s (NASDAQ:MU) price target from $98 to $91 while maintaining an Equal Weight rating. This adjustment reflected concerns that DeepSeek’s AI innovations could cause deflation and potentially trigger increased export controls or decreased investment.
Parnassus Value Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) posted fiscal-third-quarter results that met expectations. Micron’s DRAM (dynamic random access memory) and NAND (non-volatile storage technology) segments grew revenue strongly, continuing the company’s recovery from a cyclical downturn last year. We believe Micron is well positioned to capitalize on AI-driven demand for greater memory.”
3. Citigroup Inc. (NYSE: C)
Forward P/E Ratio as of March 6: 9.67
Number of Hedge Fund Holders: 101
Citigroup Inc. (NYSE:C) is a financial services holding company that offers a spectrum of products and services to consumers, corporations, governments, and institutions worldwide. It operates through 5 key segments: Services, Markets, Banking, US Personal Banking, and Wealth Management.
Its Services division’s 2024 revenue was up 9% year-over-year to $19.6 billion. This growth stemmed from increased fee revenue, which was up 17%, and higher deposit volumes, despite a low-rate environment. The division gained market share in TTS (Trade and Treasury Solutions) and security services, boasting its best fourth quarter in a decade with 6% market growth. Services generated $1.9 billion in Q4 2024 net income and $6.5 billion for the full year.
For 2025, Citigroup Inc. (NYSE:C) expects continued non-interest revenue growth, driven by expansion with institutional and commercial clients. It aims to deepen relationships with asset managers through digital and data investments. Modest NII (Net Interest Income) growth is expected in 2025, fueled by higher deposit volumes. Repricing actions will offset potential rate headwinds.
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.”
2. Exxon Mobil Corp. (NYSE:XOM)
Forward P/E Ratio as of March 6: 13.46
Number of Hedge Fund Holders: 104
Exxon Mobil Corp. (NYSE:XOM) is a global energy and petrochemical company that explores, produces, and refines crude oil and natural gas. It also manufactures and markets energy, chemical, and specialty products under the iconic Exxon, Esso, and Mobil brands, while pursuing lower-emission technologies.
The company’s Upstream segment involves the exploration and production of crude oil and natural gas. In 2024, it achieved record production from advantaged assets and the highest liquid production in over 40 years. This was driven by strength in the Permian and Guyana. In the Permian, combined production from Exxon Mobil Corp. (NYSE:XOM) and Pioneer assets will reach 2.3 million barrels per day by 2030, which is up from 1.5 million in 2024. Guyana production reached 650,000 barrels per day in just 10 years, and tripled local GDP per capita since 2020.
In 2025, projects like Yellowtail in Guyana and advanced Permian recovery techniques will be implemented. These focus on low-cost, low-emission and high-return growth. Yellowtail is the company’s fourth and largest deepwater oil development project in Guyana, for increasing production capacity. Advanced Permian recovery techniques refer to improved methods used by Exxon Mobil Corp. (NYSE:XOM) in the Permian Basin to extract more oil and gas.
Madison Dividend Income Fund views Exxon Mobil positively due to its strategic assets, efficient operations, planned production growth, and strong shareholder return policy, even with moderate oil prices. Here’s what it stated in its first quarter 2024 investor letter:
“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 Corp. (NYSE:BAC)
Forward P/E Ratio as of March 6: 11.43
Number of Hedge Fund Holders: 113
Bank of America Corp. (NYSE:BAC) is a global financial services provider that delivers a range of banking, investment, and risk management solutions to individuals, businesses, and institutions worldwide. It operates through its 4 core segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets.
Its Consumer Banking segment contributed ~$11 billion to the company’s total 2024 revenue. This was 40% of the company’s earnings. Q4 2024 revenue for this segment was $10.6 billion. The segment added over 200,000 net new checking accounts and marked six years of growth. Investment balances reached $518 billion, with $25 billion in full-year flows. Deposits stabilized, ending at $952 billion, with average deposits up $4 billion from Q3, while the rate paid declined to 0.64%.
Digital engagement at Bank of America Corp. (NYSE:BAC) was strong, with over 14 billion digital logins in 2024. Digital sales crossed 60% in Q4 2024, and the Erica capability surpassed 2.5 billion interactions. Erica capabilities encompass its AI-powered ability to interact with customers, provide financial information, and perform banking tasks through the Bank of America app. The company now plans continued investment and expects growth in loans and deposits.
Diamond Hill Large Cap Strategy 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.”
While we acknowledge the growth potential of Bank of America Corp. (NYSE:BAC), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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