We recently published a list of 10 Best Bargain Stocks to Buy in May. In this article, we are going to take a look at where Union Pacific Corporation (NYSE:UNP) stands against other best bargain stocks to buy in May.
While increasing tariffs and a hard sell-off have resulted in uncertainty, Neuberger Berman, an investment manager, expects that negotiations can bring some relief to initial tariff proposals. Furthermore, the firm anticipates a sharply slower growth than a US recession. Also, it believes that stimulus in Europe and China can rejuvenate global industrial activity, and the firm recommends styles, sectors, and regions that are most geared to it.
Investment Style- Where Do Opportunities Lie?
Given that a significant amount of tariff shock has now been priced in, Neuberger Berman is constructive on global equities for the remainder of the year. The firm expects that an ongoing recovery in the global industrial economy might be dampened but not derailed. The underlying momentum in the goods economy is expected to support equities that are most levered to it. Furthermore, the firm prefers value over growth (which is relatively expensive) and small caps over large caps. While an overdose of growth-inhibiting policy can impact the relatively healthy economy and push it into recession, the investment management firm believes that the US hasn’t yet reached that point. As per the firm, performance during the decline demonstrates relative strength in some of the more cyclical economic sectors in the US and around the world. The goods-oriented sectors, regions, and styles continue to outperform amidst the recent sell-off.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Lies Ahead?
S&P Global expects inflation to remain closer to 3.0% in 2025 as tariffs raise the prices along the domestic supply chain as well as for the end consumers. For 2026, the firm expects growth to pick up after a slow start. This is because of the abatement of uncertainty associated with the structure of tariffs and the further easing of the policy rate by the Federal Reserve. Also, the growth is expected to be aided partly because of a more favorable growth backdrop in the eurozone, which can help expand US exports.
Neuberger Berman opines that a combination of improving fundamentals and stabilizing risks increased the optimism in the energy sector. As per the firm, increased global industrial activity is expected to continue to buoy oil demand and keep prices aloft. Furthermore, energy seems to be the most undervalued sector in the S&P 500 relative to the current and expected earnings growth. The investment management firm believes that much of the negative news, including regulatory concerns and geopolitical risks, seem to be factored in. This suggests that energy stocks can increase as the sentiment improves.
Our Methodology
To list the 10 Best Bargain Stocks to Buy in May, we used a screener to shortlist the companies that trade at a forward P/E of less than ~20.0x. Next, we chose the ones that analysts see upside to, as of April 11. We also mentioned hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in the 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 intermodal container train winding through a rural landscape.
Union Pacific Corporation (NYSE:UNP)
Forward P/E as of April 11: ~18.2x
Average Upside Potential: ~19.1%
Number of Hedge Fund Holders: 93
Union Pacific Corporation (NYSE:UNP) is a rail transportation company. Citi upped the company’s stock to “Buy” from “Neutral.” As per the firm, the transports were already setting up for a difficult Q1. Adding tariffs to the mix makes the future uncertain through the remainder of 2025 and beyond. Despite the uncertainty, the significant selloff made the transport stocks more attractive on both an absolute and relative basis, says the firm. Notably, a downturn in freight demand is expected to catalyze the carrier exits and rationalize excess capacity, says Citi. The growth in international intermodal volumes offers a strong opportunity for Union Pacific Corporation (NYSE:UNP) to offset declines in other areas.
Intermodal transportation remains a critical growth area in the logistics industry, thanks to e-commerce and global trade patterns. Union Pacific Corporation (NYSE:UNP)’s strong network and strategic positioning offer it a competitive advantage in capturing growth opportunities. Furthermore, its pricing power, aided by operational improvements and service reliability, enables the company to optimize its revenue per unit. By its focus on high-value intermodal corridors and use of the pricing strategies, the company is expected to fuel revenue growth and drive profitability. Union Pacific Corporation (NYSE:UNP)’s service-led growth approach, together with its healthy market position, can help it capitalise on the opportunities and surpass the market expectations for earnings growth.
Overall, UNP ranks 10th on our list of best bargain stocks to buy in May. While we acknowledge the potential of UNP 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than UNP but that trades at less than 5 times its earnings, check out our report about this 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.