In this article, we discuss the 10 oversold large-cap stocks to buy now along with the latest market updates.
The Fed recently reduced the funds rate by 50 basis points, a decision seen as daring by some analysts, though it has been largely embraced by the market and many experts. The market seems to be on an upward trajectory since the day of rate cuts as the S&P gained over 4.3% on October 14 and closed at another all-time high.
While there are some concerns, experts are quite optimistic that they won’t be of much significance as we discussed in our article about best-performing long-term stocks in 2024. Here is an excerpt from the article:
“Dominic Chu of CNBC expressed concerns about potential market overconfidence, given the calmness amid geopolitical risks, the upcoming U.S. presidential election, and consumer spending challenges. [Gunjan] Banerji acknowledged these risks but emphasized that much of the market’s optimism is tied to the Fed’s actions, with people reassured by the larger-than-expected rate cut.
Finally, Banerji pointed out a broadening of the market rally beyond the tech sector and mentioned the strong performances in sectors like energy and materials, and record highs from companies like Caterpillar and McDonald’s, which indicates a healthier, more diverse market rally.”
The Path Forward for Equities and AI
Noah Blackstein, Senior Portfolio Manager at Dynamic Funds recently joined CNBC’s ‘Squawk Box’ and showed optimism around the equity markets. He suggested that current highs may continue. He expects the Fed will implement two more rate cuts this year, which would help sustain market momentum. Despite some geopolitical uncertainties and election concerns, the broader expectation in the market since July, along with favorable banking and credit indicators, supports his positive outlook.
Blackstein believes the labor market’s strength may be overstated and noted that revisions to employment data are likely due to a low participation rate in recent surveys. He also argued that real interest rates are historically high and tight, which further suggests the need for more cuts.
Regarding the economy, Blackstein expects further rate reductions to avoid potential market volatility, especially in light of recent hurricane impacts on employment and retail sales. He highlighted that while real interest rates may seem moderate when compared to the last 20 years, they are still elevated in historical terms.
As the Fed steers the economy away from a potential recession, Blackstein views the next phase as an opportunity for long-term growth, especially in areas like family housing and AI. He believes AI will drive a productivity revolution and integrate data strategies into several sectors, which will ultimately lead to cost savings and revenue growth for corporations.
With that, we look at the 10 Oversold Large Cap Stocks To Buy Now.
10 Oversold Large Cap Stocks To Buy Now
Our Methodology
To list 10 oversold large-cap stocks, we used a Finviz screener to extract stocks that have fallen significantly on a YTD basis and have a forward P/E ratio between 5x to 15x. After getting a list of 20 stocks, we narrowed it to the most widely held by institutional investors. Finally, the stocks were ranked in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
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 Oversold Large Cap Stocks To Buy Now
10. Magna International Inc. (NYSE:MGA)
Market Cap: $12.15 billion
FWD PE Ratio: 7.72
YTD Share Price Decline: ~29%
Number of Hedge Fund Holders: 16
Magna International Inc. (NYSE:MGA) is a mobility technology company that operates 345 manufacturing assembly sites and 105 product development, engineering, and sales centers in 28 countries.
It offers vehicle engineering and manufacturing services, including capabilities in body, chassis, seating, powertrain, and more. It is also expanding into areas like battery management and micromobility. The company is organized into four segments: Body Exteriors & Structures, Seating Systems, Power & Vision, and Complete Vehicles, which guide internal reporting and strategic decision-making.
According to Magna’s (NYSE:MGA) management, it is focused on margin improvement, capital discipline, and strong free cash flow. Operational improvements are expected to contribute to margin growth in 2024 and 2025. The company reduced its gross engineering spending for 2024 by $90 million and lowered its capital expenditure forecast by $200 million.
For 2026, sales are expected to range between $44 billion and $46.5 billion, which reflects market shifts, including delays in EV programs. Despite challenges, the company continues to improve margins and increase free cash flow. The company expects its free cash flow to grow annually, reaching between $1.8 billion and $2.1 billion by 2026, which is over $1.6 billion higher than in 2023.
