14 Best Undervalued Stocks To Buy Now

Published on September 17, 2023 at 12:19 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 14 best undervalued stocks to buy now according to the media. To see more such companies, go directly to 5 Best Undervalued Stocks To Buy Now.

Much has been said and will be said about value investing and the art of picking stocks that are trading below their true value. But legendary value investor Howard Marks has penned some great words of wisdom on this topic that remain unprecedented. His book entitled “The Most Important Thing” needs more attention, especially during volatile times of today when investors are scrambling to make sense of the stock market movements.

A chapter in Marks’ book entitled “The Most Important Thing is … Value” talks in detail about different approaches to investing. Marks shows us the cracks and weaknesses of technical analysis-based investing techniques and why momentum investing and analyzing a stock based on its past trends is not the right approach. While Marks vehemently rejects any kind of conjecture or speculation and touts the usefulness of value investing, he acknowledges that value investing also gives importance to taking into account the future when it comes to stock analysis. He says:

“It would be convenient to say that adherence to value investing permits investors to avoid conjecture about the future and that growth investing con sists only of conjecture about the future, but that would be a considerable exaggeration. After all, establishing the current value of a business requires an opinion regarding its future, and that in turn must take into account the likely macro-economic environment, competitive developments and technological advances. Even a promising net-net investment can be doomed if the company’s assets are squandered on money-losing operations or un- wise acquisitions. There’s no bright-line distinction between value and growth; both re- quire us to deal with the future. Value investors think about the company’s potential for growth, and the “growth at a reasonable price” school pays explicit homage to value. It’s all a matter of degree. However, I think it can fairly be said that growth investing is about the future, whereas value investing emphasizes current-day considerations but can’t escape dealing with the future.”

Marks also emphasizes in the book about appreciating the role of luck and randomness and builds upon the ideas of Nassim Nicholas Taleb who discussed the matters of luck in his famous book Fooled by Randomness. Marks’ intention behind this chapter is to highlight the importance of having long-term outlook while investing. Making $1 million playing Russian roulette is not same as making $1 million through several years of patient investing. Even a terrible financial advisor could get lucky and post huge returns in a month or a year but that would only be by sheer luck and this advisor might feel good for a few months but he would ultimately be exposed. That’s why investors should not be fooled by short-term news cycles if they truly want to invest in companies that have intrinsic value.

Howard Marks of Oaktree Capital Management

Our Methodology

For this article we surveyed at least 15 credible financial websites and picked 14 stocks that these websites believe are undervalued. We went with a consensus opinion-based approach and picked only those stocks that we spotted repeatedly mentioned by several websites during our survey. The list is ranked in ascending order of the number of hedge fund investors.

Best Undervalued Stocks To Buy Now According to the Media

14. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 23

NextEra Energy, Inc. (NYSE:NEE) is considered an important undervalued stock with long-term potential by many credible financial outlets. NextEra Energy, Inc. (NYSE:NEE) has lost about 21% year to date.

As of the end of the second quarter of 2023, 59 hedge funds tracked by Insider Monkey had stakes in NextEra Energy, Inc. (NYSE:NEE). The biggest stakeholder of NextEra Energy, Inc. (NYSE:NEE) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $190 million stake in the company.

13. United Airlines Holdings Inc. (NYSE:UAL)

Number of Hedge Fund Holders: 40

United Airlines Holdings Inc. (NYSE:UAL) shares have gained about 27% year to date through September 8, thanks to the rising travel demand. United Airlines Holdings Inc. (NYSE:UAL) is still considered as an undervalued play by many mainstream media outlets. United Airlines Holdings Inc. (NYSE:UAL)’s PE ratio as of September 8 stands at 5.95.

As of the end of the second quarter of 2023, 40 hedge funds tracked by Insider Monkey have stakes in United Airlines Holdings Inc. (NYSE:UAL). The biggest stakeholder of United Airlines Holdings Inc. (NYSE:UAL) is Ken Griffin’s Citadel Investment Group which owns a $272 million stake in the company.

12. Albemarle Corporation (NYSE:ALB)

Number of Hedge Fund Holders: 41

Lithium company Albemarle Corporation (NYSE:ALB) ranks 12th in our list of the best undervalued stocks to buy according to the media. Albemarle Corporation (NYSE:ALB) recently upped its bid to acquire Liontown Resources. Last month Albemarle Corporation (NYSE:ALB) posted second quarter results. Adjusted EPS in the quarter came in at $7.33, beating estimates by $2.81. Revenue in the quarter jumped 60.1% year over year but still missed estimates by $20 million.

