15 Most Undervalued Small-Cap Stocks To Buy According To Hedge Funds

Published on February 5, 2023 at 10:40 am by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 15 most undervalued small-cap stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued Small-Cap Stocks To Buy According To Hedge Funds.

Small-cap stocks suffer when financial markets are facing turbulence because investors tend to flee riskier stocks towards safer, large-cap companies. However, it’s an open secret that not all small-cap companies are risky. There are always immense opportunities for investors in the small-cap world. A WSJ article last year pointed to the trend in the investing world where investors were piling into cheap and undervalued small-cap stocks amid the broader market turmoil. While it is hard to predict when the next rotation will kick off, investors say some small-cap stocks have fallen so far that they now look inexpensive, compared with shares of larger companies.

The WSJ report, published in June 2022, quoted Jason Pride, chief investment officer of private wealth at Glenmede, who thinks small caps had “fallen too hard.” The analyst at the time had an Overweight rating for small-cap stocks

Our Methodology

For this article we scanned Insider Monkey’s database of 920 hedge funds’ stock holdings and picked the top 15 small-cap stocks that have PE ratios of less than 15. These are some of the most popular undervalued small-cap stocks to buy according to elite money managers. PE ratios mentioned in this article are as of January 30.

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Most Undervalued Small-Cap Stocks To Buy According To Hedge Funds

15. Banco BBVA Argentina S.A. (NYSE:BBAR)

Number of Hedge Fund Holders: 7

Banco BBVA Argentina S.A. (NYSE:BBAR) is a financial services company based in Argentina. Banco BBVA Argentina S.A. (NYSE:BBAR) is a dividend payer, with a yield of about 0.76% as of January 30. Insider Monkey’s database of 920 hedge fund holdings shows that 7 hedge funds had stakes in Banco BBVA Argentina S.A. (NYSE:BBAR) at the end of the September quarter. The most notable of these hedge funds was Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was $2.71 million.

In November, Banco BBVA Argentina S.A. (NYSE:BBAR) posted its third-quarter results. Banco BBVA Argentina S.A. (NYSE:BBAR)’s adjusted EPS in the period came in at AR$48.17. Operating income in the quarter totaled $48.4 billion, a 24% growth when compared to the previous quarter.

14. Park National Corporation (NYSE:PRK)

Number of Hedge Fund Holders: 8

Ohio-based Park National Corporation (NYSE:PRK) is a banking company. Park National Corporation (NYSE:PRK) is trading at a PE ratio of 13.40 as of January 30. A total of 8 hedge funds tracked by Insider Monkey reported having stakes in Park National Corporation (NYSE:PRK) at the end of the third quarter of 2022. The total value of these shares was $4.1 million. The biggest stakeholder of Park National Corporation (NYSE:PRK) was Ken Griffin’s Citadel Investment Group which owns a $1.4 million stake in the company.

This small-cap stock is under pressure after Park National Corporation (NYSE:PRK) posted weak quarterly results earlier in January. For the fourth quarter of 2022, Park National Corporation (NYSE:PRK)’s adjusted EPS came in at $1.94, missing estimates by $0.32. Revenue in the quarter jumped about 8.5% to a total $119.75 million, missing estimates by $3.51 million.

13. Heartland Financial USA, Inc. (NASDAQ:HTLF)

Number of Hedge Fund Holders: 8

Heartland Financial USA, Inc. (NASDAQ:HTLF) has a dividend yield of over 2.5% as of January 30. As of the end of the third quarter, 8 hedge funds had stakes in Heartland Financial USA, Inc. (NASDAQ:HTLF). The total value of these stakes was about $14 million.

In January, Heartland Financial USA, Inc. (NASDAQ:HTLF) upped its quarterly dividend by a whopping 7% when the company declared a quarterly dividend of $0.30 per share. The dividend is payable on February 28.

12. Enterprise Financial Services Corp. (NASDAQ:EFSC)

Number of Hedge Fund Holders: 11

Yet another financial services company in our list of the most undervalued small-cap stocks to buy according to hedge funds, Enterprise Financial Services Corp (NASDAQ:EFSC) has a PE ratio of 9.76 and a dividend yield of 1.93 as of January 30.

11 hedge funds have stakes in Enterprise Financial Services Corp (NASDAQ:EFSC) as of the end of the third quarter of 2022.

11. Vector Group Ltd. (NYSE:VGR)

Number of Hedge Fund Holders: 16

Vector Group Ltd. (NYSE:VGR) is a holding company with several businesses. This small-cap stock has 16 hedge funds invested in it, as of the end of the third quarter. The net worth of these hedge funds’ stakes at the end of the third quarter of last year was about $92 million. Vector Group Ltd. (NYSE:VGR) is also a high dividend small-cap stock. In November last year, Vector Group Ltd. (NYSE:VGR) announced a dividend of $0.20 per share. Forward dividend yield at the time came in at 7.35%. The dividend was payable on December 20 to shareholders of record as of December 9.

