The stock market has been more erratic with investors reacting to heightened trade tensions and new tariffs. On March 5, it was reported by BBC News that America imposed a 25% tariff on Mexican and Canadian imports and a 10% tariff on Chinese imports. China retaliated with tariffs of between 5% and 15% on selected American imports and Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum stated that retaliatory measures would be on the agenda. These tariffs have been a cause of concern over heightened business costs, supply disruptions, and a more general slowing of the global economy.
Against this backdrop, the S&P 500 fell sharply with over 80% of its constituents in red, CNBC reported. A handful of investors used the pullback to scoop up battered stocks and most notably those with solid fundamentals that have underperformed in recent months. Richard Fisher, a one-time president at the Dallas Federal Reserve, explained in a CNBC TV appearance that tariffs are a hidden tax that impose cost and have the ability to slow growth as companies adjust to higher cost. With market sentiment being very sensitive to policy and macroeconomic conditions, investors are searching for undervalued positions that can weather short-term fluctuations and generate long-term growth.
In such a scenario, investors are turning towards companies with good valuations, good growth in earnings and revenue growth rates, and sustainable competitive advantage. Value investing, where one tries to acquire stocks at a price that is lesser than their intrinsic value, is a well-tested and trustworthy means to navigate through uncertain markets.
Our Methodology
In order to allow investors to capitalize on current market imbalances, we used stocks screeners to select ten stocks that meet rigorous tests for value. We looked for firms with a forward P/E of less than 20 and a minimum average upside potential of 30% based on analysts’ target prices in an effort to supply a portfolio of solid undervalued candidates. The stocks are ranked in ascending order of analysts’ upside potential. The information was obtained on March 6, 2025, from CNN.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Undervalued Stocks with the Highest Upside Potential
10. The AES Corporation (NYSE:AES)
Forward P/E Ratio: 5.32x
Upside Potential: 33%
Number of Hedge Fund Holders: 53
The AES Corporation (NYSE:AES) is a power and utility company with worldwide experience in energy storage, clean energy, and grid modernization. They have thermal power generation facilities, hydro power generation facilities, wind power generation facilities, and solar power generation facilities that generate power for millions of customers in Europe, Latin America, and in America. AES is moving towards clean energy technologies because of growing demand for clean electricity generation and decarbonization.
Q4 2024 adjusted EPS was $0.54, representing a 58.8% positive surprise over analysts’ forecasted expectations of $0.34. It was 26% lower than Q4 2023’s $0.73 a share due to greater charges on interest and power price movements. AES is still expanding its clean energy portfolio by acquiring solar, wind, and battery storage assets to drive long-term earnings growth.
The AES Corporation (NYSE:AES) has been making long-term contracts with utilities and firms for renewable power, yielding revenue stability and cash flows. The company is also building battery storage products, strengthening its market position in grid reliability and energy transformation markets.
Analysts are predicting a 33% increase from its current level of $11.25 with a mean target price of $15. Investors in April 2025 will be hoping for growth in green energy activities, enhanced cash flows, and growth in margins when the company makes its next earnings announcement.
9. PagSeguro Digital Ltd. (NYSE:PAGS)
Forward P/E Ratio: 5.52x
Upside Potential: 43%
Number of Hedge Fund Holders: 36
PagSeguro Digital Ltd. (NYSE:PAGS) is a leading Brazilian fintech company that provides digital payments, mobile banking, and point-of-sale (POS) solutions to small business and micro-merchant clients.
PagSeguro Digital Ltd.’s (NYSE:PAGS) Q4 2024 revenue came in at $3.2 billion, 25% higher than last year due to high volumes and growth in digital banking business. Q4 2024 EPS of PagSeguro came in at $0.34, surpassing analysts’ forecast of $0.29 by $0.05. Q4 revenue came in at $875.27 million, surpassing analysts’ forecast of $872.66 million. Total payment volume (TPV) surged on the back of growth in Brazil’s shift towards cashless payments.
The company is adding to its PagBank ecosystem a full range of finance services from digital accounts to investments and personal loans. The initiative boosts customer retention and engagement and solidifies the business’s competitive edge over fintech companies and legacy banks.
Analysts are optimistic but cautious with a mean target price of $10.73, up 43% from a level of $7.50. Investors are cautious due to increased competition and regulatory risks in Brazil’s fintech market. Investors will be watching for transaction growth in the next earnings announcement in May 2025 and profitability growth and further digital banking growth.
