In this article, we will take a detailed look at the 12 Stocks to Buy at a Discount Now. For a quick overview of such stocks, read our article 5 Stocks to Buy at a Discount Now.
Despite the Dow hitting an all-time high earlier this month and many technology stocks like Salesforce Inc (NYSE:CRM), Alphabet Inc Class A (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT) extending their gains from the past year, several analysts believe the stock market has a lot of room to run. Possible rate cuts is one of the reasons behind this optimism.
Bank of America’s analyst Michael Hartnett earlier this month said in his note that this is still a buy the dip market as he believes the market is still pricing in 140 bps of rate cuts from the Fed this year and the first half of 2024 upside is “bigger than downside.”
If executed smartly, the strategy involving buying stocks on the dip has proven to post higher returns in the past. A 2018 report by S&P Global took a look at the efficiency of the ‘Buy the Dip’ strategy by analyzing historical returns. The report said that between 2002 and 2017, buying stocks that lost about 10% or more relative to the broader market index, during a single day, significantly outperformed the index. The report said that individual stock declines are usually triggered by weak earnings reports or disappointing guidance chances. But ‘Buy the Dip’ strategy, according to the report, is still profitable when we exclude the effect of these events and short-term news.
Photo by Marga Santoso on Unsplash
Methodology
For this article we first used a stock screener to identify stocks with PE ratios less than 15 and year-to-date stock price decline of 5% and above through January 16. From these stocks we selected 12 stocks with the highest number of hedge fund investors. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12. Cenovus Energy Inc (NYSE:CVE)
Number of Hedge Fund Investors: 41
Cenovus Energy Inc (NYSE:CVE) ranks 12th in our list of the stocks to buy at a discount now according to hedge funds. The stock has lost about 5.8% year to date through January 16.
As of the end of the third quarter of 2023, 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Cenovus Energy Inc (NYSE:CVE).
L1 Long Short Fund made the following comment about Cenovus Energy Inc. (NYSE:CVE) in its Q3 2023 investor letter:
“Cenovus Energy Inc. (NYSE:CVE) (Long +23%) shares rallied as WTI oil prices rose to ~US$91/bbl over the month, the highest level since November 2022. The company also had tailwinds from higher refinery margins, particularly in North America which remains their key exposure. Cenovus continues to generate strong free cash flow at current oil price levels, with the long-life nature of its oil sands assets and its low cost of production providing a break-even oil price at around ~US$40/bbl. We estimate the company can reach its net debt target in early CY24, enabling a step-up in shareholder returns through on-market share buybacks.”
11. Ford Motor Co (NYSE:F)
Number of Hedge Fund Investors: 43
Ford Motor Co (NYSE:F) shares are down by about 5.7% year to date through January 16. But it is one of the most popular car stocks among elite hedge funds tracked by Insider Monkey. As of the end the third quarter of 2023, 43 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Ford Motor Co (NYSE:F). Ford is one of the best stocks to buy at a discount now.
The biggest hedge fund stakeholder of Ford Motor Co (NYSE:F) during this period was Ken Fisher’s Fisher Asset Management which owns a $691 million stake in Ford Motor Co (NYSE:F).
During the fourth quarter of 2023 Ford sold 25,937 EVs, up about 24% on a year-over-year basis.
10. Baidu Inc (NASDAQ:BIDU)
Number of Hedge Fund Investors: 44
Chinese technology stock Baidu Inc (NASDAQ:BIDU) is popular among elite money managers. As of the end of the third quarter of 2023, 44 hedge funds tracked by Insider Monkey had stakes in Baidu Inc (NASDAQ:BIDU). The most notable hedge fund stakeholder of Baidu Inc (NASDAQ:BIDU) during this period was Panayotis Takis Sparaggis’s Alkeon Capital Management which owns a $332 million stake in Baidu Inc (NASDAQ:BIDU).
Earlier this month, UBS published a report listing stocks for the next five years and labeled them as “Enabling Tech” companies. Baidu Inc (NASDAQ:BIDU) made it to the list as UBS praised Baidu Inc’s (NASDAQ:BIDU) valuation and said its non-tech business could be its long-term catalyst.
