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.
8. Stellantis N.V. (NYSE:STLA)
Year-to-Date Decline: 44.25%
Forward PE: 3.53
Number of Hedge Fund Holders: 24
Stellantis N.V. (NYSE:STLA) is a leading multinational automotive company. The company has industrial operations in more than 30 countries and customers in more than 130 markets.
Stellantis has successfully made itself a leading global automaker just over three years since its formation. The firm boasts a unique portfolio of 14 iconic automative brands including Abarth, Alfa Romeo, Chrysler, Dodge, FIAT, Maserati, Peugeot, Vauxhall, Free2move, and Leasys, among others. Stellantis is competing well as it was reported to be the top-selling automaker in France, Italy, Brazil, Portugal, Turkey, Algeria, and Argentina year-to-date through September while it was in the top three in Germany, Spain, and the United Kingdom.
While the company is undergoing a transitional period of product upgrades and inventory reduction actions, its Q3 net revenues came out to be lower. Results were impacted as the firm executed its planned US inventory reductions and focused on stabilization of US market share Simultaneously, it faced headwinds from a challenging European market environment with stringent quality requirements delaying the start of certain high-volume products. On the bright side, Stellantis is executing Product Blitz under which it plans no fewer than 20 new product launches in 2024. Three products launched in the third quarter namely Alfa Romeo Junior, Citroën C3, and Citroën Basalt.
While the top-line reflects temporary challenges, Stellantis N.V. (NYSE:STLA) is set to benefit from its iconic and innovative brands reaching all price points across multiple regions as well as the Product Blitz.
7. TORM plc (NASDAQ:TRMD)
Year-to-Date Decline: 30.97%
Forward PE: 4.42
Number of Hedge Fund Holders: 25
TORM plc (NASDAQ:TRMD) is one of the world’s largest owners and operators of product tankers that transport refined oil products and chemicals. The firm was founded in 1889 and has 9 offices in Denmark, India, the Philippines, Singapore, the UK, the UAE, and the US. TORM has a highly diversified blue-chip customer base comprising top independent oil companies, state-owned oil companies, oil traders, and refiners.
TORM is a pure-play product tanker company that differs from most of its peers in the industry. The firm follows a unique approach and integrates both commercial and technical management in-house. Its operating model with integrated in-house commercial and technical management has proved to be one of the strongest in the industry. As evident from the high earnings and free cash flow achieved in recent years, the firm is in a good position to continue growth.
The company’s performance in the third quarter was promising despite the impact of seasonality. Fleet-wide freight rates were slightly above last year’s levels. The firm entered into an agreement to acquire eight second-hand 2014-15 built MR vessels. In the first nine months of 2024, adjusted EBITDA was 709.2 million and net profit was $534.1 million climbing over the year, reflecting the strong market fundamentals and the growth of its fleet.
TORM plc (NASDAQ:TRMD) is a leading global product tanker company with a modern and well-maintained fleet. The firm has been dedicated to operational excellence since its inception in 1889. Customers globally rely on the company to move the gasoline, naphtha, diesel, and jet fuel that enable businesses to run every day.
6. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Year-to-Date Decline: 68.86%
Forward PE: 5.06
Number of Hedge Fund Holders: 33
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) serves as an integrated healthcare, pharmacy, and retail leader. The firm is present in 8 countries with a portfolio of consumer brands including Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico. Additionally, it has a portfolio of healthcare-focused investments in certain countries including the US and China. The firm’s three segments include U.S. Retail Pharmacy, International, and U.S. Healthcare.
The firm is the largest retail health, pharmacy, and daily living destination across the US and Europe. It plays a crucial role in the healthcare ecosystem as a trusted, global innovator in retail pharmacy with over 12,500 locations across the United States, Europe, and Latin America. WBA benefits from a retail pharmacy-led store model. It has over 8,000 stores of which the majority, approximately 6,000 are profitable, supporting the firm’s conviction in in a retail pharmacy-led model. The firm has earned a solid position of trust with millions of customers which is commendable.
In the fiscal fourth quarter, sales increased 6% year-over-year to $37.5 billion, reflecting sales growth across all segments. Sales in fiscal 2024 were $147.7 billion, an increase of 6.2% as compared to the prior-year period. As the firm moves into fiscal 2025, it is reorienting to its legacy strength as a retail pharmacy-led company by optimizing its footprint and controlling costs. The firm announced an accretive footprint optimization program that targets approximately 1,200 closures over the next three years, including approximately 500 closures in fiscal 2025.
