In this article we discuss the 5 best undervalued stocks to buy now. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Undervalued Stocks to Buy Now.
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5. Celanese Corporation (NYSE: CE)
P/E Ratio as of June 14: 8.99
Number of Hedge Fund Holders: 36
Ranking 5th in our list of 10 best undervalued stocks to buy now is Celanese Corporation (NYSE:CE). The Texas-based global chemical and specialty materials company was founded in 1918 and operates over 25 generating plants and 6 analysis stations in 11 countries located in different parts of North America, Europe, and Asia.
Celanese Corporation (NYSE:CE) posted its net sales of $1.8 billion in the first quarter of 2021, a 15% increase from the previous quarter. CE shares currently trade for $160.34 and have a P/E ratio of 8.99. The current dividend yield is 1.70%. The 52-week price range of Celanese Corporation (NYSE:CE) is $81.63-171.00. Shares of CE jumped 81% over the last twelve months. On June 10, Wolfe Research initiated coverage on Celanese Corporation (NYSE:CE) with an Outperform rating.
There were 36 hedge funds that reported owning stakes in Celanese Corporation (NYSE:CE) at the end of the first quarter, up from 33 funds a quarter earlier. The total value of these stakes at the end of Q1 is $759 million.
4. Bio-Rad Laboratories, Inc. (NYSE: BIO)
P/E Ratio as of June 14: 4.43
Number of Hedge Fund Holders: 44
Bio-Rad Laboratories, Inc. (NYSE:BIO) ranks 4th on the list of 10 best undervalued stocks to buy now. The California-based manufacturer of technological products specializing in life science offers its services to over 35 countries in the United States. Last year, the company purchased single-cell examinator Celsee, Inc. The acquisition broadens the company’s cutting-edge products and technology to meet the growing demand of the market.
Bio-Rad Laboratories, Inc. (NYSE:BIO) posted its net sales of $726.8 billion in the first quarter of 2021, a 27.1% increase from $571.6 billion in the first quarter of 2020. BIO shares currently trade for $601.68 and have a P/E ratio of 4.43. The 52-week price range of Bio-Rad Laboratories, Inc. (NYSE:BIO) is $425.43-689.00 Shares of BIO jumped 34% over the last three months. On February 12, Citigroup maintained a Buy rating on Bio-Rad Laboratories and raises the price target to $750.
There were 44 hedge funds that reported owning stakes in Bio-Rad Laboratories, Inc. (NYSE:BIO) at the end of the first quarter, up from 42 funds a quarter earlier. The total value of these stakes at the end of Q1 is $890 million.
3. Athene Holding Ltd. (NYSE: ATH)
P/E Ratio as of June 14: 3.61
Number of Hedge Fund Holders:44
Ranking 3rd in our list of 10 best undervalued stocks to buy now is retirement services company Athene Holding Ltd. (NYSE:ATH). The company offers various services such as fixed annuities and funding agreements. In 2016, the firm began trading on the New York Stock Exchange (NYSE) and raised $1.1 billion, making it the second-largest US-listed firm to launch that year.
Athene Holding Ltd. (NYSE:ATH) posted its net invested assets of $155.7 billion in the first quarter of 2021, a 28.5% increase year-over-year. ATH shares currently trade for $63.01 and have a P/E ratio of 3.61. The 52-week price range of Athene Holding Ltd. (NYSE:ATH) is $29.00-63.64. Shares of ATH jumped 103% over the last twelve months. On May 19, Morgan Stanley maintained an Overweight rating on Athene Holding and raised the price target to $60.
There were 44 hedge funds that reported owning stakes in Athene Holding Ltd. (NYSE:ATH) at the end of the first quarter, up from 36 funds a quarter earlier. The total value of these stakes at the end of Q1 is $1.34 billion
Lakewood Capital Management mentioned Athene Holding Ltd. (NYSE:ATH) in its Q2 2020 investor letter:
“We previously discussed our long position in Athene Holding in our third quarter 2019 letter, and the stock performed well over the next several months as management continued to execute on its competitively advantaged strategy in retirement services. However, Athene’s stock was punished by the pandemic-related sell-off, and at 60% of tangible book value, we believe it has the potential to double over the next 18 months.
While investors are justifiably concerned about future credit impairments, we think they are unlikely to amount to more than 10% of its tangible book value of $10 billion. Given that Athene typically generates pre-tax profits of nearly $1.5 billion, the company should still grow tangible book value in 2020. Athene has also capitalized on the significant disruption in the marketplace to improve its competitive position and increase its return profile. In June, the company, along with its co-investment vehicle ACRA, announced an accretive transaction with Prudential’s Jackson business, whereby it would reinsure $27 billion of fixed annuity and fixed indexed annuity reserves and acquire an 11% stake in Jackson’s remaining business. This deal will increase Athene’s earnings by nearly 10% and add 100bps to overall returns on equity by 2022. We estimate that Athene is paying just 3x pro forma earnings for this business, underscoring its unique ability to acquire complex assets at incredibly attractive prices. Furthermore, Athene continues to have significant dry powder to do additional deals, comprised of over $3 billion of excess equity capital on its balance sheet and nearly $2 billion of excess third-party capital in ACRA.