Ariel Global Fund made the following comment about Baidu, Inc. (NASDAQ:BIDU) in its Q2 2023 investor letter:
“By comparison, after a strong run last quarter, China’s internet search and online community leader, Baidu, Inc. (NASDAQ:BIDU) declined alongside a correction in Chinese stocks attributed to weak gross domestic product. We believe this price action runs counter to the company’s solid business fundamentals. Baidu delivered a top- and bottom-line earnings beat in the period, driven by a recovery in ad and cloud revenues. The company continues to invest heavily in Artificial Intelligence (AI) and is launching a generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
9. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Investors: 47
MGM Resorts International (NYSE:MGM) shares are down by about 6% year to date through January 16. During the third quarter, MGM’s EPS came in at $0.64, beating estimates by $0.15. Revenue in the quarter jumped 16.1% year over year to $3.97 billion, surpassing estimates by $80 million.
As of the end of the third quarter of 2023, 47 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in the casino and entertainment giant MGM Resorts International (NYSE:MGM). MGM ranks 7th in our list of the best stocks to buy at a discount now.
Longleaf Partners Fund stated the following regarding MGM Resorts International (NYSE:MGM) in its fourth quarter 2023 investor letter:
“MGM Resorts International (NYSE:MGM) & Hyatt – Hospitality companies MGM Resorts and Hyatt were both strong performers in the fourth quarter and for the year, outperforming expectations that the post-COVID travel rebound would ease in 2023. Casino and online gaming company MGM saw double-digit revenue growth and strong 2023 bookings in Las Vegas in the first half, which moderated in the second half but remained solid. A cybersecurity attack negatively impacted 3Q results, but MGM does not expect the $100 million hit to have a material effect on its financial condition and operational results for the year. MGM bought back discounted shares at a 15% annualized rate and authorized another $2 billion buyback in 4Q, which represents another 15% of the company.”
8. Noble Corporation PLC (NYSE:NE)
Number of Hedge Fund Investors: 48
Offshore drilling company Noble Corporation PLC (NYSE:NE) shares are down by about 7% year to date. The stock has a dividend yield of about 3.5% as of January 16. In December, analyst firm started covering the stock with a Neutral rating and $52 price target. The firm praised Noble Corporation PLC’s (NYSE:NE) concentration of ultra-deepwater assets that are highly in demand in the current market.
As of the end of the third quarter of 2023, 48 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Noble Corporation PLC (NYSE:NE). The most notable stakeholder of Noble Corporation PLC (NYSE:NE) was William B. Gray’s Orbis Investment Management which owns a $178 million stake in Noble Corporation PLC (NYSE:NE). In addition to Noble, hedge funds are also buying Salesforce Inc (NYSE:CRM), Alphabet Inc Class A (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT).
Carillon Scout Mid Cap Fund made the following comment about Noble Corporation Plc (NYSE:NE) in its Q3 2023 investor letter:
“Noble Corporation Plc (NYSE:NE), an offshore contract driller, benefited from improved sentiment regarding the offshore drilling business as higher day rates, the all-in daily costs of renting a drilling rig, were reported across the industry. The supply and demand for offshore rigs has tightened considerably.”
7. Devon Energy Corp (NYSE:DVN)
Number of Hedge Fund Investors: 52
With a PE ratio of 7.2 and a dividend yield of over 6%, Devon Energy Corp (NYSE:DVN) is one of the best stocks to buy at a discount according to hedge fund managers. A total of 52 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Devon Energy Corp (NYSE:DVN). The biggest hedge fund stakeholder of Devon Energy Corp (NYSE:DVN) during this period was Donald Yacktman’s Yacktman Asset Management which had a $145.2 million stake in the company.
In December, Goldman Sachs talked about five large-cap energy stocks it believes could rebound in 2024. Goldman’s analysts believe Devon Energy Corp (NYSE:DVN) will regain operational momentum through capital spending and production strategy. The investment firm has a $51 price target on the stock.
6. JD.Com Inc (NASDAQ:JD)
Number of Hedge Fund Investors: 53
Chinese ecommerce company JD.Com Inc (NASDAQ:JD) shares have lost about 9% year to date through January 16. Over the past one year the stock has lost a whopping 58%. In December, JD.Com Inc (NASDAQ:JD) founder Richard Liu reportedly commented at an internal forum that JD.Com Inc (NASDAQ:JD) has become “bloated” and needs changes. In November JD.Com Inc (NASDAQ:JD) posted better-than-expected Q3 earnings. JD is one of the best stocks to buy at a discount now according to smart money investors.
As of the end of the third quarter of 2023, 53 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in JD.Com Inc (NASDAQ:JD). In addition to JD, some other stocks hedge funds are buying include Salesforce Inc (NYSE:CRM), Alphabet Inc Class A (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT).
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Disclosure. None. 12 Stocks to Buy at a Discount Now was initially published on Insider Monkey.