Stocks rallied on January 15, following an encouraging consumer price index (CPI) report that indicated a slowdown in core inflation and strong earnings from major U.S. banks. The Bureau of Labor Statistics reported that core inflation, which excludes food and energy, rose 3.2% in December, down from the previous month and slightly below the 3.3% forecast by economists surveyed by Dow Jones. Headline inflation increased 2.9% over the past year, matching expectations.
In an interview on January 16, Tom Lee, Managing Partner at Fundstrat provided his outlook on the current market dynamics and stock performance expectations for the year. Lee noted that the market is showing relief following the better-than-expected December Consumer Price Index (CPI) report, which, along with the Producer Price Index (PPI), has been dovish. This has set the stage for bond yields, which had been approaching 5%, to cool down, particularly in a context where market sentiment has been largely negative. Lee emphasized that the recent dovish inflation prints, including the core CPI, have alleviated fears of a hot number, leading to a reduction in the probability of a rate hike, as reflected in the Fed funds futures.
Lee also discussed the implications of the California fires on future inflation, suggesting that these events could introduce additional volatility. However, he remains optimistic about the inflation outlook over the next three months, expecting it to be significantly lower compared to the levels seen in November and October. He pointed out that the inflation figures in January of last year were around 0.4%, indicating that the upcoming months could offer favorable comparisons, which is positive for the market.
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Regarding the potential for a good year in the stock market, especially after the S&P’s back-to-back 20%+ gains, Lee expressed a high level of optimism, estimating an 80% chance of achieving double-digit returns for the year. He highlighted the positive start to January, with the S&P main index already up 0.7% by January 15, as a good harbinger for the year ahead. However, Lee acknowledged that the market’s performance could be challenged if bond yields remain elevated, as this would represent a severe tightening of financial conditions, potentially impacting sectors such as housing.
When asked about the market’s resilience if the Federal Reserve does not cut rates until later in the year and bond yields remain high, Lee admitted that such a scenario would test the market’s resolve. While he doesn’t believe it would be fatal for equities, he noted that it would be difficult for investors to remain highly bullish if yields stay near 5% for the next six months. This could raise concerns about a policy error from the Fed, either due to financial conditions being too tight or the bears arguing that the Fed cut too aggressively in the past.
The stock market’s positive momentum, fueled by encouraging inflation data and strong earnings reports, suggests a promising outlook for the year ahead. Companies with strong fundamentals, growth prospects, and undervaluation are positioned for significant returns. With that in context, let’s take a look at the 12 cheapest stocks with the biggest upside potential.
Stocks
Our Methodology
To compile our list of the 12 cheapest stocks with biggest upside potential, we used Finviz and Yahoo stock screeners to find the 40 largest companies trading below the forward P/E ratio of 10 as of January 15. We then sourced the analysts’ average price targets and picked the 12 stocks that had the highest upside potential. We also included their stock price as of January 15 and their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential as of January 15.
Why do we care about what hedge funds do? 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).
12 Cheapest Stocks with Biggest Upside Potential
12. TotalEnergies SE (NYSE:TTE)
Upside Potential: 27.50%
Forward P/E Ratio as of January 15: 7.20
Stock Price as of January 15: $57.56
Number of Hedge Fund Investors: 17
TotalEnergies SE (NYSE:TTE) is a global energy supermajor with a diversified portfolio spanning oil, gas, and renewable energy. The company has a strong presence in over 130 countries and is a leading player in both upstream and downstream operations, including exploration, production, refining, and marketing.
TotalEnergies SE (NYSE:TTE) is investing heavily in its core hydrocarbon business to ensure stable and growing production. The company has successfully ramped up projects such as Mero 2 in Brazil and the Fénix field offshore Argentina, which have contributed to its robust production levels. The company is also actively exploring new opportunities and has recently sanctioned the GranMorgu project offshore Suriname, which is expected to add significant reserves and production capacity. In the integrated LNG and Gas Trading business, TotalEnergies SE (NYSE:TTE) is focusing on enhancing its integration along the gas value chain by acquiring low-cost upstream dry gas supply in the Eagle Ford in Texas.
