We recently compiled a list of the 10 Under-the-Radar Stocks with Massive Upside for 2025. In this article, we are going to take a look at where Coty Inc. (NYSE:COTY) stands against other under-the-radar stocks.

Investing in under-the-radar stocks can be a savvy move for those looking to diversify their portfolios and potentially reap significant rewards. These lesser-known companies often fly under the radar of mainstream investors, which can result in undervalued stock prices. Under-the-radar stocks can be found in various sectors, from emerging technologies to niche industries, and are often characterized by their small market capitalization, limited analyst coverage, and low trading volumes.

According to Business Insider, several lesser-known hedge funds have outperformed the market, Glen Kacher’s Light Street and David Rogers’ Castle Hook, for instance, returned 60% last year, outpacing many of their more prominent peers. Jason Mudrick’s firm also had a strong year, with returns of over 31%. Meanwhile, the largest hedge funds in the world, such as Citadel, D.E. Shaw, and Millennium, had good years, although most failed to match the S&P 500’s 23% gain.

The impressive returns achieved by lesser-known hedge funds can be attributed to their bold investment strategies, which included a focus on under-the-radar stocks. By investing in these hidden gems, these funds were able to capitalize on undervalued opportunities and reap significant rewards. As a result, these under-the-radar stocks proved to be a key factor in the funds’ success.

Read Also: 12 Cheapest Stocks with Biggest Upside Potential and Top 10 Undervalued Tech Stocks to Buy According to Hedge Funds.

In an interview with Bloomberg on January 18, David Kostin, Chief US Equity Strategist at Goldman Sachs, shared his outlook for US equities, forecasting an 11% upside for the S&P 500 index, based on the expectation that earnings per share will grow around 11% in calendar 2025 and 7% in calendar 2026. Kostin emphasized that equity investors are already looking ahead, with the fourth-quarter earnings season about to kick off, Kostin noted that earnings growth for the quarter is expected to be around 8%, but the strong dollar may lead to fewer positive surprises than in previous years.

Kostin highlighted that the US stock market is trading at a high multiple, around 22-23 times forward earnings, which is historically high. As a result, earnings will be the primary driver of the market, rather than multiple expansion. He expects the S&P 500 index to rise to around 6,500, driven by earnings growth. Kostin also cautioned that a higher bond yield environment is a concern, as it has been a headwind for equities in the past. However, Kostin expects that inflation will come down slowly, and bond yields will fall to around 4.25% over the rest of the year.

Kostin suggested that portfolio managers should focus on owning US companies with domestically driven revenues, rather than those with high export exposure. This is because companies with high domestic sales are less likely to be affected by retaliatory tariffs. Kostin also mentioned that the Magnificent Seven companies have significant sales outside the US, and may face potential risks due to their high export exposure.

Kostin acknowledged that the Magnificent Seven companies have had fantastic stock performances in 2023 and 2024. However, he expects their premium earnings growth to narrow substantially in 2025 and 2026, leading to a narrowing excess return. As a result, Kostin favors mid-cap stocks, which trade at lower multiples and have similar growth rates to large-cap stocks. He believes that mid-cap US equities, with a market capitalization of between $5 billion to $20 billion, offer a better risk-reward profile.

Lesser-known, under-the-radar companies are often overlooked by mainstream investors, but present a unique potential for growth, particularly in sectors poised for innovation and transformation.

Our Methodology

To compile our list of the 10 under-the-radar stocks with massive upside for 2025, we sifted through internet rankings to find 30 under-the-radar stocks. From that list, we narrowed our choices to the 10 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of January 17. We also included their stock price as of January 17 and their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024.

Why do we care about what hedge funds do? 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).

Coty Inc. (NYSE:COTY)

Upside Potential: 39.28%

Stock Price as of January 18: $7.18

Number of Hedge Fund Investors: 26

Coty Inc. (NYSE:COTY) is a global beauty company specializing in cosmetics, fragrances, and skincare products. The company owns popular brands such as CoverGirl and Sally Hansen and collaborates with high-profile celebrities for product launches.

Coty Inc. (NYSE:COTY) has been at the forefront of digital transformation, recognizing the growing importance of online channels in the beauty industry. The company has made significant strides in expanding its e-commerce presence. This growth is driven by a robust omnichannel approach, where online and offline channels work in harmony to enhance customer engagement and drive sales. Coty Inc.’s (NYSE:COTY) strong partnerships with platforms like Amazon and its own retail websites have been instrumental in this success. The company continues to invest in digital marketing, advocacy marketing, and retail.com marketing to convert online advocacy into sales, particularly among younger consumers who are increasingly connected through social media and influencer ecosystems.

Coty Inc. (NYSE:COTY) has been actively repositioning its brands to align with current consumer trends and preferences. The company has revitalized its heritage brands such as Rimmel and CoverGirl, which have been repositioned with a focus on creating products that resonate with younger consumers and have the potential to go viral. Additionally, Coty Inc. (NYSE:COTY) is investing in agile beauty, a new approach that accelerates the innovation process and allows the company to bring new products to market more quickly and efficiently. This strategy is particularly important in the Consumer Beauty division, where Coty Inc. (NYSE:COTY)  aims to diversify into other categories such as mass fragrances and skincare.

Furthermore, Coty Inc. (NYSE:COTY) has been expanding its presence in growth engine regions, such as Latin America and Southeast Asia, to tap into emerging markets with high potential. Coty Inc. (NYSE:COTY) has been diversifying its portfolio beyond fragrances into cosmetics and skincare. The company has launched new brands and products, such as Gucci makeup and Marc Jacobs beauty, as a part of this strategy to capture new market segments and drive growth.

Overall COTY ranks 7th on our list of the under-the-radar stocks. While we acknowledge the potential of COTY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COTY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.