We recently compiled a list of the 10 Best Undervalued Stocks to Buy Right Now. In this article, we are going to take a look at where Bank of Montreal (NYSE:BMO) stands against the other best undervalued stocks.
As per Evercore, the equity market rally is expected to further accelerate under the Donald Trump presidency. The S&P 500 is expected to touch 6,600 by June end. This growth in the index is expected to stem from Trump’s deregulatory agency, which should fuel corporate profits. Trump is expected to act fast to enact his policies.
The investment firm went on to add that measures such as deregulation and corporate tax cuts are expected to fuel business activity and unlock significant rally in stocks. The bull market’s 2-year run stemmed from healthy growth from mega-cap technology stocks, and high valuations are expected to further rise. Evercore hinted at data demonstrating that the average bull market witnessed an increase of 152% over 50 months, while the current market saw a run-up of only 65% over the previous 25 months.
Trump’s Next Presidency- How Will It Affect US Economy?
After Donald Trump’s win, economists and market strategists have been assessing how his economic policies might affect the broader US economy and equity markets. While the initial reaction was positive, some experts opine that Trump’s plans might fuel inflation, which will hurt consumers hoping to get some respite from it. Trump’s tax plan revolves around extending the provisions in the TCJA. The provisions are yet to expire at 2025 end. These provisions consist of lowered tax brackets and expanded standard deduction.
Trump’s campaign proposed lowering the corporate tax rate to 15% from the current rate of 21%. What will be the impact on the economy? Well, the economy might initially grow moderately under Trump’s plans. That being said, the impact might fade over time, mainly because of the effect of deporting millions of immigrants, as per Oxford Economics. As per the chief U.S. economist at Oxford Economics, the real GDP might grow 0.3 percentage points higher in 2026 as compared to the situation if existing policies continue. However, in 2028, the GDP growth might eventually fall to 0.6 percentage points lower in 2028 as compared to earlier projections as a result of deportations and increased tariffs.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Inflation Under Trump’s Presidency
Consumers tend to rank inflation among their biggest economic concerns. Global economists and market strategists believe that Trump’s Presidency can reignite inflation worries. According to investing legend, Jim Rogers, Trump’s tariffs might increase domestic inflation. As a result, the US Fed will be forced to keep the interest rates high. He further added that higher tariffs on goods, commodities, and products will lead to increased global inflation.
Moreover, Trump has plans to deport millions of immigrants. This can also fuel inflation as employers will experience labor crunch, resulting in higher wages.
While there are some uncertainties regarding the potential impacts of Trump’s economic policies, market experts believe that investors can go long on stocks that remain undervalued despite the recent rally.
Our Methodology
To list the 10 Best Undervalued Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the list of stocks trading at a forward P/E multiple of less than 15. Next, we selected the stocks which were popular among hedge funds. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Stocks
Bank of Montreal (NYSE:BMO)
Forward P/E Ratio as of 8 November: 11.89x
Number of Hedge Fund Holders: 13
Bank of Montreal (NYSE:BMO) offers diversified financial services primarily in North America.
Amidst the credit quality concerns, the Bank of Montreal (NYSE:BMO) has been maintaining a strong position in the Canadian mortgage market. The broader Canadian residential mortgage sector demonstrated resilience. The rate cuts are expected to stimulate mortgage growth and potentially boost the Bank of Montreal (NYSE:BMO)’s loan portfolio. Lower rates might also result in improved credit performance as borrowers find it easier to service debts.
Bank of Montreal (NYSE:BMO)’s strong presence in the Canadian mortgage market places it well to capitalize on any upturn in housing activity. Overall, the healthy presence in the Canadian mortgage market, diversified operations, and proactive approach to credit risk management are expected to act as critical tailwinds.
Wall Street believes that good cost discipline and the sustained strength of its operating performance should continue to help its growth trajectory. Given Bank of Montreal (NYSE:BMO)’s strategic goals, a strong balance sheet, and healthy capital and liquidity, the company appears to be well-positioned to post sustainable returns to its shareholders.
Overall, BMO ranks 10th on our list of the 10 best undervalued stocks to buy right now. While we acknowledge the potential of BMO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than BMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