A total of 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Albemarle Corporation (NYSE:ALB). The biggest stakeholder of Albemarle Corporation (NYSE:ALB) during this period was Philippe Laffont’s Coatue Management which owns a $154.3 million stake in the company.

11. The Estee Lauder Companies Inc. (NYSE:EL)

Number of Hedge Fund Holders: 44

Cosmetics company The Estee Lauder Companies Inc. (NYSE:EL) is a surprising entry in the list as several top websites we surveyed believe the stock is an undervalued play. The Estee Lauder Companies Inc. (NYSE:EL) shares have lost about 37% over the past one year. JPMorgan last month said a report that it believes The Estee Lauder Companies Inc. (NYSE:EL) shares have “bottomed out.” The comment came even when the company recently gave disappointing sales guidance. JPMorgan has an Overweight rating on The Estee Lauder Companies Inc. (NYSE:EL).

The Estee Lauder Companies Inc. (NYSE:EL)’s CEO Frabrizio Freda said the following about the company’s long-term plans during a latest earnings call:

“So to be clear, we will be a company by the end of 2024 with $6 billion brands, extraordinary scale in the global system and global reach. So this is behind our strengths. Then I wanted to underline the strengths of our innovation. Our innovation is strong. It’s also in tough challenging year like 2023, remains at 25%. And the innovation pipeline for 2024, 2025 is very, very strong. Particularly in 2025, we have some extra wide spaces innovation, which are very promising. So this also will support the continuous strength of these other parts of the business — other regions, as you mentioned. And then finally, the execution in this region has been stepping up because we explained that as the recovery from the pandemic progress, our ability to execute in the post-pandemic world has been developed and is getting better and better month after month.

So in the regions which have been faster in the post-pandemic development, we have been faster in recovering great execution and great results, so this will continue to progress in 2024. So we have good confidence on that. On the U.S. where, on the contrary, we said there is work to be done, the team is very focused on doing this work. We have a very clear plan. Again, I summarized them in the prepared remarks, but to go back to them, our strategy in rebuilding the North America growth is really various [indiscernible] four big building blocks. The first one is a very rich pipeline of newness, which is later in 2024 and further reinforced in 2025, focus on breakthrough innovation on new claims that will help also unlocking the consumers in online, and especially multi more aggressively.”

Here is what Aristotle Atlantic Partners has to say about The Estee Lauder Companies Inc. (NYSE:EL) in its Q2 2023 investor letter:

“Estee Lauder shares were weak during the second quarter, following an inline earnings report where Estee again pushed out the timing of a recovery in their travel retail business due to sluggish travel trends in China and an inventory overhand in that end market. Estee reduced fiscal 2023 earnings guidance again and pushed the timing of the recovery toward the end of this calendar year. Outside of travel retail, growth was solid in the Americas, Europe, APAC, Emerging Markets and China.”

10. Comerica Incorporated (NYSE:CMA)

Number of Hedge Fund Holders: 46

Comerica Incorporated (NYSE:CMA) ranks 10th in our list of the best undervalued stocks to buy according to the media. Comerica Incorporated (NYSE:CMA) is recommended by several financial websites amid its attractive valuation. Comerica Incorporated (NYSE:CMA)’s PE ratio as of September 8 stands at 4.74. Comerica Incorporated (NYSE:CMA) is taking a hit after S&P Global Ratings downgraded it amid large deposit outflows and higher for longer rates.

As of the end of the second quarter of 2023, 46 hedge funds out of the 910 funds in Insider Monkey’s database had stakes in Comerica Incorporated (NYSE:CMA).