The biggest hedge fund stakeholder of Vector Group Ltd. (NYSE:VGR) at the end of the September quarter was Jim Simons’s Renaissance Technologies which had a $69 million stake in Vector Group Ltd. (NYSE:VGR).

10. Renasant Corporation (NASDAQ:RNST)

Number of Hedge Fund Holders: 16

Renasant Corporation (NASDAQ:RNST) is a Missouri-based bank holding company. As of the end of the third quarter, 16 hedge funds out of the 920 funds had stakes in Renasant Corporation (NASDAQ:RNST). The total value of these stakes was about $49 million.

Renasant Corporation (NASDAQ:RNST) is also a dividend payer. In November, Renasant Corporation (NASDAQ:RNST) announced quarterly dividend of $0.22 per share. Forward dividend yield at the time came in at 2.2%.

9. ArcBest Corporation (NASDAQ:ARCB)

Number of Hedge Fund Holders: 18

Transportation company ArcBest Corporation (NASDAQ:ARCB) ranks 9th in our list of the most undervalued small-cap stocks to buy according to hedge funds. Insider Monkey’s database of elite hedge funds shows that 18 hedge funds had stakes in ArcBest Corporation (NASDAQ:ARCB) at the end of the third quarter of 2022. The net worth of these shares was about $85 million. The biggest stakeholder of ArcBest Corporation (NASDAQ:ARCB) was Jim Simons’ Renaissance Technologies which owns a $26.3 million stake in the company.

ArcBest Corporation (NASDAQ:ARCB) has a strong balance sheet and operating revenue. ArcBest Corporation (NASDAQ:ARCB) also pays dividends to its shareholders. As of the end of the third quarter, ArcBest Corporation (NASDAQ:ARCB)’s market share reached 6.3%, up from 4.9% in the comparative quarter.

8. Century Communities, Inc. (NYSE:CCS)

Number of Hedge Fund Holders: 18

Century Communities, Inc. (NYSE:CCS) ranks 8th in our list of the most undervalued small-cap stocks to buy according to hedge funds. Century Communities, Inc. (NYSE:CCS) is operating in the homebuilding industry. In December, Century Communities, Inc. (NYSE:CCS) was rated as Outperform by Wedbush. Century Communities, Inc. (NYSE:CCS) believes “a favorable rate environment in 2023 should support owning affordable builders that can deliver homes in a timely fashion.”

A total of 18 hedge funds tracked by Insider Monkey had stakes in Century Communities, Inc. (NYSE:CCS) at the end of the third quarter.

Here is what Diamond Hill Capital Management specifically said about Century Communities, Inc. (NYSE:CCS):

“Recent share price weakness in homebuilder Century Communities, Inc. (NYSE:CCS) gave us an opportunity to initiate a holding at what we believe is an attractive discount to intrinsic value. This is a company we know well from prior experience — it operates in a number of large US markets, including Atlanta, Denver and Las Vegas. CCS sells homes across a range of prices, but over time it has increased focus on entry-level homes, where demand is highest. The direction of the housing market is an open question, but we have confidence in CCS’s strong management team which has experience in managing opportunistically in prior cycles.”

7. Pactiv Evergreen Inc. (NASDAQ:PTVE)

Number of Hedge Fund Holders: 19

Pactiv Evergreen Inc. (NASDAQ:PTVE) is an Illinois-based company that operates in the packaging industry. This small-cap undervalued stock in our list is also a dividend payer. It has a dividend yield of over 3.5% as of January 30. In November, Pactiv Evergreen Inc. (NASDAQ:PTVE) posted third-quarter results. Its GAAP EPS in the third quarter came in at $0.98, beating estimates by $0.83. Revenue in the quarter jumped 15% to total $1.61 billion, beating estimates by $130 million.

As of the end of the third quarter, 19 hedge funds tracked by Insider Monkey had stakes in Pactiv Evergreen Inc. (NASDAQ:PTVE). The total value of these stakes was $233.4 million. The biggest stakeholder of Pactiv Evergreen Inc. (NASDAQ:PTVE) was David Rosen’s Rubric Capital Management which had a $38 million stake in the company.

6. Masonite International Corporation (NYSE:DOOR)

Number of Hedge Fund Holders: 19

Masonite International Corporation (NYSE:DOOR) makes and sells doors for interior and exterior settings. Masonite International Corporation (NYSE:DOOR) has a PE ratio of 12.8. Insider Monkey’s database of 920 hedge funds’ holdings shows that 19 hedge funds had stakes in Masonite International Corporation (NYSE:DOOR) at the end of the third quarter. The net worth of these stakes was $233 million.

In December, Masonite International Corporation (NYSE:DOOR) revealed a restructuring plan to increase efficiency and cut costs. Masonite International Corporation (NYSE:DOOR) said its plan includes restructuring actions across Masonite’s (DOOR) North American residential and architectural segments. Masonite International Corporation (NYSE:DOOR) said this plan could be completed by the end of fiscal 2023. The move could result in annual cash savings of about $15 million to $20 million.

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