Building on a heritage going back more than 170 years, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) currently has strong market positions in Europe and Latin America. As the firm stabilizes its core retail pharmacy business, it remains positive about reaping consumer as well as financial benefits in the long run.
5. Ulta Beauty, Inc. (NASDAQ:ULTA)
Year-to-Date Decline: 30.38%
Forward PE: 14.43
Number of Hedge Fund Holders: 40
Ulta Beauty, Inc. (NASDAQ:ULTA) is one of the largest beauty retailers in the US offering cosmetics, fragrances, skincare products, hair care products, and salon services. The firm has a clear vision of becoming the most loved beauty destination of its guests. As of February 3, 2024, Ulta Beauty operates 1,385 stores across all 50 states
The firm remains competitively differentiated based on three factors, shopping experience, value proposition, and convenience. The shopping experience is top-notch with over 25,000 products from over 600 brands, including the Ulta Beauty Collection, the firm’s private label. To make beauty accessible, the firm offers value through Ulta Beauty Rewards, its industry-leading loyalty program, targeted promotions through its CRM platform, coupons, and in-store events. For convenience, multiple options such as pickup in-store, buying online and picking up curbside, shipping from the store, and shipping to home are available.
In October, Ulta Beauty, Inc. (NASDAQ:ULTA) laid down its strategic priorities to drive market share leadership in beauty and wellness and profitable growth. The firm plans to increase new stores with a target of over 1,800 stores over the long-term, drive loyalty program growth to 50 million members by 2028, improve the immersive in-store experience as well as digital engagement, and lead in wellness with an expanded assortment and enhanced experience.
It is important to note that Ulta Beauty, Inc. (NASDAQ:ULTA) was the original disruptor in beauty bringing ‘All Things Beauty. All In One Place’ over 30 years ago. While the firm has a successful business model and a leadership position in a robust and expanding beauty market, it is poised to grow.
4. Vale S.A. (NYSE:VALE)
Year-to-Date Decline: 36.60%
Forward PE: 5.06
Number of Hedge Fund Holders: 41
Vale S.A. (NYSE:VALE) is a global company practicing sustainable mining and has a presence in 20 countries. It was founded in 1942 as Companhia Vale do Rio Doce. Since the first ore was extracted in Itabira, Minas Gerais, the firm started working in logistics, through its railroads, ports, and terminals, in energy and in steel making. Vale operates through segments including Iron Ore Solutions and Energy Transition Metals.
Vale pioneered the world as a global mining company. The firm serves as the largest producer of iron ore, pellets, and nickel while simultaneously having operations in manganese, ferroalloys, copper, gold, silver, and cobalt. Therefore, the firm’s core business is an essential activity for the world with iron ore, nickel, and copper used in everyday life. Additionally, the firm has created a logistics network that is part of mines, railroads, ships, and ports. Other than its products, Vale carries cargo to third parties and offers two passenger train lines in Brazil thereby serving as the largest exporter of mineral abroad.
During the third quarter, operational and sales performance improved across all business segments of Vale S.A. (NYSE:VALE). The firm’s iron ore production reached its highest levels in more than five years. While pellet production remains at peak since 2019, copper and nickel production is progressing well. Vale reported major business highlights, with the commissioning of the Vargem Grande 1 project’s wet processing operations started in September, completion of the joint venture transaction with Apollo, and mechanical completion achieved by the second underground mine of the Voisey’s Bay Mine Extension project.
Hence, Vale S.A. (NYSE:VALE) has a strong foothold in mining alongside a solid logistics infrastructure integrating high-quality ore extraction and its transportation by ship, rail, and port to distribution centers. As of Q3, the stock is held by 41 hedge funds.
3. Dollar General Corporation (NYSE:DG)
Year-to-Date Decline: 47.36%
Forward PE: 11.38
Number of Hedge Fund Holders: 45
Dollar General Corporation (NYSE:DG) is an American chain of discount stores. Since its founding in 1939, the firm has delivered affordability on food, beauty, health, home, and office essentials, as well as seasonal items from the most trusted brands in America along with Dollar General’s high-quality private brands.
