In this article, we discuss 10 value stocks that analysts are recommending amid market volatility.
The stock market in the United States has been very volatile in the past few weeks. In addition to the larger picture around inflation and interest rate hikes, another factor that has been contributing to the downward spiral in stocks has been falling liquidity. According to a report from the news agency Reuters, the liquidity levels in markets in the US are dangerously close to levels last seen during the panic of the pandemic-ravaged 2020. Liquidity generally refers to the ease with which investors can trade different stocks without affecting their share too much.
Rocky Fishman, a strategist at investment bank Goldman Sachs, told the Financial Times in early February that liquidy had weakened so substantially that there was the potential for outsized market moves. Fishman underlined the difference between the prices at which trades can buy or sell e-mini S&P 500 index futures was close to 50 cents, almost double the 25 cents in a normal market. These futures are one of the most popular ways of betting on the direction the market might take in the near-term.
Experts think that the rise of automated trading and passive investing is one of the reasons why liquidity has fallen and made the market more volatile, even though active traders have been making efforts to restore balance. During periods of low liquidity, it becomes harder to buy or sell stocks since the volatility of the market makes it harder for traders to get desired prices. JPMorgan has highlighted that the increased volatility is pushing investors towards equity-based ETFs, whose percentage of total equity volumes stands at 45%, the highest in two years.
Large companies like PayPal Holdings, Inc. (NASDAQ:PYPL), Meta Platforms, Inc. (NASDAQ:FB), and Netflix, Inc. (NASDAQ:NFLX) have seen their value plummet in recent weeks due to this phenomenon. Meta Platforms, Inc. (NASDAQ:FB) registered one of the worst declines of market history in early February after the valuation of the firm dropped by around $230 billion in a single volatile day of trading. PayPal Holdings, Inc. (NASDAQ:PYPL) lost nearly one-fourth of its value and Netflix, Inc. (NASDAQ:NFLX) shares were down by the most they have been in a decade. The volatile conditions are pushing investors towards value stocks that are better-protected against the macroeconomic environment.
As the market shifts towards value, analysts have been busy revising their ratings of firms that have not been in the spotlight over the past few years due to growth-oriented market conditions. Some of the top value stocks to buy now according to analysts include Simpson Manufacturing Co., Inc. (NYSE:SSD), Agnico Eagle Mines Limited (NYSE:AEM), and General Dynamics Corporation (NYSE:GD), among others discussed in detail below.
Our Methodology
The companies that analysts from different investment advisories have upgraded in the past few weeks were selected for the list. The price-to-earnings ratio of each stock was also considered. Only those with a PE Ratio of less than 20 feature on the list. The analyst ratings and business fundamentals of each stock are also discussed to provide readers with some additional context for their investment choices.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each company.
Source:Pixabay
Analysts are Recommending These Value Stocks Amid Market Volatility
10. Enova International, Inc. (NYSE:ENVA)
Number of Hedge Fund Holders: 20
PE Ratio: 6.57
Enova International, Inc. (NYSE:ENVA) is a technology and analytics firm based in Chicago. The stock has rallied in the past few days after the firm posted market-beating earnings for the fourth quarter of 2021, reporting a 25% jump in originations quarter-over-quarter.
On February 7, Maxim analyst Michael Diana upgraded Enova International, Inc. stock to Buy from Hold with a price target of $55, highlighting the “record quarterly loan originations and continued strong credit quality” of the firm in a bullish thesis for investors.
At the end of the third quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $257 million in Enova International, Inc., compared to 22 in the previous quarter worth $252 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm 683 Capital Partners is a leading shareholder in Enova International, Inc., with 3 million shares worth more than $105 million.
Just like Simpson Manufacturing Co., Inc., Agnico Eagle Mines Limited, and General Dynamics Corporation, Enova International, Inc. is one of the stocks that investors are flocking to.
9. Thomson Reuters Corporation (NYSE:TRI)
Number of Hedge Fund Holders: 27
PE Ratio: 8.15
Thomson Reuters Corporation (NYSE:TRI) is a Canadian firm that provides business information services. It recently declared a quarterly dividend of $0.445 per share, an increase of 10% from the previous dividend of $0.405 per share. The forward yield was 1.69%.
On February 10, RBC Capital analyst Drew McReynolds upgraded Thomson Reuters Corporation stock to Outperform from Sector Perform with a price target of $120, noting that the stock offered attractive exposure to low-risk, double-digit net asset value growth.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm Woodline Partners Karl is a leading shareholder in Thomson Reuters Corporation, with 485,924 shares worth more than $53 million.
At the end of the third quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $246 million in Thomson Reuters Corporation, the same as in the preceding quarter worth $354 million.
8. Tenet Healthcare Corporation (NYSE:THC)
Number of Hedge Fund Holders: 47
PE Ratio: 9.62
Tenet Healthcare Corporation (NYSE:THC) is a Texas-based diversified healthcare company. It recently posted earnings for the fourth quarter of 2021, reporting earnings per share of $2.70, beating estimates by $1.21. The revenue over the period was $4.8 billion.
On February 10, Truist analyst David MacDonald upgraded Tenet Healthcare Corporation stock to Buy from Hold with a price target of $90, highlighting that the core demand for the services of the firm remained strong and recent acquisitions were positive.
At the end of the third quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Tenet Healthcare Corporation, up from 39 the preceding quarter worth $1.8 billion.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Glenview Capital is a leading shareholder in Tenet Healthcare Corporation, with 8.6 million shares worth more than $574 million.