We are also encouraged to see KKR (a previous Lakewood long) recently announce that it is acquiring Global Atlantic, an Athene competitor (that is more levered but generates similar returns on equity) for 1x tangible book value. Applying the same valuation to our estimate of Athene’s book value at the end of 2021 yields nearly 100% upside in the shares over the next 18 months. At that level, the shares would be trading at just 6x forward earnings.”
2. The Progressive Corporation (NYSE: PGR)
P/E Ratio as of June 14: 8.51
Number of Hedge Fund Holders: 45
Ranking 2nd on the 10 best undervalued stocks to buy now is The Progressive Corporation (NYSE:PGR). The Ohio-based American insurance company is one of the worldwide leaders in vehicle insurance with over 13 million policies. The Progressive Corporation (NYSE:PGR) owns notable brands such as Progressive Commercial Holdings, Inc., National Continental Insurance Company, and Progressive Express Insurance Company. Earlier this year, the company purchased commercial vehicle insurer Protective Insurance Corporation in a $338 million deal. The acquisition will help expand the company’s operations and provide greater quality service to its clients.
The Progressive Corporation (NYSE:PGR) posted its net realized gains of $585.3 million in the first quarter of 2021, up from $553.6 million year-over-year. The Progressive Corporation (NYSE:PGR) shares currently trade for $93.60 and have a PE ratio of 8.51. The 52-week price range of The Progressive Corporation (NYSE:PGR) is $75.25-105.59. Shares of PGR jumped 22% over the last twelve months. On March 19, Edward Jones upgrades Progressive to a Buy rating.
There were 45 hedge funds that reported owning stakes in The Progressive Corporation (NYSE:PGR) at the end of the first quarter, down from 48 funds a quarter earlier. The total value of these stakes at the end of Q1 is $1.21 billion.
Tweedy, Browne Company LLC mentioned The Progressive Corporation (NYSE:PGR) in its Q1 2021 investor letter:
“One of our new buys in the Worldwide High Dividend Yield Value Fund during the quarter was Progressive Corporation, the third largest personal automobile insurance carrier in the U.S., with a market share of 13% as of December 31, 2020. While the Company has a successful history of expanding into new markets (like commercial auto insurance), personal auto insurance still dominates its profit and loss statement (“P&L”), representing 89% of Progressive’s pre-tax underwriting profit in 2020.
Progressive is a best-of-breed auto insurance carrier. The company has a long track record of innovation, market share gains, industry-leading profitability (lowest 10-year average combined ratio) and generating high returns (19% average operating ROE). Over the 16 years ended December 31, 2020, the value compound (defined as growth in book value per share plus cumulative dividends per share) was +13.3%. The Company seems to have clear competitive advantages: direct distribution (low expense ratio) and superior data analytics (low loss ratio).
At purchase, we paid between $85 and $87 per share, or roughly 15 times estimated 2021 operating earnings per share (excluding net after-tax gains/losses realized on securities), approximately 75% to 80% of our conservative estimates of intrinsic value. Moreover, Progressive has paid an above average dividend in the form of a regular quarterly dividend and a discretionary additional variable dividend paid annually. In 2019 and 2020, the total dividend declared per share was $2.65 and $4.90, respectively.”
1. Lennar Corporation (NYSE: LEN)
P/E Ratio as of June 14: 9.48
Number of Hedge Fund Holders: 49
Topping the list of 10 best undervalued stocks to buy now with Lennar Corporation (NYSE:LEN). Lennar Corporation operates as one of the biggest home construction firms in the United States with over 59,925 new homes delivered in 2020. In 2018, Lennar Corporation teamed up with Amazon.com, Inc. (NASDAQ:AMZN) to introduce smart home technology The Connected Home. The Connected Home includes built-in WiFi and everything from smart locks, doorbells, lights, etc. that can be controlled by Amazon.com, Inc. (NASDAQ:AMZN)’s voice-activated Alexa. Earlier this year, the company extended its partnership with Amazon.com, Inc. (NASDAQ:AMZN)’s Ring. The acquisition will include the ring video doorbell pro and the ring alarm to the home bundle which can be accessed through the Ring app.
Lennar Corporation (NYSE:LEN) posted its revenue of $5.3 billion in the first quarter of 2021, up from consensus estimates of $5.13 billion. LEN shares currently trade for $92.74 and have a P/E ratio of 9.48. The current dividend yield is 1.08%. The 52-week price range of Lennar Corporation (NYSE:LEN) is $57.09-110.61. Shares of LEN jumped 56% over the last twelve months. On April 16, Wells Fargo initiated coverage on Lennar Corporation (NYSE:LEN) with an Equal-Weight rating and announced a price target of $112.
There were 49 hedge funds that reported owning stakes in Lennar Corporation (NYSE:LEN) at the end of the first quarter.
You can also take a peek at 10 Best ADR Stocks to Buy in 2021 and 10 Best Plastics Stocks to Buy Now.
