In this article, we will take a look at the 5 most undervalued small-cap stocks to buy according to hedge funds. To see more such companies, go directly to 15 Most Undervalued Small-Cap Stocks To Buy According To Hedge Funds.
5. NMI Holdings, Inc. (NASDAQ:NMIH)
Number of Hedge Fund Holders: 21
NMI Holdings, Inc. (NASDAQ:NMIH) is a mortgage guaranty insurance services company. In November, NMI Holdings, Inc. (NASDAQ:NMIH) posted its third quarter results. NMI Holdings, Inc. (NASDAQ:NMIH)’s adjusted EPS in the third quarter totaled $0.90, beating estimates by $0.09. Revenue in the quarter came in at $130.58 million, which showed a 5.3% growth on a YoY basis. However, revenue missed estimates by $4.84 million.
A total of 21 hedge funds out of the 920 funds tracked by Insider Monkey reported owning stakes in NMI Holdings, Inc. (NASDAQ:NMIH) at the end of the third quarter. The total value of these stakes was $153 million.
In December, investment firm BTIG analyst Eric Hagen downgraded NMI Holdings, Inc. (NASDAQ:NMIH), along with several other mortgage stocks, to Neutral amid higher interest rates. The analyst, however, noted that NMI Holdings, Inc. (NASDAQ:NMIH) can deliver “one of the strongest ROEs” in 2023.
4. Winnebago Industries, Inc. (NYSE:WGO)
Number of Hedge Fund Holders: 23
Winnebago Industries, Inc. (NYSE:WGO) is a recreational vehicles company. Winnebago Industries, Inc. (NYSE:WGO) could be under pressure in the short term as RV sales dip during recessions but analysts believe Winnebago Industries, Inc. (NYSE:WGO) has several long-term growth catalysts. In December, Winnebago Industries (NYSE:WGO) beat estimates for the first quarter revenue and EPS. However, Winnebago Industries, Inc. (NYSE:WGO) said it could face a challenging period in 2023.
3. Warrior Met Coal, Inc. (NYSE:HCC)
Number of Hedge Fund Holders: 24
Warrior Met Coal, Inc. (NYSE:HCC) is an Alabama-based coal company that is trading at a PE ratio of 2.8 as of January 30. Warrior Met Coal, Inc. (NYSE:HCC) has gained about 20% over the past six months. Warrior Met Coal, Inc. (NYSE:HCC) also has a dividend yield of 0.65%. Of the 920 hedge funds tracked by Insider Monkey at the end of the third quarter, 24 funds had stakes in Warrior Met Coal, Inc. (NYSE:HCC). The total value of these stakes was $225 million. The biggest stakeholder in Warrior Met Coal, Inc. (NYSE:HCC) was Jim Simons’ Renaissance Technologies which owns a $45 million stake in the company. The second biggest stakeholder of Warrior Met Coal, Inc. (NYSE:HCC) was Martin Whitman’s Third Avenue Management with a $39 million stake.
2. Delek US Holdings, Inc. (NYSE:DK)
Number of Hedge Fund Holders: 27
Delek US Holdings, Inc. (NYSE:DK) is one of the most notable downstream companies in the US. Delek US Holdings, Inc. (NYSE:DK) has strong refining operations as well. It has the capacity to refine a total of 302,000 barrels of crude oil per day across its four refineries in Texas and other states. Delek US Holdings, Inc. (NYSE:DK) has a dividend yield of over 3.5% as of January 30.
As of the end of the third quarter of 2022, 27 hedge funds had stakes in Delek US Holdings, Inc. (NYSE:DK).
1. CONSOL Energy Inc. (NYSE:CEIX)
Number of Hedge Fund Holders: 31
CONSOL Energy Inc. (NYSE:CEIX) has gained a whopping 162% over the past year. CONSOL Energy Inc. (NYSE:CEIX) is still trading at an attractive valuation. It is also a high dividend energy stock. CONSOL Energy Inc. (NYSE:CEIX)’s dividend yield stands at over 7% as January 30. The biggest growth catalyst for CONSOL Energy Inc. (NYSE:CEIX) is the rising demand of coal all over the world. Coal came back into the limelight as countries struggled to meet their energy demand following the geopolitical crisis in Europe. Analysts think coal will continue to remain in demand in 2023 and beyond.
CONSOL Energy Inc. (NYSE:CEIX) is also popular among smart money. Of the 920 hedge funds tracked by Insider Monkey, 31 hedge funds had stakes in CONSOL Energy Inc. (NYSE:CEIX) at the end of the third quarter, significantly up from 23 funds in the previous quarter.
Greenlight Capital made the following comment about CONSOL Energy Inc. (NYSE:CEIX) in its Q3 2022 investor letter:
“CONSOL Energy Inc. (NYSE:CEIX) shares rose from $49.38 to $64.32. As we wrote last quarter, we expect the company to generate approximately $50 per share in after-tax free cash flow by the end of 2023. The company paid its first dividend of $1 per share in August and also announced a policy of distributing at least 35% of its free cash flow to its shareholders. We would emphasize the “at least” part and see room for the percentage to expand as the cash flows materialize. Coal markets have remained quite strong and visibility is improving, such that 2024 looks to us like another strong year.”
You can also take a peek at Top 20 Financial Cities in the World and 15 Countries with the Largest Refining Capacity.