Third Avenue Value Fund made the following comment about Comerica Incorporated (NYSE:CMA) in its first quarter 2023 investor letter:

“The largest detractors from Fund performance during the quarter included two banks, Comerica Incorporated (NYSE:CMA) and Deutsche Bank. As it relates to the Fund specifically, events within U.S. banking applied most directly to our investment in Comerica, a U.S. super-regional that does have a large portion of corporate deposits and is not classified as a globally systemically important bank (“G-SIB”), which means it has not recognized certain mark-to-market securities losses in its regulatory capital. Comerica was a 2.6% position at the beginning of the quarter, prior to a roughly 34% stock price decline during the quarter. After purchasing more shares following the stock price decline, the Fund’s position in Comerica was approximately 2.3% at quarter end. While the general contagion fears and bank depositor behavior remain a fluid situation today, we took some confidence from immediate, forceful and targeted actions by the Fed, FDIC and Treasury. In our view, the Fed’s Bank Term Funding Program (“BTFP”) seems a well-tailored and appropriate near-term liquidity solution that allows banks to obtain immediate liquidity, collateralized by the par value of securities, to meet any near-term deposit outflows. At the time of this writing, early signs are that the deposit flight from regional banks is calming rapidly and depositor psychology is improving, though this could change. To the extent that calming continues, our suspicion is that there may be very attractive bargains to be had among regional banks. More will be known in the coming days and weeks as information regarding deposit flows emanates post-quarter end. That said, there will remain some mystery around the extent of the bargains on offer because increases in FDIC funding, increases in regulatory capital requirements, more stringent liquidity stress testing, and changes to the list of banks subject to G-SIB regulatory regimes are all on the table now. It is also very likely that deposit costs, which had been rising very slowly, will rise much more rapidly as commercial banks work harder to entice depositors to stay put. None of these developments, if they eventuate, are likely to impact banks’ returns and earnings in a positive way.

More broadly, the Third Avenue Value Fund owned investments categorized as financials totaling 15.94% by weight, at quarter end. This category includes non-bank financials such as Old Republic, a U.S. property and casualty insurer and title insurance business, Lazard, an advisory business and asset management firm, and Ashmore, a U.K. asset management firm specializing in emerging markets credit. The Fund’s actual bank exposure at quarter end totaled 9.52% and is comprised of Bank of Ireland, Deutsche Bank and Comerica, in order of position size…” (Click here to read the full text)

9. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 53

Verizon Communications Inc. (NYSE:VZ) made it to the list of best undervalued stocks compiled by almost all major finance publications recently. Verizon Communications Inc. (NYSE:VZ) has retreated about 18% over the past one year and its PE ratio is 6.76 as of September 8.

Insider Monkey’s database of 910 hedge funds shows that 53 hedge funds out of the 910 funds had stakes in Verizon Communications Inc. (NYSE:VZ). The biggest stakeholder of Verizon Communications Inc. (NYSE:VZ) during this period was Ric Dillon’s Diamond Hill Capital which owns a $250 million stake in the company.

The London Company Large Cap Strategy made the following comment about Verizon Communications Inc. (NYSE:VZ) in its second quarter 2023 investor letter:

“Exited: Verizon Communications Inc. (NYSE:VZ) Sale reflects heightened competitive activity from both AT&T and T-Mobile. While VZ has the highest quality network, we are concerned that competitors’ focus on market share gains could continue to negatively affect VZ’s business.”

8. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 71

Oil giant Exxon Mobil Corporation (NYSE:XOM) is one of the most undervalued stocks to buy according to the media. Bloomberg recently reported that Exxon Mobil Corporation (NYSE:XOM) was in talks with major car companies including Tesla Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and Volkswagen, for supplying them with lithium for EV batteries as the company plans a push into the lithium industry.

Insider Monkey’s database of 910 hedge funds shows that 71 hedge funds had stakes in Exxon Mobil Corporation (NYSE:XOM). The biggest stakeholder of Exxon Mobil Corporation (NYSE:XOM) was First Eagle Investment Management which had a $1.4 billion stake in the company.

7. General Motors Company (NYSE:GM)

Number of Hedge Fund Holders: 72

General Motors Company (NYSE:GM) is one of the best undervalued stocks to buy according to a plethora of finance websites we surveyed. General Motors Company (NYSE:GM)’s PE ratio as of September 8 is 4.55. General Motors Company (NYSE:GM) recently announced details of its collaboration with Google for bringing AI features to its OnStar Interactive Virtual Assistant.

As of the end of the second quarter of 2023, 72 hedge funds in Insider Monkey’s database of hedge funds had stakes in General Motors Company (NYSE:GM).

6. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 73

Pfizer Inc. (NYSE:PFE) shares recently hit 52-week lows after rival Moderna released strong data for its COVID-19 vaccination. Pfizer Inc. (NYSE:PFE) has several growth catalysts in the pipeline and a dominant position in the industry. Pfizer Inc. (NYSE:PFE)’s 12-month average price target set by analysts is around $40, according to data from Yahoo Finance.

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