In this article, we will look at the 11 Best Undervalued Stocks to Invest in Now.
How Will Tariffs Affect the Market?
On March 5th, BBC reported that the US stock market had fallen after the tariffs sparked trade war fear. The recent imposition of tariffs by President Donald Trump on imports from Canada, Mexico, and China has sparked significant concerns about a potential trade war. The United States has imposed a 25% tariff on most imports from these countries, with Canadian energy products facing a 10% tariff. On the other hand, tariffs on Chinese imports have been increased from 10% to 20%. As a result, Prime Minister of Canada, Justin Trudeau announced immediate tariffs on $30 billion worth of US goods, with plans for additional tariffs on $125 billion in goods over the next three weeks. Moreover, China imposed tariffs ranging from 10% to 15% on various US agricultural imports, such as chicken, pork, and soybeans. The tariffs have raised fears of inflation and a broader trade conflict, leading to a decline in US and global stock markets. As a result, the S&P 500 experienced a significant drop, and European markets also closed lower.
Today, Richard Fisher, former Dallas Fed president, appeared on a CNBC interview to talk about the recent tariffs and their impact on the market. Fisher stated that a tariff is a cost factor that goes into producing and distributing a product, making it a form of tax. Business operators of all sizes have to figure out a way to protect their margins against the impact. On the other hand, the Federal Reserve has to gauge the amount of revenue it would generate from these tariffs considering it is slowing down the economy and can cause inflation as the companies will have to raise prices to maintain their margins. Moreover, Richard Fisher noted that such tariffs take a long to be digested, as businesses don’t change something overnight. The only way for companies to maintain their margins without increasing prices is by increasing productivity, which again does not happen overnight and takes time.
While talking about how the Fed might react to the tariffs, Fisher mentioned that it is a little too early to guess. The Fed is bringing inflation down and we are getting closer to the 2% target, however, at the same time tariff increases the cost of doing business, which might slow down the economy and tickle up inflation. To conclude Fisher noted that tariffs won’t be digested quickly and will take time.
With that let’s take a look at the 11 best undervalued stocks to invest in now.
Stock market data. Photo by Jakub Zerdzicki on Pexels
Our Methodology
For this article, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we aggregated a list of stocks trading below the forward P/E of 15 and earnings growth expectations this year. Next, we cross-checked the Forward P/E from Seeking Alpha and Earnings growth from Yahoo Finance. Lastly, after sorting our list by market capitalization, we ranked the stocks in ascending order of the number of hedge funds holding each stock, sourced from Insider Monkey’s Q4 database of 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11 Best Undervalued Stocks to Invest in Now
11. Royal Bank of Canada (NYSE:RY)
Forward P/E Ratio: 12.71
Earnings Growth This Year: 11.22%
Number of Hedge Fund Holders: 31
Royal Bank of Canada (NYSE:RY) is a Canadian financial company that operates by providing banking services for businesses, individuals, and governments. Its services include everyday banking including, checking accounts, loans, and investments to individuals and businesses. Moreover, the bank also helps in wealth management, investment advice, and trust services for people in Canada, the US, and the Caribbean.
During the fiscal first quarter of 2025, the bank reported strong financial performance. It grew its net income by 43% year-over-year to reach a record high of $5.1 billion. Royal Bank of Canada (NYSE:RY) was able to maintain an ROE of 16.8%, reflecting profitability. Moreover, the company’s net interest income also grew by 26% year-over-year, driven by strong deposit growth in Personal Banking and loan growth in Commercial Banking.
On February 26, Matthew Lee from Canaccord Genuity maintained a Buy rating on the stock with a price target of C$191. Lee noted that Royal Bank of Canada (NYSE:RY) has exceeded market and internal estimations in its adjusted earnings per share. Moreover, the revenue and expense ratio also came above expectations thereby justifying a Buy rating on the stock. It is one of the best-undervalued stocks to invest in now.
10. Novartis AG (NYSE:NVS)
Forward P/E Ratio: 10.27
Earnings Growth This Year: 7.93%
Number of Hedge Fund Holders: 33
Novartis AG (NYSE:NVS) is a Swiss pharmaceutical company that focuses on creating and selling medicines to treat various health conditions. The company develops both new, patented medicines and generic versions of existing drugs. It develops medicines for various conditions including, immunology, dermatology, cancer, cardiovascular diseases, and more.
On February 20, Florent Cespedes from Bernstein maintained a Buy rating on the stock with a price target of CHF115. Recently, Novartis AG (NYSE:NVS) announced a deal to repurchase Anthos Therapeutics for up to $3.1 billion. This acquisition allows the company to regain control over Abelacimab, a promising drug for preventing blood clots and strokes.