In its Q3 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Tenet Healthcare Corporation was one of them. Here is what the fund said:
“Tenet may be best known as the second-largest public hospital chain in the U.S., but its largest business is outpatient acute care centers. In early 2020, investors fled the health care industry because of the great uncertainty that the pandemic presented. The early days of the pandemic were very hard on the hospital industry especially, but as the Covid-19 surge peaked and diminished, hospitals were able to schedule elective procedures and engage in profitable activities.”
7. Sleep Number Corporation (NASDAQ:SNBR)
Number of Hedge Fund Holders: 20
PE Ratio: 9.58
Sleep Number Corporation (NASDAQ:SNBR) provides sleep solutions and services. The company has navigated supply chain issues in the first half of 2021 to post market-beating earnings for the second half.
Wedbush analyst Seth Basham recently upgraded Sleep Number Corporation stock to Outperform from Neutral with a price target of $88, underlining that the firm was “well-positioned” in relation to price-tier focus and cash flow generation was strong.
At the end of the third quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $168 million in Sleep Number Corporation, compared to 25 in the preceding quarter worth $242 million.
6. KeyCorp (NYSE:KEY)
Number of Hedge Fund Holders: 36
PE Ratio: 10.13
KeyCorp (NYSE:KEY) provides retail and commercial banking services. It recently posted earnings for the fourth quarter of 2021, reporting earnings per share of $0.64, beating estimates by $0.08. The revenue over the period was $1.9 billion, up 5.4% year-on-year.
Investment bank Credit Suisse recently upgraded KeyCorp stock to Outperform from Neutral without a change in the price target.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Balyasny Asset Management is a leading shareholder in KeyCorp with 5.9 million shares worth more than $128 million.
At the end of the third quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $399 million in KeyCorp, compared to 40 in the preceding quarter worth $443 million.
Along with Simpson Manufacturing Co., Inc., Agnico Eagle Mines Limited, and General Dynamics Corporation, KeyCorp is one of the stocks that elite investors are buying.
5. Minerals Technologies Inc. (NYSE:MTX)
Number of Hedge Fund Holders: 12
PE Ratio: 14.63
Minerals Technologies Inc. (NYSE:MTX) is a New York-based specialty chemicals firm. On February 7, JPMorgan analyst Jeffrey Zekauskas upgraded the stock to Overweight from Neutral with a price target of $75, citing the valuation as the primary reason behind the upgrade.
Minerals Technologies Inc. has also been on the radar of elite hedge funds amid increased market volatility. At the end of the third quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $94 million in Minerals Technologies Inc., up from 10 in the preceding quarter worth $101 million.
4. Black Hills Corporation (NYSE:BKH)
Number of Hedge Fund Holders: 16
PE Ratio: 17.05
Black Hills Corporation (NYSE:BKH) operates as a utilities firm. On February 7, Mizuho analyst Paul Fremont upgraded the stock to Buy from Neutral with a price target of $71, citing valuation as one of the main reasons behind the decision to upgrade.
Major hedge funds concur with this bullish thesis on Black Hills Corporation. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm GAMCO Investors is a leading shareholder in Black Hills Corporation, with 201,491 shares worth more than $12 million.
3. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 36
PE Ratio: 18.67
General Dynamics Corporation is an aerospace and defense firm. On February 4, Morgan Stanley analyst Kristine Liwag upgraded the stock to Equal Weight from Underweight and raised the price target to $215 from $210, noting that the management of the firm had provided strong visibility and an encouraging three-year outlook for the Gulfstream business.
General Dynamics Corporation is one of the favorite defense stocks among hedge funds. At the end of the third quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $6.7 billion in General Dynamics Corporation, compared to 37 in the preceding quarter worth $6.2 billion.
2. Agnico Eagle Mines Limited (NYSE:AEM)
Number of Hedge Fund Holders: 33
PE Ratio: 19.03
Agnico Eagle Mines Limited is a mineral exploration firm with prime interests in gold. Barclays analyst Matthew Murphy recently upgraded the stock to Overweight from Equal Weight and raised the price target to $69 from $67, noting that gold stocks presented an “attractive” hedge against possible central bank errors moving forward.
Top hedge funds hold large stakes in Agnico Eagle Mines Limited. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Agnico Eagle Mines Limited, with 5.2 million shares worth more than $272 million.
1. Simpson Manufacturing Co., Inc. (NYSE:SSD)
Number of Hedge Fund Holders: 19
PE Ratio: 19.88
Simpson Manufacturing Co., Inc. makes and sells building products. CJS Securities analyst Daniel Moore recently upgraded the stock to Outperform from Market Perform, noting that the firm had a strong growth outlook.
Hedge funds have been bullish on Simpson Manufacturing Co., Inc. in recent weeks. At the end of the third quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $177 million in Simpson Manufacturing Co., Inc., the same as in the previous quarter worth $198 million.
In its Q4 2020 investor letter, Conestoga Capital Advisors, an asset management firm, highlighted a few stocks and Simpson Manufacturing Co., Inc. was one of them. Here is what the fund said:
“SSD is a leading provider of structural connectors to the U.S. housing market. Despite reporting better-than-expected growth in its business, investors focused on several negative factors, including concerns about rising raw material prices, tough 2021 comparisons and the halted rollout of mechanical anchors and fasteners with Home Depot. We believe the company will continue to benefit from a strong residential housing market particularly in the Southern and Western parts of the U.S. Additionally, the company’s focus on internal improvement with respect to working capital should drive long-term shareholder returns.”
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This article is originally published at Insider Monkey.