Additionally, Magna’s (NYSE:MGA) shareholder returns are also quite attractive. The company has been raising its dividend for several years and has a yield of nearly 4.5% compared to its 1.89% sector average. The company’s forward payout ratio is 31.28%. With a high yield and healthy payout ratio, the company is retaining more earnings for growth, while returning a significant sum to shareholders at the same time.
9. Franklin Resources, Inc. (NYSE:BEN)
Market Cap: $10.8 billion
FWD PE Ratio: 8.54
YTD Share Price Decline: ~30%
Number of Hedge Fund Holders: 27
Franklin Resources, Inc. (NYSE:BEN) is a global investment management firm serving clients in over 150 countries. It operates under the Franklin Templeton name through its various subsidiaries. The company specializes in equity, fixed income, alternatives, and multi-asset solutions. It employs more than 1,500 investment professionals worldwide and offers expertise in investment management, wealth management, and technology solutions.
The company recently reported preliminary assets under management (AUM) of $1.68 trillion as of September 30, 2024, unchanged from August 31, 2024. The company experienced $22.4 billion in long-term net outflows, with its subsidiary, Western Asset Management accounting for $27.9 billion of that figure, which was partially balanced by positive market performance. For the quarter ending September 30, 2024, market gains were offset by $31.3 billion in net outflows, including $37 billion from Western Asset Management.
On October 2, Franklin Resources (NYSE:BEN) announced a stronger partnership with Envestnet to offer tax-efficient, personalized investment strategies using Envestnet’s Canvas Custom Indexing platform. The expanded partnership will give Envestnet’s large network of advisors access to Canvas and help them create more customized and tax-friendly investment plans for their clients.
Canvas allows advisors to build diversified portfolios with more control and flexibility, going beyond traditional direct indexing. It is designed to meet the rising demand for personalized investment options, with Franklin Templeton bringing its experience in separately managed accounts (SMAs), managing $140 billion in SMA assets.
The partnership improves Franklin Resources’ (NYSE:BEN) position in the growing SMA market, where it already manages significant assets, while also providing greater scalability for its services. It strengthens the firm’s role as a leader in personalized wealth management.
8. Dollar Tree, Inc. (NASDAQ:DLTR)
Market Cap: $14.6 billion
FWD PE Ratio: 12.65
YTD Share Price Decline: ~53%
Number of Hedge Fund Holders: 38
Dollar Tree, Inc. (NASDAQ:DLTR) operates over 15,000 discount stores under the brands Dollar Tree, Family Dollar, and Dollar Tree Canada. The company primarily targets a broad income range with affordable products, while Family Dollar caters to lower-income customers and offers a variety of essentials. Dollar Tree’s price points range from $1.25 to $5, while Family Dollar’s prices range from $1 to $10.
Dollar Tree (NASDAQ:DLTR) offers consumables like food, health products, and household items, along with seasonal merchandise. Family Dollar serves a broader range of customers, offering general merchandise, including apparel, electronics, and school supplies.
It has been facing challenges in the retail market and has seen a decline in discretionary spending as consumers focus on essentials. Increased competition has also prompted the company to reassess its strategy. In late 2023, Dollar Tree conducted a store portfolio review that resulted in the decision to close around 970 underperforming Family Dollar stores.
On the positive side, the Family Dollar segment saw an improvement in discretionary spending in the second quarter, and lower payroll expenses are expected shortly. For Q3, net sales are forecasted between $7.4 billion and $7.6 billion, with adjusted EPS of $1.05 to $1.15.
For the full year, net sales are expected to reach between $30.6 billion and $30.9 billion, with adjusted EPS between $5.20 and $5.60, down from the previous midpoint of $6.75.
Dollar Tree (NASDAQ:DLTR) has been actively accelerating its new store openings as part of its growth strategy. It is focused not only on opening new stores but also on converting existing ones to newer formats, such as the multi-price store format, which has shown positive performance. Due to this, the company remains confident in its growth potential.
7. Aptiv PLC (NYSE:APTV)
Market Cap: $16.4 billion
FWD PE Ratio: 11.32
YTD Share Price Decline: ~23%
Number of Hedge Fund Holders: 38
Aptiv PLC (NYSE:APTV) is an auto components company that provides solutions for electrified, software-driven vehicles. It designs and manufactures essential vehicle components, specializing in electrical, electronic, and safety technologies.
