In this article, we are going to talk about our list of the 10 undervalued stocks to buy now. You can skip our comprehensive analysis of these stocks and go directly to the 5 Undervalued Stocks to Buy Now.
The world is experiencing innovation and change at a rate never seen before. After the Covid pandemic hit the globe, stocks of tech giants accounted for half of all gains in the S&P 500. But as the economy comes back to a full awakening, analysts believe value stocks will outperform growth stocks in 2022. Value stocks are ones that are trading below their intrinsic value due to some short-term anomaly or market headwind, and investors like to buy in and wait for prices to rise to expected levels. Co-CEO and Chief Investment Officer at Austin-based hedge fund Dimensional Funds Gerard O’Reilly told CNBC in an interview that he expects value stocks to outperform growth in 2022, and advises his clients to keep an eye out for the long-term, where value stocks can post better returns.
As the Fed starts to wind down its bond purchases, long term interest rates will hike, and short term hikes look imminent this year as well. This will start to hamper the earnings growth trajectory of big tech names. Chief Investment Officer at Morgan Stanley Wealth Management Lisa Shalett believes investors are not adequately concerned about federal regulations on big tech companies, as the government seems adamant on reining in these mammoth names and the monopolies they enjoy. She believes the ‘tried and tested’ growth stocks proved good buys during the pandemic because work-from-home orders facilitated their demand, but now the space is too crowded. She added:
That’s great for value stocks and cyclical companies but not for tech once rates start to more definitively move higher.
As we head into another year full of opportunity and (hopefully positive) surprises, it is pertinent to keep an eye out for undervalued stocks that have the potential to beat the market. Let’s now take a look at the top 10 undervalued stocks to buy now.
Our Methodology
For this article, we sifted through companies to find ones that are growing their top-line, and trade at less than the S&P 500’s forward PE ratio of around 20. Hedge fund sentiment around each stock was derived using Insider Monkey’s database of 867 elite hedge funds.
10 Undervalued Stocks to Buy Now
10. Arrow Electronics, Inc. (NYSE:ARW)
Number of Hedge Fund Holders: 20
PE Ratio: 10.35
Arrow Electronics, Inc. (NYSE:ARW) provides services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The Colorado-based company reported earnings per share of $4.04, which beat estimates by $0.47, at the end of the third quarter. Revenue stood at $8.51 billion, which was below expectations by $74.24 million.
At the end of the third quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $683.94 million in Arrow Electronics, Inc. (NYSE:ARW).
In December, Arrow Electronics, Inc.’s (NYSE:ARW) board approved a stock repurchase program of $600 million worth of shares. In the last 5 years to the third quarter of 2021, the company has repurchased around $2 billion worth of shares. CEO Michael J. Long was cited as saying that the company’s growth, profitability and effective management of working capital and balance sheet has allowed it to return cash to shareholders, and reduce shares outstanding by around 21% over the last 5 years.
Out of all hedge funds tracked by Insider Monkey, AQR Capital Management is a leading shareholder of Arrow Electronics, Inc. (NYSE:ARW) stock, with 2.54 million shares worth $285.06 million.
In addition to Dell Technologies Inc. (NYSE:DELL), HP Inc. (NYSE:HPQ) and Amkor Technology, Inc. (NASDAQ:AMKR), Arrow Electronics, Inc. (NYSE:ARW) is a top stock that is currently trading below market levels.
9. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
PE Ratio: 10.05
Verizon Communications Inc. (NYSE:VZ) is a telecommunication firm based in New York, and stands to benefit from the 5G tech boom in the United States in the coming years. In January, Verizon Communications Inc. (NYSE:VZ) announced that more than 100 million consumers in around 1,700 cities across the United States will now have access to its 5G Ultra Wideband network, which provides speeds 10 times faster than the previous 4G LTE service.
Perfectly poised for a strong 2022, Verizon Communications Inc. (NYSE:VZ) shares were held by 57 hedge funds at the end of the third quarter of 2021, with a combined value of $10.3 billion. The company has recently made significant investments, which have helped give it an edge over competitors in the United States. Verizon Communications Inc. (NYSE:VZ) reported earnings per share of $1.41 for the third quarter, beating estimates by $0.05.