Furthermore, TotalEnergies SE (NYSE:TTE) has started two giant solar farms in the U.S. with battery storage to solidify its presence in the fast-growing ERCOT market in Texas. The company has also partnered with Adani in India and RWE in Germany and the Netherlands for offshore wind projects to expand in renewable energy portfolio.
11. Lloyds Banking Group plc (NYSE:LYG)
Upside Potential: 30.19%
Forward P/E Ratio as of January 15: 7.74
Stock Price as of January 15: $2.65
Number of Hedge Fund Investors: 10
Lloyds Banking Group plc (NYSE:LYG) is a major financial institution based in the United Kingdom. The group offers a wide range of banking and financial services to individuals, small businesses, and corporations through brands such as Lloyds Bank, Halifax, and Bank of Scotland.
Lloyds Banking Group plc (NYSE:LYG) is investing heavily in its strategic initiatives to drive long-term growth. The Group aims to deliver $1.83 billion in incremental revenues by 2026, with a significant portion of this growth coming from other operating income. The group is strategically investing in technology, product innovation, and customer experience enhancements. The Group has recently launched a “Your Credit Score” tool to help customers manage their financial health, which has been linked to increased take-up in personal loans and improved credit quality.
Lloyds Banking Group plc (NYSE:LYG) is committed to cost discipline and efficiency to enhance profitability. The Group aims to achieve a sub-50% cost-to-income ratio by 2026, which is a significant improvement from current levels. This will be achieved through a combination of cost savings, technology investments, and strategic restructuring. Lloyds Banking Group plc (NYSE:LYG) is also focused on reducing its cost base through efficiency gains, which are expected to become more pronounced in 2026 as the impact of depreciation and other cost-saving measures take effect.
10. Comcast Corporation (NASDAQ:CMCSA)
Upside Potential: 31.53%
Forward P/E Ratio as of January 15: 8.24
Stock Price as of January 15: $36.38
Number of Hedge Fund Investors: 72
Comcast Corporation (NASDAQ:CMCSA) is one of the largest cable, broadband, and telecommunications companies with a significant presence in the United States. The company serves millions of customers through its various business units, including Comcast Cable, NBCUniversal, and Sky. Comcast Cable
Comcast Corporation (NASDAQ:CMCSA) is expanding its broadband connectivity and enhancing its network capabilities to meet the growing demand of consumers and businesses. As of December 9, the company has 63 million homes with its broadband service and plans to add another 1.2 million homes in 2025. The company has a key focus on offering 1 gigabit speed to ensure that customers have access to high-speed internet for streaming, gaming, and other data-intensive activities. Comcast Corporation (NASDAQ:CMCSA) is also rolling out DOCSIS 4.0 technology, that enables next-generation broadband over cable’s hybrid fiber coax (HFC) networks. This technology will further enhance network performance and enable multi-gig symmetrical speeds.
Comcast Corporation (NASDAQ:CMCSA) is also leveraging its existing broadband customer base to drive growth in the mobile market. The company has recently introduced a mobile WiFi boost feature that automatically enhances mobile device performance when connected to the home network, providing up to 1 gigabit speed. The company is also bundling mobile services with broadband, offering free mobile lines with higher-tier broadband packages. This strategy aims to help the company acquire new subscribers.
9. Banco Santander, S.A. (NYSE:SAN)
Upside Potential: 33.06%
Forward P/E Ratio as of January 15: 6.60
Stock Price as of January 15: $4.81
Number of Hedge Fund Investors: 15
Banco Santander, S.A. (NYSE:SAN) is one of the largest banking institutions in Europe, with a significant presence in over 40 countries in Latin America, North America, and Asia. Banco Santander, S.A. (NYSE:SAN) serves over 171 million customers through a diverse range of banking and financial services, including retail, consumer, corporate and investment banking, wealth management, and payments.
Banco Santander, S.A. (NYSE:SAN) is focusing on enhancing customer experience through digital innovation and simplification. The bank is deploying global platforms and digital tools to streamline processes, reduce customer onboarding times, and improve overall user experience. The bank is also deploying a common operating model across its banks. These efforts are freeing up time for employees to focus on commercial activities and customer service.
