After Trump’s victory in the presidential election, US stocks surged to record highs. Much of the stock market’s history reveals that value stocks have outperformed their growthier counterparts but the trend has reversed over the last decade. With mega-sized technology stocks especially those driven by AI dominating, the reverse trend intensified. It is important to consider that the Morningstar US Large Growth Index has returned 258% and the Morningstar US Large Value Index has returned 148% in the last decade, reflecting a significant difference.
Growth stocks looked unstoppable until a week in July when the Morningstar growth index fell 3.97% while the value index climbed 3.39%. This was when the investors were confident about the interest rate cuts that were to be executed in the later part of the year. Thus, it looked like they shifted their focus from big tech to more underperforming sectors.
Over the next year, the outlook for value stocks looks bright as concluded by Bankrate’s quarterly Market Mavens Survey. The survey revealed that experts see value-priced equities outperforming over the next four quarters. 42% of respondents preferred value stocks to growth stock over the next year while 33% think returns will be about the same.
When leading investing professionals were asked whether value stocks or growth stocks would offer greater returns over the next year, they put forward different reasons for their preferences. While the view regarding value outperforming growth at the start of a rate-cutting cycle was noticed in the responses, one of the experts inclined towards value stocks by stating:
“If the Fed is cutting rates because the economy is faltering, market participants are apt to seek out the best growth opportunities in a weakening growth environment. However, if economic growth holds up and rates come down, value would be the place to be for the best return prospects.”
Others were of the opinion that falling inflation and interest rates would benefit both classes equally. With that being said, let’s move to the 10 oversold value stocks to buy right now.
Our Methodology:
In order to compile a list of the 10 oversold value stocks to buy right now, we first used a stock screener to identify value stocks that have fallen by at least 30% year-to-date and are trading at a forward P/E ratio under 15, as of November 22. We focused on companies trading in industries including consumer staples, financials, legacy healthcare, industrials, and materials. Finally, we ranked the stocks in ascending order of their hedge fund holders, as of Q3 data.
At Insider Monkey we are obsessed with 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 Value Stocks To Buy Right Now
10. Borr Drilling Limited (NYSE:BORR)
Year-to-Date Decline: 46.04%
Forward PE: 5.92
Number of Hedge Fund Holders: 10
Borr Drilling Limited (NYSE:BORR) is a premier offshore shallow-water drilling contractor committed to providing drilling services to the global oil and gas industry. The company’s expertise revolves around operating modern jack-up rigs, specially designed to perform efficiently in water depths of up to nearly 400 feet. It serves various client needs such as exploration, production, workover, plug and abandonment, and Carbon Capture and Storage (CCS) services.
As of the third quarter, Borr has been awarded 17 new contract commitments year-to-date, representing 4,129 days and $731 million of potential contract revenue. Borr’s current delivered fleet includes 23 modern jack-up rigs. The firm’s last new build “Var” remains under construction at Seatrium and is expected to be delivered in November 2024, increasing its fleet to 24 modern rigs. The technical utilization for the firm’s working rigs was 98.7% in the third quarter of 2024, and the economic utilization was 96.9%.
Therefore, Borr Drilling Limited (NYSE:BORR) is an efficient drilling contractor with an international footprint and diversified portfolio. With robust and favorable fundamentals of the global jack-up rig market, the firm is well positioned.
9. Banco Bradesco S.A. (NYSE:BBD)
Year-to-Date Decline: 30.12%
Forward PE: 6.57
Number of Hedge Fund Holders: 22
Banco Bradesco S.A. (NYSE:BBD) provides various banking products and services to individuals, corporates, and businesses in Brazil and internationally. The firm operates through two segments, Banking and Insurance. Bradesco was founded in 1943 in Marília, in the interior of São Paulo, under the name of Banco Brasileiro de Descontos, with an initial strategy of serving small businessmen, public servants, and people of modest possessions.
Banco Bradesco is one of the largest financial groups in Latin America with 80 years of experience. The firm focuses on customer centricity as the center of its actions by offering nationwide coverage and a presence in key locations abroad. The firm has even optimized its organizational structure allowing for quicker decision-making to help support clients, apart from adjusting the way it serves customers through a large distribution network.
Banco Bradesco S.A. (NYSE:BBD) is currently pursuing profitability recovery in a sustainable way through a transformational plan. This plan is about more investments in digital channels, hiring for technology, footprint revision, and accelerating gains in cash management. It recently closed a good third quarter. It recorded a recurring net income of R$5.2 billion in 3Q24. Operating income reached R$6.8 billion, up 29% year-over-year. The main factors driving the operational improvement were increased revenue, robust insurance profitability, and a reduction in credit risk.
Banco Bradesco S.A. (NYSE:BBD) is a leading financial services firm with one of the broadest range of services and products on the market as well as material results to offer. As of Q3, the stock is held by 22 hedge funds and ranks on our list of the 10 oversold value stocks to buy right now.