It operates in two key segments: Signal and Power Solutions, which focuses on vehicle electrical architecture, and Advanced Safety and User Experience, which develops technologies for safety and autonomous driving. The company has nearly 140 manufacturing facilities and 11 technical centers worldwide, serving major automotive OEMs in over 50 countries.
Aptiv (NYSE:APTV) is actively investing in electrification, autonomous driving, and vehicle connectivity to stay competitive. Recently, Aptiv expanded its facility in Orgadam, Chennai, investing over $45 million to produce advanced cockpit controllers, radars, and electronic control units for both Indian and global markets, reinforcing its commitment to India’s automotive industry.
The analyst sentiment toward the company is quite positive as it has been covered by 24 analysts with an average price target of $89.50, representing an upside of nearly 28.5% on October 17. On September 20, The Fly reported that Wells Fargo upgraded Aptiv’s (NYSE:APTV) stock rating from Equal Weight to Overweight and raised its price target from $78 to $87.
The firm believes that after a period of slowed growth, the stock is now more attractively valued, making it a good investment opportunity. Wells Fargo highlighted its strong potential for increasing its gross margins and its improved valuation as key factors for the upgrade. Despite a reduction in growth pace, the firm expects the company to continue experiencing above-average growth compared to its competitors.
6. Baidu, Inc. (NASDAQ:BIDU)
Market Cap: $32.02 billion
FWD PE Ratio: 8.50
YTD Share Price Decline: ~20.3%
Number of Hedge Fund Holders: 42
Baidu, Inc. (NASDAQ:BIDU) is a Chinese technology company that primarily focuses on the internet, AI, and cloud computing and holds a significant share in China’s search engine market. The company has been a pioneer in AI advancements, especially with its foundation models, including ERNIE Bot and ERNIE 4.0, which have been integrated into its products to deliver AI-native experiences.
Its services span across several sectors, including its Mobile Ecosystem, AI Cloud, and Intelligent Driving initiatives. The Mobile Ecosystem includes popular apps like Baidu App, ERNIE Bot, and Baidu Post, and offers search and feed-based content while integrating third-party services. AI Cloud provides enterprise and public sector solutions with AI-powered tools tailored for industries like transportation, energy, and finance.
In intelligent driving, Baidu (NASDAQ:BIDU) leads in autonomous ride-hailing through its Apollo Go service, which operates in multiple Chinese cities and is expanding with fully driverless services. Xiaodu, Baidu’s smart device division, holds the top position in smart displays and speakers in China.
Baidu (NASDAQ:BIDU) now plans to expand its Apollo Go driverless ride-hailing service internationally, targeting Hong Kong, Singapore, and the Middle East, as reported by The Wall Street Journal on October 9. The company aims to launch its Apollo 10.0 platform globally. The expansion is followed by intense competition in China, where Baidu operates over 400 robotaxis in cities like Wuhan. The company is shifting focus from its slowing ad business to AI, autonomous driving, and cloud computing for growth.
Ariel Investments stated the following regarding Baidu, Inc. (NASDAQ:BIDU) in its first quarter 2024 investor letter:
“Alternatively, several positions weighed on performance. China’s internet search and online community leader, Baidu, Inc. traded lower alongside Chinese equities as intensifying problems in China weighed on investor sentiment during the period. The company continues to invest heavily in Artificial Intelligence (AI) and recently launched its generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
5. Vale S.A. (NYSE:VALE)
Market Cap: $45.85 billion
FWD PE Ratio: 5.47
YTD Share Price Decline: ~21%
Number of Hedge Fund Holders: 34
Vale S.A. (NYSE:VALE) is a Brazilian multinational corporation and is the world’s largest producer of iron ore and nickel, with operations across 30 countries. The company also produces manganese, copper, bauxite, and other minerals, while also managing extensive logistics operations such as railroads, ports, and ships. The company also invests in renewable energy through hydroelectric plants.
