In this article, we will look at the 12 Undervalued Cyclical Stocks to Buy Right Now.
Consumer Cyclicals: Sector Outlook 2025
On December 14, Brooke Roach, analyst at Goldman Sachs joined CNBC for an interview to discuss the firm’s outlook on consumer cyclicals for 2025. Roach mentioned that the firm is bullish on the outlook for consumer discretionary growth into 2025. She highlighted that the firm has a property consumer cash flow model, which considers various economist’s input regarding wages, healthcare, and essential expenditure cost. The model suggests that consumer spending will be strong in 2025, with discretionary cash flow growth of 5.2%. She explained that based on the research and findings the firm has a more optimistic view of consumer growth and thereby a bullish sentiment toward investment in apparel and accessories stocks in 2025.
Read Also: 12 Cheapest Stocks with Biggest Upside Potential and Top 10 Undervalued Tech Stocks to Buy According to Hedge Funds.
While talking about the themes that the firm has analyzed in 2024 and expects to continue this year, Roach mentioned that the consumer is very demanding and is seeking value. This means that they are looking for variety and innovation. Roach further elaborated that many of the top performers in the sector have been those companies that were able to provide the required innovation for the consumers. She also highlighted that heavy reliance on China as a sourcing partner has also been an issue for some of the companies. According to Roach, investors are looking for visibility into the sourcing plans, and companies that have successfully been able to present a plan for diversifying their sourcing have provided a more compelling investment case.
We have also covered consumer spending and its impact on the cyclical sector in the 8 Best Cyclical Stocks to Buy According to Hedge Funds. Here’s an excerpt from the article:
During strong economic periods, cyclical stocks tend to perform well because consumers have more disposable income to spend on luxury items, vacations, and home improvements. Conversely, during economic downturns or recessions, people often cut back on discretionary spending, leading to a decrease in demand for these goods and services.
As the Federal Reserve lowers interest rates, it is creating a favorable environment for investing in cyclical stocks. Lower interest rates reduce the cost of borrowing, which encourages both consumers and businesses to take out loans and increase their spending. This uptick in consumer spending is especially beneficial for companies that rely heavily on discretionary purchases.
On January 16, Reuters reported that the U.S. Commerce Department announced a rise in retail sales for December, driven by robust consumer demand for motor vehicles and a variety of other goods. The data highlights the economy’s resilience and supports the Federal Reserve’s cautious stance on further interest rate reductions this year. The upbeat retail figures, combined with recent labor market strength, prompted some economists to revise their economic growth forecasts for the fourth quarter closer to the strong pace seen in the July-September quarter.
With that let’s take a look at the 12 undervalued cyclical stocks to buy right now.
An overview of a manufacturing plant, representing the production of consumer products from the company.
Our Methodology
To compile the list of the 12 undervalued cyclical stocks to buy right now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we aggregated an initial list of cyclical stocks trading under the forward P/E of 15 with positive earnings growth expected this year. Next, we cross-checked the forward P/E for each stock from Seeking Alpha and earnings growth from Yahoo Finance. Lastly, we ranked the stocks in ascending order of the number of hedge fund holders sourced from the third quarter hedge fund database of Insider Monkey. Please note that the data was collected on January 29, 2025.
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12 Undervalued Cyclical Stocks to Buy Right Now
12. Amcor plc (NYSE:AMCR)
Forward P/E Ratio: 13.35
Earnings Growth: 0.38%
Number of Hedge Fund Holders: 18
Amcor plc (NYSE:AMCR) is a leading international packaging company that specializes in creating various types of packaging solutions for a wide range of products. The company produces packaging material for food, beverages, pharmaceuticals, medical devices, and personal care products. This includes both flexible packaging and rigid containers. It operates in more than 40 countries with approximately 218 sites worldwide.
On January 5, Anthony Pettinari, an analyst at CitiGroup upgraded the stock from Neutral to a Buy rating, increasing the price target from $11 to $12. Pettinari believes that the recent market sell-off is an opportunity for Amcor plc (NYSE:AMCR) as the company is trading close to its 52-week low. The analyst sees potential in the anticipated merger with Berry Global, as it will allow the company to reduce its cost which will be strategically beneficial amidst the ongoing volatility.
On January 23, Amcor plc (NYSE:AMCR) reported reaching a significant milestone in its planned merger with Berry Global, which is set to create a major player in consumer and healthcare packaging solutions. Both companies have filed a definitive joint proxy statement with the U.S. Securities and Exchange Commission (SEC), which is essential for moving forward with their all-stock merger agreement. The merger is anticipated to generate $650 million in synergies by the end of the third year post-merger. It is one of the 12 undervalued cyclical stocks to buy right now.
