We recently compiled a list of the 12 Oversold Value Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Informatica Inc. (NYSE:INFA) stands against the other oversold value stocks.
Value stocks, as defined by their low forward P/E ratio, can present compelling investment opportunities, especially when they’ve become oversold due to negative market sentiment or temporary economic uncertainties. An oversold condition typically signals that investors have overreacted to negative events and recent challenges, driving stock prices below their fundamental intrinsic value. This discrepancy creates an attractive entry point for discerning investors who recognize that such pessimism is often short-lived. As investor sentiment stabilizes and market perceptions realign with underlying fundamentals, these undervalued stocks can experience significant rebounds, delivering strong returns. As legendary value investor Warren Buffett famously advised, “Be fearful when others are greedy, and greedy when others are fearful.”
READ ALSO: 11 Oversold Blue Chip Stocks to Buy According to Hedge Funds
Until recently, however, it was challenging for investors to identify genuinely oversold value opportunities. The entire US stock market was trading near record-high valuations, with the forward P/E ratio almost reaching 24x in late 2024 – significantly above the historical average of around 16x. Under such conditions, most stocks appeared expensive, limiting the potential to find attractive entry points for value-driven investors. The recent market correction, however, has markedly improved this situation. As market indices have retreated into correction territory, valuations have dropped by approximately 10% as well. The new dilemma, however, is to identify whether the current correction has ended or the markets will continue to go lower.
The reputable Yardeni Research boutique believes that the current market selloff is entirely attributable to the Trump 2.0 tariff turmoil. Here’s what they said in a recent email dispatch:
“The bulls still believe (hope) that President Donald Trump is using tariffs as a bargaining tool to negotiate lower tariffs with America’s major trading partners. Some of them predict that if that’s not the case, then Trump will back off in response to political pressure to do so from lots of constituencies that stand to be harmed by a trade war. He might also back off if the stock market continues to tank. The bears warn that by the time Trump ever would relent, the economy would be in a consumer-led recession and the stock market surely would be in a bear market.”
We tend to agree with this reasoning and believe that the new US administration is unlikely to push too hard on tariffs and other policies that are likely to hit the markets too hard and hurt not only individual investors but also the business partners and institutions that supported the Presidential race. Furthermore, a widespread economic recession and a bearish stock market are certainly going to make the new US administration lose political points, something which is strongly undesirable for the prospect of being re-elected in 2028.
With that being said, the current 21x forward P/E valuation for the stock market is the cheapest in more than a year and may be approaching a local bottom. Furthermore, many industries have already been hit hard by Trump 2.0 policies and are trading at or near their 52-week lows. The key takeaway for readers is that we are at an opportunistic moment to look for oversold value stocks to buy.
A business executive in a modern office looking over reports detailing artificial intelligence.
Our Methodology
To find oversold value stocks we used Finviz to screen for stocks with a forward P/E under 15 which are down at least -30% in the last year and display a Relative Strength Index (RSI) below 40. Then we compared the list with our proprietary Q4 2024 database of hedge funds’ ownership and included in the article the top 12 stocks with the largest number of hedge funds that own the stock.
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).
Informatica Inc. (NYSE:INFA)
Number of Hedge Fund Holders: 32
Informatica Inc. (NYSE:INFA) is a leading provider of enterprise cloud data management software. The company offers a comprehensive platform that enables organizations to efficiently manage, integrate, govern, and secure their data across hybrid and multi-cloud environments. INFA’s solutions support key use cases such as data integration, master data management, data quality, data cataloging, and data privacy. Its products are used by enterprises to drive digital transformation, analytics, and artificial intelligence initiatives. The company operates under a subscription-based model and serves a broad customer base across various industries including financial services, healthcare, retail, and the public sector.
Informatica Inc. (NYSE:INFA) delivered cloud ARR growth of 34% in Q4. Though slightly below the expected 34.5%, it represents the largest dollar amount in company history. The company achieved total ARR growth of 6%, below the expected 7%, while managing the decline of on-premises business and migrating customers to the cloud. The company demonstrated strong financial performance with over 400 basis points improvement in non-GAAP operating margin YoY and exceeded guidance for unlevered free cash flow. However, renewal rates fell short of expectations by approximately 2% in both cloud and self-managed businesses, though cloud renewal rates remained in the low 90s with a net retention rate of 124%.
Looking ahead to 2025, Informatica Inc. (NYSE:INFA)’s cloud business comprises 70% of new customers and workloads, while 30% comes from modernization of existing on-premises workloads. The company maintains a strong position in data management with less than 10% of their $900 million on-premises base modernized, representing significant future opportunity. In the AI space, INFA is leveraging both its CLAIRE GPT service for enhanced user experience and positioning itself as a crucial data backbone for enterprise GenAI implementations, though material impact from GenAI initiatives is not factored into 2025 forecasts. With a forward P/E ratio of 13.55, INFA is one of the oversold stocks to buy according to hedge funds.
Overall INFA ranks 11th on our list of the 12 oversold value stocks to buy according to hedge funds. While we acknowledge the potential of INFA 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 INFA 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 30 Best Stocks To Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
