We recently published a list of Stocks On the Rise: 10 Best Stocks to Buy Right Now. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against other best stocks to buy right now.
As per Merrill Lynch, 2025 has not shown much movement. Between the US tariffs and trade wars, geopolitical scenarios, and more, investors continue to be surrounded by attention-grabbing headlines. The firm believes that investors are required to stay focused on numerous key trends that continue to emerge beneath the surface, such as a rebound in the global economic activity, demonstrating signs of a manufacturing recovery. The US continues to be aided by a strong consumer and healthy labor market with double-digit US earnings growth and the unfolding of market rotation. Elsewhere, China has been making efforts to revive its business confidence and consumption. Also, certain parts of Europe have been experiencing expansion mode.
Consolidation in Sector Valuations
Merrill Lynch believes that robust business confidence has been overwhelming tariff and trade worries, with the global economy demonstrating signs of picking up steam instead of slowing down as the consensus has been expecting. This has resulted in the bull run in equities to spread out from the US into other countries that have started to outperform the US. Generally, a synchronized global acceleration remains positive for the earnings outlook and risk assets.
While the growth stocks have been experiencing a sell-off and value stocks continue to appreciate, Morningstar has seen its sector valuations consolidate towards fair value. For instance, the healthcare, real estate, and basic materials were the most undervalued sectors when the year kicked off, but each has now moved closer towards the fair value. Elsewhere, consumer cyclical was overvalued and has experienced a drop to fair value.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Amidst Uncertainties, What Should Be the Strategy?
Morningstar highlighted the current headlines which continue to weigh on investors’ sentiments. From the corporate earnings and guidance, to the tensions related to DeepSeek, including Trump’s tariffs news, there has been significant volatility in the broader markets. Morningstar believes that investors are required to focus on fundamentals, maintain a long-term mindset, and focus on valuations. As per the firm’s valuations, the rotation into value stocks possesses sufficient ability to run. Apart from attractiveness of the value stocks, the rotation into value is expected to yield healthy returns as the broader economy slows and earnings of growth stocks also witness the same momentum.
Our Methodology
To list the Stocks on the Rise: 10 Best Stocks to Buy Right Now, we used a screener to shortlist the stocks that have gained at least 30% YTD, and have a market cap of over $2 billion. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An e-commerce platform displaying a wide range of products to customers online.
Alibaba Group Holding Limited (NYSE:BABA)
% Gain on a YTD Basis: ~64.5%
Market cap as on March 6: ~$333.3 billion
Number of Hedge Fund Holders: 107
Benchmark analysts gave a “Buy” rating on Alibaba Group Holding Limited (NYSE:BABA)’s stock and the price objective of $190.00. The optimism stems from expected fundamental improvements throughout its core divisions, such as e-commerce, cloud computing, and Artificial Intelligence and Data Computing (AIDC). Furthermore, Benchmark has highlighted the potential impact of the acceleration of AI adoption in China, thanks to the breakthrough of DeepSeek, an AI technology. The analysts at the firm opine that Alibaba Group Holding Limited (NYSE:BABA) remains well-placed to benefit from the secular growth trend, potentially resulting in strong upside potential for the company’s stock.
Alibaba Group Holding Limited (NYSE:BABA)’s strong emphasis on AI can place it as a leader in next-gen cloud services and e-commerce solutions. Furthermore, the AI integration throughout the platforms can result in improved operational efficiency, enhanced user experiences, and new revenue streams. Also, Alibaba Group Holding Limited (NYSE:BABA)’s e-commerce platforms have demonstrated signs of improved monetization. Its vast user base and rich data resources offer significant opportunities for targeted advertising and value-added services.
Artisan Partners, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Alibaba Group Holding Limited’s (NYSE:BABA) share price decline was primarily giving back the gains from the prior quarter. Recall that all Chinese stocks surged last quarter after the Chinese government unveiled an unanticipated stimulus that temporarily captivated investors. The reality of the undersized stimulus and the challenges facing the Chinese economy eventually prevailed, leading Chinese equities—including Alibaba—to come back down to earth. Despite our concerns about China’s economic outlook, which we outlined in detail in last quarter’s letter, shares of Alibaba still represent significant value. The company is a leading player in several attractive market segments. We believe management is doing the right things, such as selling off businesses and returning capital to shareholders. It has made several changes to management and strategy that we expect will return the business to healthy growth over the coming year. In our opinion, the valuation is depressed and does not reflect a fair value for a company with these attributes.”
Overall, BABA ranks 1st on our list of best stocks to buy right now. While we acknowledge the potential of BABA 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