Banco Santander, S.A. (NYSE:SAN) is leveraging its global footprint to expand its business and drive cross-border collaboration. The bank is making significant investments in its Corporate and Investment Banking (CIB) division, particularly in the U.S., to deepen client relationships and enhance its capabilities. The bank recently launched Openbank, a digital banking platform in the U.S., and introduced Zinia, a co-branded card with Amazon in Germany.
8. Rio Tinto Group (NYSE:RIO)
Upside Potential: 33.82%
Forward P/E Ratio as of January 15: 8.31
Stock Price as of January 15: $60.38
Number of Hedge Fund Investors: 30
Rio Tinto Group (NYSE:RIO) is a global mining company headquartered in London, United Kingdom. The company is a major producer of essential commodities such as aluminum, copper, iron ore, and, more recently, lithium.
Rio Tinto Group’s (NYSE:RIO) recent acquisition of Arcadium Lithium is a significant step in the company’s strategy to become a leading player in the lithium market. Arcadium is a global, vertically integrated lithium chemical producer with a diverse portfolio of Tier-1 assets. These assets include vast low-cost lithium brine operations in Argentina and hard rock mines in Quebec, Canada. By integrating Arcadium into its portfolio, Rio Tinto Group (NYSE:RIO) aims to position itself to meet the growing global demand for lithium, which is a critical component in electric vehicles and energy storage systems.
Furthermore, Arcadium’s expertise in Direct Lithium Extraction (DLE) technology, particularly through its ILiAD initiative, complements Rio Tinto Group’s (NYSE:RIO) existing technology development efforts. DLE technology offers a more sustainable and efficient method of extracting lithium, using less energy, water, and land while achieving higher recovery rates. This technology is crucial in meeting the environmental and sustainability standards that are increasingly important to consumers and regulatory bodies.
7. The Cigna Group (NYSE:CI)
Upside Potential: 37.22%
Forward P/E Ratio as of January 15: 9.05
Stock Price as of January 15: $285.03
Number of Hedge Fund Investors: 66
The Cigna Group (NYSE:CI) is a global health services company headquartered in Bloomfield, Connecticut. The company provides health insurance plans, pharmacy benefit management, and wellness programs to individuals, employers, and government organizations. The Cigna Group (NYSE:CI) operates in more than 30 countries and is known for its innovative approach to healthcare delivery and personalized services.
The Cigna Group (NYSE:CI) leveraging technology to drive healthcare innovation and improve patient outcomes. The company is at the forefront of adopting AI-powered diagnostics and treatments, which promise to revolutionize the healthcare landscape with more personalized and effective care. The company has also introduced a new feature on its telehealth platform, MDLIVE, to allow patients with lower health risk issues to receive fast, flexible care via an online portal, often within one hour.
The Cigna Group (NYSE:CI) is also expanding its capabilities in behavioral health services through its brand Evernorth, which offers health services, including pharmacy, care, and benefits. Over the past five years, the company has seen a near doubling in behavioral therapy utilization, and it has responded by significantly increasing the number of providers in its network and offering new coaching programs. The company is also implementing online scheduling and access, with guaranteed appointments within 72 hours for its customers.
6. JD.com, Inc. (NASDAQ:JD)
Upside Potential: 39.29%
Forward P/E Ratio as of January 15: 8.29
Stock Price as of January 15: $34.74
Number of Hedge Fund Investors: 75
JD.com, Inc. (NASDAQ:JD) is one of China’s leading e-commerce platforms which has established itself as a key player in the retail and logistics sectors. The company’s comprehensive online marketplace offers a wide range of products, from electronics and home appliances to general merchandise and fashion items.
JD.com, Inc. (NASDAQ:JD) is continuously improving its user experience and engagement. The company has been investing in various initiatives to make shopping on its platform more convenient and attractive. For instance, the company has extended many services from its first-party products to third-party products, such as free shipping for orders over 59 RMB ($8) and home return services. Additionally, the company has introduced innovative services such as compensation for delayed shipping to exceed user expectations. These efforts are aims to attract new users and enhance their shopping frequency.