During the fiscal fourth quarter of 2024, the company reported a significant increase in net income during Q4 2024, exceeding Wall Street forecasts. It grew its net income by 26% to $3.93 billion. Moreover, the company also achieved a record-high free cash flow of $16.3 billion, marking a 24% increase. This demonstrates the company’s financial strength and ability to generate substantial cash from its operations. It is one of the best-undervalued stocks to invest in now.
Aristotle Capital International Equity Strategy stated the following regarding Novartis AG (NYSE:NVS) in its Q2 2024 investor letter:
“We have been investors in the Swiss pharmaceutical company Novartis AG (NYSE:NVS) for over a decade, having first purchased shares in 2011. During our holding period, the company has undergone significant changes. Vasant (“Vas”) Narasimhan was promoted to CEO in 2018 and, we believe, has positively influenced the company’s culture and helped shift the business more toward innovative medicines. Examples include the sale of Novartis’s consumer (over-the-counter) joint venture; the divestiture of its vaccines and animal health businesses; the spinoff of Alcon, a global leader in the treatment of eye diseases and eye conditions (also an International Equity holding); and most recently, the spinoff of generics manufacturer Sandoz. As part of its portfolio transformation, Novartis has been able to improve its margins and gain share of branded pharmaceuticals. With many catalysts having neared completion, we decided to sell Novartis to fund the purchase of what we believe is a more optimal investment in Roche.”
9. Amgen Inc. (NASDAQ:AMGN)
Forward P/E Ratio: 14.93
Earnings Growth This Year: 4.02%
Number of Hedge Fund Holders: 72
Amgen Inc. (NASDAQ:AMGN) is a biotechnology company that specializes in creating medicines to treat serious diseases including cancer, heart disease, osteoporosis, and inflammatory conditions. It is well-known for its treatments like EPOGEN, Aranesp, Neulasta, and Repatha, among others.
On March 4, David Amsellem, analyst at Piper Sandler, reiterated a Buy rating on the stock, with a price target of $329. Amgen Inc. (NASDAQ:AMGN) has a robust portfolio of medicines. It ended fiscal 2024 with 14 medicines, where each medicine annualized at more than $1 billion. More notably the company is expanding its portfolio further in 2025. Its TEPEZZA is expected to be approved internationally, making it the only FDA-approved medicine to treat Thyroid Eye Disease. Moreover, new indications for UPLIZNA that treat neuromyelitis optica spectrum disorder are anticipated to further boost its portfolio. It is one of the best-undervalued stocks to invest in now.
PGIM Jennison Health Sciences Fund stated the following regarding Amgen Inc. (NASDAQ:AMGN) in its Q2 2024 investor letter:
“Amgen Inc. (NASDAQ:AMGN) is a large cap global biotech company with a diverse portfolio of marketed and pipeline products. Amgen’s discovery pipeline had led the company to broaden its focus from oncology, immunology, and renal disease to include musculoskeletal, cardiovascular, and neurologic conditions. In addition, Amgen has turned its expertise in antibody manufacturing into a leading position in the development of biosimilars of competitor drugs. Most recently, Amgen shares advanced in 2Q following its announcement that its novel injectable GLP-1 agonist / GIPR antagonist, MariTide, for obesity showed promising interim Phase 2 data and has shown enough promise to warrant advancement into pivotal trials as soon as late 2024. While Eli Lilly and Novo Nordisk will remain the market leaders in the diabetes / obesity space, we think there is room for Amgen to carve out a meaningful share of the market with its antibody-peptide conjugate approach that could enable monthly or better dosing for MariTide.”
8. Verizon Communications Inc. (NYSE:VZ)
Forward P/E Ratio: 9.22
Earnings Growth This Year: 1.87%
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is an international leader in telecommunications. Its services range from consumer services, where the company provides wireless and wireline communications services, to Technology and Streaming, where it provides streaming services and supports the Internet of Things (IoT), which involves connecting various devices to the Internet.
The company recently gained the spotlight due to its strategic partnership with Accenture which is aimed at enhancing cybersecurity services to help organizations across various industries tackle emerging threats. The partnership focuses on developing advanced cybersecurity solutions to address growing threats such as data breaches, phishing attacks, and social engineering. Moreover, on March 2, Scotiabank analyst Maher Yaghi raised the firm’s target on the stock from $47.5 to $48, while keeping a Buy rating on the stock.
Verizon Communications Inc. (NYSE:VZ) had a strong fiscal 2024, with strong financial results, including 3.1% wireless service revenue growth and 2.1% adjusted EBITDA growth. It also added 2.5 million postpaid mobility and broadband subscribers, expanding margins and ending the year with over $20 billion in wireless service revenue. Looking ahead, management expects significant wireless service revenue growth, focusing on service revenue, adjusted EBITDA, and free cash flow. It is one of the best-undervalued stocks to invest in now.
Third Point Management stated the following regarding Verizon Communications Inc. (NYSE:VZ) in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