11. Levi Strauss & Co. (NYSE:LEVI)
Forward P/E Ratio: 14.8
Earnings Growth: 9.60%
Number of Hedge Fund Holders: 27
Levi Strauss & Co. (NYSE:LEVI) is a well-known apparel company that specializes in designing and selling clothing, particularly jeans. The company creates a variety of clothing items including jeans, casual wear, and accessories for men, women, and children. Their popular brands include Levi’s, Dockers, Denizen, Signature by Levi Strauss & Co. (NYSE:LEVI), and Beyond Yoga. It operates in more than 110 countries and has around 3,200 retail stores along with a presence on online platforms.
On January 22, Dana Telsey, an analyst at Telsey Advisory initiated a Buy rating on the stock with a price target of $26. The brand has been growing substantially, during the fiscal third quarter of 2024, management reported their brand grew 5% internationally, marking the best quarterly performance in two years. Levi Strauss & Co. (NYSE:LEVI) reported net revenue of $1.5 billion for the quarter, which remained flat on a reported basis due to Dockers, China, and Mexico not meeting expectations.
To tackle this the company is evaluating strategic alternatives for Dockers, including potential sale options, to focus on its core Levi’s brand and direct-to-consumer (DTC) strategies. On the other hand, while DTC sales in Mexico grew in double digits, wholesale performance was mixed due to external factors such as a cybersecurity breach affecting shipping. The company is working closely with partners to stabilize this segment. Management anticipates continued revenue growth and profitability improvements as it strengthens its core strategies and addresses underperforming areas. It is one of the undervalued cyclical stocks to buy right now.
Middle Coast Investing stated the following regarding Levi Strauss & Co. (NYSE:LEVI) in its Q4 2024 investor letter:
I’ve owned Levi-Strauss (LEVI) briefly before, and am trying again after a ye where its stock nearly doubled from where I bought it, before dropping 30%. This is a small position based on the company’s improving cash flow and balance sheet and the ubiquity of the brand. But it’s also to some degree just a better alternative to cash for one account.
10. BorgWarner Inc. (NYSE:BWA)
Forward P/E Ratio: 7.78
Earnings Growth: 6.47%
Number of Hedge Fund Holders: 27
BorgWarner Inc. (NYSE:BWA) is a prominent player in the automotive industry. The company provides key components for electric, hybrid, and combustion engine vehicles. It operates through four main business segments including Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems, and Battery & Charging Systems.
BorgWarner Inc. (NYSE:BWA) is making significant strides in the electric vehicle (EV) market, particularly in Asia. It has secured contracts for its High Voltage Coolant Heater (HVCH) technology with three major original equipment manufacturers (OEMs) in Asia.
In China, its HVCH will be used in a fully electric SUV, with production starting in the second quarter of 2025. In Korea, the technology will be incorporated into an electric pickup truck, expected to begin production in March 2025. Lastly, in Japan, BorgWarner Inc. (NYSE:BWA) has won its first HVCH contract for a small battery electric vehicle, with production set to start in 2028. This also marks a notable entry into the Japanese market.
These strategic wins are expected to boost long-term profitability for the company. Moreover, its cheap valuation makes it one of the 12 undervalued cyclical stocks to buy right now.
Diamond Hill Large Cap Strategy stated the following regarding BorgWarner Inc. (NYSE:BWA) in its first quarter 2024 investor letter:
“Other bottom Q1 contributors included BorgWarner Inc. (NYSE:BWA) and Laboratory Corporation of America (LabCorp). Global automotive supplier BorgWarner has faced near-term volatility in the ongoing shift to electric vehicles and hybrids, which has, in turn, impacted results and weighed on shares. Given our expectation this volatility will continue for the foreseeable future, we exited our position in the quarter to upgrade our capital into more compelling opportunities.”
9. Taylor Morrison Home Corporation (NYSE:TMHC)
Forward P/E Ratio: 8
Earnings Growth: 16.18%
Number of Hedge Fund Holders: 30
Taylor Morrison Home Corporation (NYSE:TMHC) is a major homebuilder and land developer in the United States, headquartered in Arizona. It designs and constructs various types of homes, including single-family houses and multi-family units. The company caters to different market segments, such as first-time homebuyers, families looking to upgrade, and those seeking resort-style living. Taylor Morrison Home Corporation (NYSE:TMHC) operates across 11 states in high-demand areas, ensuring they reach a diverse range of customers.