Dollar General Corporation has long served as America’s neighborhood general store now penetrating more customers in more communities than ever before. The firm boasts an extensive footprint encompassing the company’s 20,345 Dollar General, DG Market, DGX, and pOpshelf stores across the United States and Mi Súper Dollar General stores in Mexico, as of August. Since the retail market can be challenging, the firm tends to navigate efficiently through difficult macroeconomic conditions by offering a unique combination of value and convenience as in the preceding year 2023.
During its fiscal 2024 second quarter ended August 2, the net sales of Dollar General Corporation (NYSE:DG) increased 4.2% to $10.2 billion while Same-Store Sales increased 0.5%. The CEO was not satisfied with the financial results with the top line below expectations. Softer sales were partly attributed to a financially constrained consumer base. However, the firm is focusing on improving what it can control, the in-store experience and its value and convenience offering.
Therefore, Dollar General Corporation (NYSE:DG) has earned itself an attractive spot as America’s neighborhood general store spanning the national footprint and being the low-cost operator. As of Q3, the stock is held by 45 hedge funds.
2. The AES Corporation (NYSE:AES)
Year-to-Date Decline: 31.49%
Forward PE: 6.46
Number of Hedge Fund Holders: 47
The AES Corporation (NYSE:AES) serves as the next-generation energy company delivering green and smart energy solutions. The firm has more than four decades of experience helping the world transition to clean, renewable energy.
AES boasts a leading position in the energy transition. The firm has the privilege of being one of the top sellers of renewable power to corporate customers. It drives competitive advantage and growth through its diverse operating portfolio and development pipeline serving customers across geographies and technologies as well as a focus on innovation. Additionally, the consistent delivery of projects on time and on budget builds a solid reputation for the firm as a trusted partner of choice.
The financial performance track record for AES is solid with an annual growth in EPS, cash flow, and dividends from 2018 to 2023. During the third quarter, the firm marked certain strategic accomplishments as it completed 1.2 GW of construction and added 2.2 GW of renewables PPAs and data center load growth at US utilities. Net income attributable to The AES Corporation (NYSE:AES) grew from $231 million in Q3 2023 to $502 million.
With a massive scale, emphasis on innovation, and a solid reputation, The AES Corporation (NYSE:AES) serves as a Fortune 500 energy leader supporting a sustainable future through green solutions. With 8.1 GW signed directly with technology customers, AES remains best positioned to serve growing demand from data centers as big companies such as Google, Microsoft, and Amazon transition to renewable energy by 2030. As of Q3, the stock is held by 47 hedge funds.
1. PDD Holdings Inc. (NASDAQ:PDD)
Year-to-Date Decline: 31.29%
Forward PE: 7.25
Number of Hedge Fund Holders: 78
PDD Holdings Inc. (NASDAQ:PDD) is a multinational commerce group owning and operating a portfolio of businesses including Pinduoduo and Temu. While Temu is an online market place, Pinduoduo is an e-commerce platform offering products related to agricultural produce, apparel, shoes, bags, food and beverage, electronic appliances, and others. The firm was founded by Colin Huang in 2015.
PDD has emerged as one of the major e-commerce players in China. As stated by the investment management company, Baron Funds, PDD’s competitive moat lies in its team purchase model that facilitates bulk buying through direct partnerships with manufacturers, thereby eliminating intermediaries and lowering costs. With more demand for affordable products in China alongside small-scale merchants finding alternatives to Alibaba, PDD has driven growth. Even Americans looking for bargains have been heading to Temu, which according to Earnest Analytics, had nearly 17% of the US online discount store market as of last November.
For the third quarter, PDD Holdings Inc. (NASDAQ:PDD) recorded total revenues of RMB99,354.4 million, increasing 44% from RMB68,840.4 million in the same quarter of 2023. Regardless of intense competition and external challenges, the topline growth was good. With the plans to create a healthy and sustainable ecosystem, the firm has been investing in its platform ecosystem through merchant support policies and trust and safety updates. The CEO remains positive about this consistent investment which will be driving impactful results in the long term.
PDD Holdings Inc. (NASDAQ:PDD), the owner of Temu and Pinduoduo, is a prominent e-commerce player which has seen a growth momentum from both home and abroad. As of Q3, the stock is held by 78 hedge funds.
While we acknowledge the potential of PDD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than PDD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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