Vale (NYSE:VALE) recently announced that it has achieved record iron ore output and increased its production forecasts for 2024. The company surpassed its previous record of Q4 2018 as iron ore production increased by 5% year-over-year to 91 million tons due to improved performance at key sites like S11D, Itabira, and Brucutu.
The company also ramped up pellet production by 13%, reaching 10.4 million tons. Sales of iron ore rose by 2%, totaling 81.8 million tons. Copper production grew by 5% to 85.9 thousand tons, driven by improved performance across all operations, despite a disruption at Salobo 3 in June. Ore processed at Salobo 1 and 2 was up 30% year-over-year due to strong mill performance.
Nickel production increased by 12%, reaching 47.1 thousand tons, largely due to better results from Sudbury and progress at the Voisey’s Bay underground mines.
Vale’s (NYSE:VALE) is also quite focused on technologies that drive sustainability in mining and metals. In September, Its venture capital initiative, Vale Ventures invested in Mantel, a Boston-based startup focused on developing a low-cost carbon capture technology using molten borates.
The technology aims to help decarbonize heavy industries, including mining and steel production. The investment, part of Mantel’s $30 million Series A round supports the creation of a demonstration plant capable of capturing 1,800 tons of CO2 annually.
4. Halliburton Company (NYSE:HAL)
Market Cap: $25.55 billion
FWD PE Ratio: 9.31
YTD Share Price Decline: ~20%
Number of Hedge Fund Holders: 41
Halliburton Company (NYSE:HAL) provides products and services to the energy industry and operates in over 70 countries. It was founded in 1919 and since then, it has grown to become one of the largest oilfield services providers globally.
It offers a range of services, from energy exploration and drilling to reservoir management and production optimization. It is renowned for its technological advancements in hydraulic fracturing (fracking) and energy solutions and plays a significant role in major global oil and gas operations.
Halliburton (NYSE:HAL) is quite favored by analysts as it has been covered by 31 analysts with an average price target of $40. The price target represents an upside of approximately 38.5% from current levels on October 17.
On September 26, TipRanks reported that analyst Pei Hwa Ho from DBS maintained a Buy rating on Halliburton (NYSE:HAL) with a price target of $45.00. The price target is based on the company’s focus on digital technologies and automation, which have improved service efficiency, reduced costs, and lowered its carbon footprint. Innovations like the iCruise system and Zeus Electric Fracturing System have improved the company’s operational and financial performance and have positioned it ahead of competitors.
Collaborations with Wintershall Dea and AIQ further show the company’s commitment to technological leadership.
Moreover, Halliburton’s (NYSE:HAL) strategy of returning over 50% of free cash flow to shareholders, along with the stock’s attractive valuation after recent price declines, also contributed to the recommendation.
3. Dollar General Corporation (NYSE:DG)
Market Cap: $18.011 billion
FWD PE Ratio: 14.07
YTD Share Price Decline: ~42%
Number of Hedge Fund Holders: 42
Dollar General Corporation (NYSE:DG) operates as a neighborhood general store offering affordable products and services. As of August 2024, the company has 20,345 stores across the U.S. and Mexico, including Dollar General, DG Market, DGX, pOpshelf, and Mi Súper Dollar General locations. It is one of the oversold large-cap stocks to buy. The stores provide essential items such as food, health and wellness products, cleaning supplies, beauty products, and seasonal décor that feature both private-label and well-known brands like Coca-Cola, PepsiCo, Procter & Gamble, and Nestlé.
Dollar General (NYSE:DG) faced some challenges in the earlier half of the year as it faced softness in discretionary categories, like seasonal home and apparel, while June showed stronger sales compared to July. Around 60% of the company’s sales come from households that earn less than $35,000 a year, making this group the core of its customer base. This is why consumer sentiment was low, especially for low-income households, with many customers reporting financial strain due to inflation and rising costs.
For 2024, Dollar General (NYSE:DG) expects continued promotional pressure and financial difficulties for customers for the rest of 2024. It lowered its EPS guidance to $5.50 to $6.20. Despite these challenges, the company is focused on long-term plans, like opening new stores and making smart investments. Overall, Dollar General remains positive about the future, believing that its strategy will build customer loyalty, increase sales, and create value for shareholders over time.