The company delivered robust financial performance during the fiscal third quarter of 2024 amidst economic uncertainty and hurricane disruptions. It delivered 3,394 homes at an average price of $598,000, resulting in over $2 billion in revenue. The high demand and price resilience across its portfolio led earnings per diluted share up by 50% year-over-year. Moreover, the home closing revenue also increased 26%, with a gross margin of 24.8%.
Homebuyer demand remained solid, particularly in the East and Central regions, with a 9% increase in net orders year-over-year. The company noted that their resort lifestyle communities significantly contributed to revenue growth, despite challenges posed by hurricanes. Taylor Morrison Home Corporation (NYSE:TMHC) is one of the 12 undervalued cyclical stocks to buy right now.
8. Boyd Gaming Corporation (NYSE:BYD)
Forward P/E Ratio: 11.97
Earnings Growth: 6.57%
Number of Hedge Fund Holders: 34
Boyd Gaming Corporation (NYSE:BYD) is a major gaming operator in the United States. The company runs 28 physical casinos across the country, primarily located in Nevada, Illinois, Indiana, and Louisiana. These include well-known properties such as the Gold Coast Hotel and Casino, and Sam’s Town Hotel and Gambling Hall.
On January 24, Barclays raised their price target on the stock from $71 to $74, while keeping an Equal Weight rating. The firm noted that while Vegas, Macau, and digital prints are likely to underwhelm, other locations outside of Las Vegas are expected to beat the lower end of expectations to provide modest hope.
During the fiscal third quarter of 2024, Boyd Gaming Corporation (NYSE:BYD) reported robust results in its Downtown Las Vegas segment, largely due to recent investments in their properties and an increase in visitors from Hawaii. The Fremont Hotel and Casino were notable, the locations achieved record revenue and earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) during the quarter. It is one of the undervalued cyclical stocks to buy right now.
7. eBay Inc. (NASDAQ:EBAY)
Forward P/E Ratio: 13.81
Earnings Growth: 12.14%
Number of Hedge Fund Holders: 43
eBay Inc. (NASDAQ:EBAY) is an international e-commerce company that runs an online marketplace. It is one of the pioneers in the e-commerce industry and operates in more than 200 countries.
Management has been focused on growing the advertisement revenue and improving the payment system. To achieve this the company has also incorporated AI into its platform with features such as magical listing and personalized recommendations. eBay Inc. (NASDAQ:EBAY) has also announced a significant collaboration with OpenAI to integrate an AI agent named Operator into its e-commerce platform. The Operator platform will act as a virtual assistant capable of autonomously performing tasks across the internet, such as online shopping and directing users to eBay for unique inventory finds.
During the fiscal third quarter of 2024, the company grew its revenue by 4% year-over-year to reach $2.6 billion. The growth was driven by its strong performance in the advertisement segment which grew 15% during the same time. eBay Inc. (NASDAQ:EBAY) is one of the 12 undervalued cyclical stocks to buy right now.
6. Crown Holdings, Inc. (NYSE:CCK)
Forward P/E Ratio: 14.15
Earnings Growth: 21.77%
Number of Hedge Fund Holders: 43
Crown Holdings, Inc. (NYSE:CCK) is a major company that specializes in packaging products for both consumer and industrial markets. It is recognized as the second-largest manufacturer of aluminum cans internationally. Vulcan Value Partners purchased positions in Crown Holdings, Inc. (NYSE:CCK) during the fourth quarter of 2024.
The investment management company pointed out that there are two significant competitive advantages for the company. Firstly, the aluminum can industry is a rational industry with high barriers to entry. Secondly, aluminum cans are being preferred over other materials such as plastics as aluminum is considered more sustainable. Both of these advantages allow Crown Holdings, Inc. (NYSE:CCK) to generate stable margins and robust free cash flow.
Moreover, on January 23, Arun Viswanathan, an analyst at RBC Capital, maintained a Buy rating on the stock keeping the price target at $113. During the fiscal third quarter of 2024, the company’s global beverage business which deals with cans grew 5% year-over-year, with increased shipments across all key markets. As a result, the operational income of the company grew from $374 million to $444 million year-over-year. It is an undervalued cyclical stock to buy right now. Vulcan Value Partners stated the following regarding Crown Holdings, Inc. (NYSE:CCK) in its Q4 2024 investor letter:
“We purchased six new positions during the quarter: Sodexo SA, Crown Holdings Inc., Heineken NV, Rentokil Initial plc, Pernod Ricard SA, and UnitedHealth Group Inc. Crown Holdings, Inc. (NYSE:CCK) is the second largest manufacturer of aluminum beverage cans globally. The beverage “can” industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. While inflation has been a slight headwind, volumes are growing as aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a better, more sustainable product. Additionally, through free cash flow generation and the proceeds from the sale of a minority investment, Crown has de-levered, putting the company in a position to buy back shares at a discount to our estimate of intrinsic value.”
