5 Most Undervalued Quality Stocks To Buy According To Hedge Funds

In this article, we discuss 5 most undervalued quality stocks to buy according to hedge funds. If you want to see more stocks in this selection, 15 Most Undervalued Quality Stocks To Buy According To Hedge Funds. 

5. Freeport-McMoRan Inc. (NYSE:FCX)

Number of Hedge Fund Holders: 57

P/E Ratio as of January 25: 17.56

Freeport-McMoRan Inc. (NYSE:FCX) is an Arizona-based company that explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas. The company’s primary mineral properties are based in North America, South America, and Indonesia. Freeport-McMoRan Inc. (NYSE:FCX) is one of the most undervalued quality stocks to invest in according to hedge funds. On January 25, the company reported a Q4 non-GAAP EPS of $0.52 and a revenue of $5.76 billion, outperforming Wall Street estimates by $0.08 and $340 million, respectively. 

On January 11, Citi analyst Alexander Hacking raised the price target on Freeport-McMoRan Inc. (NYSE:FCX) to $44 from $29 and maintained a Neutral rating on the shares. The analyst made adjustments to his copper models in preparation for the fourth quarter results and took into account the higher copper price predictions from Citi’s global commodity team.

According to Insider Monkey’s data, Freeport-McMoRan Inc. (NYSE:FCX) was part of 57 hedge fund portfolios at the end of Q3 2022, compared to 56 in the prior quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder of the company, with more than 53 million shares worth $1.45 billion. 

ClearBridge Investments made the following comment about Freeport-McMoRan Inc. (NYSE:FCX) in its Q3 2022 investor letter:

“Seeing better opportunities elsewhere in the materials sector, we exited our position in Ecolab and added to copper producer Freeport-McMoRan Inc. (NYSE:FCX), which supplies a much-needed resource for the energy transition, and specialty chemical company Linde (LIN), which has historically held onto pricing gains it has achieved following increases in energy costs. We think this pricing power should protect profitability during the acute inflationary phase and potentially lead to margin expansion when cost pressures abate. We think this pricing power should protect profitability during the acute inflationary phase and potentially lead to margin expansion when cost pressures abate.”

4. Cisco Systems, Inc. (NASDAQ:CSCO)

Number of Hedge Fund Holders: 68

P/E Ratio as of January 25: 17.19

Cisco Systems, Inc. (NASDAQ:CSCO) is a California-based company that designs, manufactures, and sells Internet Protocol-based networking and products related to the communications and information technology industry. Cisco Systems, Inc. (NASDAQ:CSCO) paid a $0.38 per share quarterly dividend to shareholders  on January 25. It is one of the most undervalued quality stocks to monitor. 

On January 17, Piper Sandler analyst James Fish raised the firm’s price target on Cisco Systems, Inc. (NASDAQ:CSCO) to $49 from $47 and kept a Neutral rating on the shares. The analyst made changes to the estimates and valuations for the cloud automation software industry before the earnings release.

According to Insider Monkey’s data, 68 hedge funds were long Cisco Systems, Inc. (NASDAQ:CSCO) at the end of September 2022, compared to 63 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the biggest stakeholder of the company, with 9.70 million shares worth $388 million. 

In its Q1 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Cisco Systems, Inc. (NASDAQ:CSCO) was one of them. Here is what the fund said:

“Cisco Systems (NASDAQ:CSCO) traded lower as investors weighed how supply chain concerns would impact sales growth. The company has been upgrading its switching and routing offerings, which should lead to strong demand as on-site locations upgrade infrastructure.”

3. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 70

P/E Ratio as of January 25: 14.89

Biogen Inc. (NASDAQ:BIIB) is a Massachusetts-based company that discovers, develops, and commercializes therapies for treating neurological and neurodegenerative diseases. On January 10, Brian Abrahams, an analyst from RBC Capital, commented on the FDA’s Summary Review of Leqembi, also known as lecanemab, that is now available. He believes that given the benefit/risk assessment appears to take into account the reported Phase III results and recent deaths in the open-label extension, there is a very high probability that the drug will be fully approved in the second half of 2023 without any major changes to the labeling, unless there are any major safety concerns. The analyst maintained that he is a buyer of Biogen Inc. (NASDAQ:BIIB) on account of the underappreciated long-term opportunity in Alzheimer’s and the likely pipeline reboot under new management, and has an Outperform rating on the shares with a price target of $362.

According to Insider Monkey’s third quarter database, 70 hedge funds were long Biogen Inc. (NASDAQ:BIIB), compared to 54 funds in the prior quarter. Steve Cohen’s Point72 Asset Management is the largest stakeholder of the company, with 1.67 million shares worth $448 million. 

ClearBridge Investments made the following comment about Biogen Inc. (NASDAQ:BIIB) in its Q3 2022 investor letter:

“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”

2. Occidental Petroleum Corporation (NYSE:OXY)

Number of Hedge Fund Holders: 74

P/E Ratio as of January 25: 5.31

Occidental Petroleum Corporation (NYSE:OXY) engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, Africa, and Latin America. It operates through three segments – Oil and Gas, Chemical, and Midstream and Marketing. Occidental Petroleum Corporation (NYSE:OXY) is one of the most undervalued quality stocks to buy according to hedge funds. 

On January 6, BofA analyst Doug Leggate upgraded Occidental Petroleum Corporation (NYSE:OXY) to Buy from Neutral with a price target of $80, down from $82. The analyst said that while the potential for gains is not as high as it was in 2020, his revised price target positions the shares at the higher end of their relative value compared to competitors. He also views Occidental Petroleum Corporation (NYSE:OXY) as relatively defensive compared to other companies in the industry, as their unhedged oil leverage allows for value transfer from debt and preferred equity and less volatility as the capital structure is being reset.

According to Insider Monkey’s data, 74 hedge funds were bullish on Occidental Petroleum Corporation (NYSE:OXY) at the end of September 2022, compared to 66 funds in the last quarter. 

Here is what Smead Value Fund has to say about Occidental Petroleum Corporation (NYSE:OXY) in its Q3 2022 investor letter:

“Our top-performing stocks in the quarter include Occidental Petroleum (NYSE:OXY). Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum (NYSE:OXY), was one of the standouts. Up through the bear market came a “bubblin’ crude!”

1. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 75

P/E Ratio as of January 25: 9.18

Exxon Mobil Corporation (NYSE:XOM) is an American multinational producer of crude oil and natural gas in the United States and internationally. It is one of the most undervalued quality stocks to buy according to smart investors. On January 13, Exxon Mobil Corporation (NYSE:XOM) announced that it will soon largely increase gasoline and diesel production at its Beaumont refinery, completing the $1.2 billion expansion first considered nine years ago. 

On January 9, Mizuho analyst Nitin Kumar upgraded Exxon Mobil Corporation (NYSE:XOM) to Buy from Neutral with a price target of $140, up from $90. Despite having a more cautious outlook for earnings and cash flows than both the management and industry consensus, the analyst believes it is difficult to imagine a situation where the company will not be a leader in generating cash in the next 3-5 years. He also identified Exxon Mobil Corporation (NYSE:XOM) as a Top Pick in the sector for 2023.

According to Insider Monkey’s data, 75 hedge funds were long Exxon Mobil Corporation (NYSE:XOM) at the end of Q3 2022, compared to 72 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 33.8 million shares worth $3 billion. 

In its Q2 2022 investor letter, First Eagle Investments, an asset management firm, highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:

“Integrated oil and gas giant Exxon Mobil Corporation (NYSE:XOM) performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industry wide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 11 Most Undervalued Natural Gas Stocks To Buy and 12 Cheap Bank Stocks To Buy.