JD.com, Inc. (NASDAQ:JD) is also expanding its product offerings across various categories, including electronics, home appliances, general merchandise, and fashion. The company is leveraging its strong supply chain capabilities to scale procurement and increase efficiency, allowing it to offer products at more competitive prices.
5. GSK plc (NYSE:GSK)
Upside Potential: 39.62%
Forward P/E Ratio as of January 15: 7.59
Stock Price as of January 15: $32.08
Number of Hedge Fund Investors: 38
GSK plc (NYSE:GSK), formerly known as GlaxoSmithKline, is a British global pharmaceutical and healthcare company. The company develops and markets a wide range of medicines, vaccines, and consumer health products. GSK plc (NYSE:GSK) is a leader in immunology, respiratory treatments, and vaccines for diseases such as influenza and shingles.
GSK plc (NYSE:GSK) is focusing on building on its existing portfolio of long-acting HIV treatments and prevention. The company is developing new regimens for four and six-monthly dosing. A pivotal trial for a four-month long-acting injectable for prevention is slated for 2026, with plans to file and launch in the same year. For treatment, a four-monthly regimen combining long-acting rilpivirine and cabotegravir is in development, with pivotal trials starting in the second half of 2025 and expected to launch in 2027.
GSK plc (NYSE:GSK) is advancing several promising assets in oncology and respiratory, including B7-H3 and B7-H4 antibody-drug conjugates for difficult-to-treat cancers and Camlipixant for refractory chronic cough. The company is also investing in new antibiotics and vaccines. Notable products include Gepotidacin, the first completely new antibiotic for uncomplicated urinary tract infections in over 20 years, and the 5-in-1 MenABCWY vaccine for meningococcal diseases.
4. Alibaba Group Holding Limited (NYSE:BABA)
Upside Potential: 46.71%
Forward P/E Ratio as of January 15: 8.49
Stock Price as of January 15: $81.68
Number of Hedge Fund Investors: 115
Alibaba Group Holding Limited (NYSE:BABA) is one of the world’s most valuable tech giants that offers a wide range of services including online retail, cloud computing, digital media, and entertainment. The company’s core business segments include Taobao and Tmall, Alibaba Cloud, Alibaba International Digital Commerce (AIDC), and other diverse ventures.
Alibaba Group Holding Limited (NYSE:BABA) is focusing on improving the overall user experience on its platforms, particularly Taobao and Tmall. This includes increasing purchase frequency and enhancing customer loyalty through initiatives such as the 88VIP membership program. The company has also implemented industry-standard software service fees and expanded the adoption of its AI-powered marketing tool, Quanzhantui, which helps merchants improve their marketing efficiency. Moreover, Alibaba Group Holding Limited (NYSE:BABA) is investing in advanced technology and AI infrastructure to deliver more reliable and cost-effective AI solutions across various industries.
Alibaba Group Holding Limited (NYSE:BABA) is also making efforts to improve the operational efficiency of its loss-making businesses, such as local services and digital media and entertainment. The company is focusing on strengthening synergies between its various business units, particularly in areas like global logistics, to create a more integrated and efficient ecosystem.
3. Honda Motor Co., Ltd. (NYSE:HMC)
Upside Potential: 47.76%
Forward P/E Ratio as of January 15: 6.75
Stock Price as of January 15: $28.31
Number of Hedge Fund Investors: 11
Honda Motor Co., Ltd. (NYSE:HMC) is a leading global automotive and motorcycle manufacturer headquartered in Tokyo, Japan. The company has grown to become one of the world’s largest and most innovative automotive companies. Honda Motor Co., Ltd. (NYSE:HMC) is a leader in innovation, producing fuel-efficient cars and developing hybrid and electric vehicle technologies. The company also produces motorcycles, a key segment in developing markets, and offers products like generators and marine engines.
Honda Motor Co., Ltd. (NYSE:HMC) is actively transitioning its product lineup to include more electric vehicles to align with global trends and regulatory requirements. The company has introduced several new EV models, such as the Honda Prologue, which is part of its strategy to offer a broader range of electric vehicles. To support this transition, Honda Motor Co., Ltd. (NYSE:HMC) is investing heavily in research and development to improve battery technology and reduce production costs, ensuring that its EVs are competitive in terms of performance and price.