5. Expedia Group, Inc. (NASDAQ:EXPE)
Forward P/E Ratio: 14.22
Earnings Growth: 21.56%
Number of Hedge Fund Holders: 52
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel company that allows users to plan and book their travel experiences. The company operates through its popular brands including Vrbo, Hotels.com, and Expedia. Its segments include B2B, B2C, and Trivago.
During the fiscal third quarter of 2024, the company improved its net bookings by 7% year-over-year to reach $27.5 billion. The improving trends in global travel are helping Expedia Group, Inc. (NASDAQ:EXPE), as a result, it grew its revenue by 3% year-over-year and also improved its net income by 61% during the same time.
On January 14, Brian Nowak, analyst at Morgan Stanley raised the price target on EXPE from $180 to $185, while keeping his Equal Weight rating on the stock. Nowak is bullish on the North American internet sector and believes that GPU and AI-related fundamental development will provide potential upside for these companies. Here’s what Carillon Chartwell Mid Cap Value Fund said about the company in its Q3 2024 investor letter:
“Expedia Group, Inc. (NASDAQ:EXPE) is an online travel services provider with several leading brands including Expedia, Hotels.com, and Vrbo. The company saw accelerating bookings growth at Expedia and a return to growth at vacation rental platform Vrbo.”
4. Aptiv PLC (NYSE:APTV)
Forward P/E Ratio: 10.38
Earnings Growth: 17.65%
Number of Hedge Fund Holders: 52
Aptiv PLC (NYSE:APTV) is an innovative technology company that leverages artificial intelligence and machine learning capabilities to enhance automotive safety and security. The company designs systems that allow vehicles to communicate with each other and their environment. Its technology not only enables the electrification of vehicles but also develops technologies that automate driving and advance user interface.
The fiscal third quarter of 2024 highlighted both strengths and challenges for the company. The total revenue for Aptiv PLC (NYSE:APTV) decreased 6% year-over-year due to less vehicle production in the US and Europe. On the other hand, despite a decrease in revenue, the company achieved a record operating income of $593 million. This is because of management’s strategies to improve profitability, including prioritizing investments in flexible product solutions, diversifying customer exposure, and optimizing its manufacturing footprint. Moreover, the company also secured $3.6 billion in new business awards during the quarter, bringing the year-to-date total to nearly $21 billion.
On January 27, Baird upgraded the stock from Neutral to Outperform and lifted the price target for APTV from $75 to $82. It is one of the 12 undervalued cyclical stocks to buy right now.
ClearBridge Large Cap Growth Strategy stated the following regarding Aptiv PLC (NYSE:APTV) in its Q3 2024 investor letter:
“Lastly, we sold our position in tier 1 automotive parts supplier Aptiv PLC (NYSE:APTV). Part of our original investment thesis for Aptiv was that the company should garner a premium multiple versus competitors as its product portfolio was well-positioned to take share as auto production shifted toward electric vehicles. However, weak global auto demand and slowing mix shift toward EVs has pressured Aptiv’s business and the company is capturing share at a slower rate than we anticipated. While Aptiv has executed well on profitability and trades at a cheap valuation, we do not foresee the same level of multiple expansion as the company’s growth relative to the market remains weak.”
3. Carnival Corporation & plc (NYSE:CCL)
Forward P/E Ratio: 14.73
Earnings Growth: 113.76%
Number of Hedge Fund Holders: 54
Carnival Corporation & plc (NYSE:CCL) is a leisure travel company that operates in the cruise industry. It operates popular brands such as Carnival Cruise Line, Holland America Line, Princess Cruises, and more.
On January 24, C. Patrick Scholes, an analyst at Truist, raised his price target on CCL from $29 to $30, while keeping his Hold rating on the stock. The firm has been talking to senior-level executives from the travel industry and their examination of big data suggests a huge upside for the travel industry. Although the cruise stocks are around 7% to 19% higher in terms of price from pre-pandemic levels, they still remain fairly below the growth rate of land-based hotel and leisure segments.