Verizon Communications Inc. (NYSE:VZ) stock has lost 6.25% in the last 12 months, and shares now seem undervalued at current levels. The company enjoys healthy competitive margins and currently offers an impressive dividend yield of around 4.7%. In December, Daiwa analyst Jonathan Kees initiated coverage of Verizon Communications Inc. (NYSE:VZ) with a ‘Neutral’ rating and a $57 price target.
Berkshire Hathaway was the leading shareholder of Verizon Communications Inc. (NYSE:VZ) stock at the end of the third quarter, given Warren Buffett’s keen eye for value stocks. The billionaire held approximately 158 million shares in Verizon Communications Inc. (NYSE:VZ) worth $8.57 billion.
Qorvo, Inc. (NASDAQ:QRVO) is a US-based company that develops and sells wireless and wired connectivity technology worldwide, and operates through its segments: Mobile Products, and Infrastructure and Defense Products.
Out of 867 hedge funds tracked by Insider Monkey, 44 reported owning stakes in Qorvo, Inc. (NASDAQ:QRVO) at the end of the third quarter. The combined value of these stakes stood at $1.95 billion. This shows a bullish trend from last quarter, where 40 hedge funds held $2.3 billion worth of stakes in the company. Seth Klarman’s hedge fund Baupost Group holds the most shares in Qorvo, Inc. (NASDAQ:QRVO), with 5.08 million shares reported at the end of the third quarter, worth $850.07 million.
Although Qorvo, Inc. (NASDAQ:QRVO) is currently navigating through a tough supply-chain environment, analysts believe that the company is set for long-term growth in its markets, and the recent sell-off presents a compelling buying opportunity.
Qorvo, Inc. (NASDAQ:QRVO) reported its Q3 earnings on November 3, and posted an EPS of $3.42, which beat consensus estimates by $0.16. The firm posted $1.26 billion in revenue for the quarter, which exceeded analysts’ forecasts by $4.38 million.
7. Amkor Technology, Inc. (NASDAQ:AMKR)
Number of Hedge Fund Holders: 25
PE Ratio: 10.76
Amkor Technology, Inc. (NASDAQ:AMKR) is a US-based company which provides outsourced semiconductor packaging and test services. The firm was found in 25 hedge funds’ portfolio at the end of the third quarter, up from 19 in the previous quarter.
In the third quarter, Amkor Technology, Inc. (NASDAQ:AMKR) posted $0.74 in EPS, beating estimates by $0.04. Revenue of $1.68 billion underperformed estimates by $20.90 million.
Amkor Technology, Inc. (NASDAQ:AMKR) is a market leader in smaller semiconductor products, and its test technology solutions enjoy strong demand in the marketplace, giving the stock significant long-term upside.
SW Investment Management is the leading shareholder of Amkor Technology, Inc. (NASDAQ:AMKR) stock, holding 2.4 million shares worth $59.88 million as of the end of September.
6. Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)
Number of Hedge Fund Holders: 28
PE Ratio: 10.12
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) deals in the manufacturing and sale of tools used to assemble semiconductor devices. It is based in Singapore.
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) posted an EPS of $2.17 for the third quarter, beating expectations by $0.01. The company raked in $485.33 million in quarterly revenue, which exceeded analysts’ forecasts by $352,250.
Royce & Associates was a leading shareholder of Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) at the end of the third quarter, with 2.20 million shares valued at $128.36 million. Out of 867 elite hedge funds tracked by Insider Monkey, 28 reported ownership of stakes in Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), at the end of the third quarter.
In late September, DA Davidson analyst Thomas Diffely maintained a ‘Buy’ rating on Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) stock, raising the price target to $100 from $90. The analyst noted that the company’s baseline revenue has increased at 10.1% CAGR over the past three years, and its growth is expected to accelerate thanks to new end markets and technology transitions that will provide “enhanced opportunities”.
Just like Dell Technologies Inc. (NYSE:DELL), HP Inc. (NYSE:HPQ) and Amkor Technology, Inc. (NASDAQ:AMKR), Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) is a top stock attracting the attention of investors.
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Disclosure: None. 10 Undervalued Stocks to Buy Now is originally published on Insider Monkey.