2. Biogen Inc. (NASDAQ:BIIB)
Market Cap: $27.6 billion
FWD PE Ratio: 11.70
YTD Share Price Decline: ~29%
Number of Hedge Fund Holders: 46
Biogen Inc. (NASDAQ:BIIB) is a global biopharmaceutical company focused on developing therapies for serious diseases, especially in neurology, specialized immunology, and rare diseases. Its portfolio includes treatments for conditions like multiple sclerosis (MS), spinal muscular atrophy (SMA), Alzheimer’s, and amyotrophic lateral sclerosis (ALS).
Biogen (NASDAQ:BIIB) has recently announced several milestones in its research. The company, along with the pharma company UCB, recently reported positive results from the Phase 3 PHOENYCS GO trial of dapirolizumab pegol, which showed improved outcomes in treating moderate-to-severe systemic lupus erythematosus (SLE). The drug met its primary goal and key secondary outcomes and demonstrated reduced disease activity and flares. With a favorable safety profile, the companies plan to launch a second Phase 3 trial in 2024 with an aim to address the unmet medical needs of SLE patients.
On October 8, Biogen (NASDAQ:BIIB) shared detailed results from Parts B and C of the Phase 2/3 DEVOTE study on a higher dose regimen of nusinersen for treating SMA. The investigational regimen (50/28 mg) showed clinical benefits in both previously treated and treatment-naive individuals. It more rapidly reduced neurofilament levels and indicated a slowdown in neurodegeneration. Improvements in motor function were observed across SMA types, with a safety profile consistent with the standard 12 mg dose. The company plans to seek global regulatory approval for this higher-dose regimen.
Finally, on October 9, Biogen (NASDAQ:BIIB) announced that its investigational drug, felzartamab, has received FDA Breakthrough Therapy Designation for treating late antibody-mediated rejection (AMR) in kidney transplant patients. The designation is granted to drugs showing potential for significant improvement over existing treatments for serious conditions. Felzartamab, an anti-CD38 monoclonal antibody, is being developed to address the unmet need in AMR, which is a major cause of kidney transplant failure. The drug is also being explored for other rare immune-mediated diseases like primary membranous nephropathy and IgA nephropathy. Phase 3 trials for these indications are planned for 2025.
1. Global Payments Inc. (NYSE:GPN)
Market Cap: $25.78 billion
FWD PE Ratio: 8.76
YTD Share Price Decline: 20.5%
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) is a payment technology company that offers innovative solutions that help businesses operate efficiently across multiple channels. It operates in two primary segments: Merchant Solutions and Issuer Solutions. The company has over 4 million customers across more than 100 countries.
The Merchant Solutions segment provides businesses worldwide with technology for processing card and digital payments, offering additional services like terminal rentals, chargeback resolution, and business analytics.
The Issuer Solutions segment of Global Payments (NYSE:GPN) offers financial institutions and service providers tools to manage card portfolios, reduce complexity, and provide seamless cardholder experiences. It supports B2B payments, commercial accounts, and electronic alternatives, with services like fraud detection, risk management, customer service, and business intelligence.
At its 2024 Investor Conference, the company focused on operational transformation and long-term value creation. The company plans potential divestitures amounting to $500 million to $600 million in annual revenue and plans to streamline operations and improve profitability.
For 2025, Global Payments (NYSE:GPN) targets mid-single-digit growth in adjusted net revenue, about 10% growth in adjusted EPS, and a 50 basis point increase in operating margins. The outlook for 2026 and 2027 is strong, with expected mid-to-high-single-digit revenue growth and EPS growth in the low teens. The company’s transformation efforts are expected to yield over $500 million in operating income benefits by mid-2027, with 30% realized in 2025, which positions it well for sustained success.
Parnassus Investments stated the following regarding Global Payments Inc. (NYSE:GPN) in its Q2 2024 investor letter:
“Global Payments Inc. (NYSE:GPN) stock fell on investor fears that a slowing economy could weigh on payment processing companies. The company will host an investor day focused on improving efficiencies and strategic redeployment of assets in the fall, which we believe will unlock hidden value in the undervalued shares.”
While we acknowledge the potential of Global Payments Inc. (NYSE:GPN) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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