The fiscal 2024 revenue for Carnival Corporation & plc (NYSE:CCL) was at an all-time high of $25 billion, indicating a 15% increase year-over-year. Management noted that the growth in the travel sector has been robust marked by increased consumer spending. Carnival Corporation & plc (NYSE:CCL) is the 3rd most undervalued cyclical stock to buy right now.
2. JD.com, Inc. (NASDAQ:JD)
Forward P/E Ratio: 9.79
Earnings Growth: 14.43%
Number of Hedge Fund Holders: 75
JD.com, Inc. (NASDAQ:JD) is a Chinese e-commerce company, which has gone on to become an established player due to its robust supply chain networks. The platform it runs offers a range of products from home appliances to technology products. Joyce Ju, an analyst at Bank of America Securities, on January 22, reiterated a Buy rating on the stock while keeping the price target at $48. The analyst believes that the company will perform strongly in Q4 on the back of government subsidies and stimulus, while also benefiting from the promotional activities.
During the fiscal third quarter of 2024, JD.com, Inc. (NASDAQ:JD) grew its revenue by 5% year-over-year, driven by growth in general merchandise and electronic categories. The established logistics and supply chain networks led to its profitability higher as gross profits improved by 16% during the same time. It is one of the undervalued cyclical stocks to buy right now.
Ariel Global Fund stated the following regarding JD.com, Inc. (NASDAQ:JD) in its Q3 2024 investor letter:
“China-based E-commerce company, JD.com, Inc. (NASDAQ:JD) was the top contributor in the quarter as the People’s Bank of China’s (PBOC) comprehensive stimulus measures bolstered investor confidence in the Chinese economy. The improving economic sentiment is fueling consumer spending which benefits the company’s retail operations. Additionally, the company’s strategic decision to diversify general merchandise product offerings, expand its third-party marketplace business and monetize advertising streams has contributed to consecutive quarterly earnings beats. JD.com is also poised to capitalize on the home appliance trade-in program, which is one of its largest product categories. Given the favorable market environment, the company’s strategic positioning and supply chain efficiency improvements, we continue to like its long-term growth prospects.”
1. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E Ratio: 9.84
Earnings Growth: 12.68%
Number of Hedge Fund Holders: 78
PDD Holdings Inc. (NASDAQ:PDD) is another Chinese e-commerce company that owns and operates renowned platforms such as Temu and Pinduoduo. Its strategic edge lies in its group-buying model from small and medium businesses, which allows its listings to be cheaper than its competitors. Its brand Temu now operates in more than 50 countries globally and has become one of the fastest-growing platforms around the world.
GreenWood Investors in its Q4 2024 investor letter highlighted that PDD Holdings Inc. (NASDAQ:PDD) has become a fast-growing player in the industry and has achieved Gross Merchandise Value comparable to other giants such as Amazon and JD. However, it has done so in only one-third time compared to its competitors. The investment management firm remains confident in Temu and sees PDD Holdings Inc. (NASDAQ:PDD) as an indispensable player in the industry. During the fiscal third quarter of 2024, the company grew its top line by 44%, year-over-year. Despite competitive pressures, the company is focused on building a sustainable ecosystem through merchant support and safety updates. It is the best undervalued cyclical stock to buy right now.
GreenWood Investors stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q4 2024 investor letter:
“Aside from transitory foreign exchange translation losses (as opposed to trading losses), the two other notable detractors from our portfolio were MEI Pharma and PDD Holdings Inc. (NASDAQ:PDD) in 2024.
PDD Holdings founder Colin Huang is who inspired us to “run 3x faster,” as the relentless corporate culture of PDD has built an e-commerce company with roughly the same GMV (gross merchandise value) of Amazon in one-third the time it took Amazon to build itself. Shares reacted negatively when the company decided to reinvest its record margins into even faster growth and creating a healthier supplier ecosystem. As it looks set to create a second Amazon with its international site Temu, we are highly attracted to the opportunity. Sales are growing 4x faster than Amazon’s, yet shares are priced at less than a quarter of the Amazon earnings multiple.
PDD is a perfect example of why we want to look outside of the “Big Ten” companies that are nearly a third of global market indices. We would not want to compete with the demanding corporate culture of PDD and Temu. Its operating model is relentless at identifying efficiency throughout the manufacturing and selling supply chain. Not only is it a more formidable competitor than Amazon, and growing much faster, but the valuation is 4x more attractive than Amazon’s…” (Click here to read the full text)
While we acknowledge the potential of PDD Holdings Inc. (NASDAQ:PDD) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PDD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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