To further strengthen its market position, Honda Motor Co., Ltd. (NYSE:HMC) is focusing on emerging markets, such as India and Vietnam, where there is a growing demand for motorcycles and other power products. The company is also investing in local production facilities to reduce costs and improve supply chain efficiency. Furthermore, Honda Motor Co., Ltd. (NYSE:HMC) is focusing on developing advanced technologies in areas such as autonomous driving, connected vehicles, and renewable energy.
2. PDD Holdings Inc. (NASDAQ:PDD)
Upside Potential: 48.38%
Forward P/E Ratio as of January 15: 7.61
Stock Price as of January 15: $98.13
Number of Hedge Fund Investors: 78
PDD Holdings Inc. (NASDAQ:PDD) is the parent company of Pinduoduo, a Chinese e-commerce platform known for its unique group-buying model. The platform connects consumers with manufacturers, offering competitive prices on a wide range of products, including groceries, electronics, and clothing. PDD serves both urban and rural consumers in China, leveraging social commerce and interactive shopping features. The company has also ventured into global markets through its subsidiary Temu, focusing on affordable e-commerce solutions.
PDD Holdings Inc. (NASDAQ:PDD), commonly known as Pinduoduo, is a leading e-commerce platform in China that has gained significant traction for its innovative group buying and social commerce models. The company has rapidly grown to become one of the largest e-commerce platforms in the country, known for its focus on offering high-quality products at competitive prices.
PDD Holdings Inc. (NASDAQ:PDD) has intensified its efforts to build a robust and healthy platform ecosystem. One of the key initiatives is the $1.36 billion fee reduction program, which includes measures such as service fee refunds, reduced fees for buy now pay later services, lower security deposits, and an easier fund withdrawal process. These measures have significantly reduced operating costs for merchants, particularly those in agricultural and national goods sectors, allowing them to allocate more resources to product development and technology upgrades.
PDD Holdings Inc. (NASDAQ:PDD) is expanding its offerings to include new smartphones, top-brand cosmetics, and healthy food for users in first- and second-tier cities. This move aims to address the personalized demands of urban professionals and younger generations. For consumers in third- and fourth-tier cities and rural areas, PDD Holdings Inc. (NASDAQ:PDD) is focusing on offering more premium home appliances, maternity and baby products, and fresh produce, driving a wave of consumption upgrades.
1. América Móvil, S.A.B. de C.V. (NYSE:AMX)
Upside Potential: 50.22%
Forward P/E Ratio as of January 15: 7.82
Stock Price as of January 15: $13.94
Number of Hedge Fund Investors: 8
América Móvil, S.A.B. de C.V. (NYSE:AMX) is one of the largest telecommunications companies in the Americas. The company provides a wide range of services including mobile, fixed-line, broadband, and pay TV. América Móvil, S.A.B. de C.V. (NYSE:AMX) operates in 18 countries across North, Central, and South America, as well as in Europe.
América Móvil, S.A.B. de C.V. (NYSE:AMX) is actively deploying 5G networks across its operating regions to provide faster and more reliable connectivity to its customers. This not only enhances the user experience but also opens up new opportunities for services such as IoT (Internet of Things) and smart city solutions. Furthermore, América Móvil, S.A.B. de C.V. (NYSE:AMX) is exploring the integration of AI and machine learning to optimize network performance, improve customer service, and develop personalized offerings. These technological initiatives are expected to drive long-term growth and maintain the company’s competitive edge.
América Móvil, S.A.B. de C.V. (NYSE:AMX) is also exploring new markets and services. The company is looking to expand its presence in Eastern Europe and other regions where it sees potential for growth. Additionally, the company is developing new services such as digital payments, cloud solutions, and enterprise services to cater to the evolving needs of its customers. By diversifying its portfolio, the company aims to create new revenue streams and enhance its value proposition to both consumers and businesses.
While we acknowledge the potential of América Móvil, S.A.B. de C.V. (NYSE:AMX) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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