We recently compiled a list of the 10 Cash-Rich Undervalued Stocks To Invest In. In this article, we are going to take a look at where United Microelectronics Corporation (NYSE:UMC) stands against the other cash-rich undervalued stocks.
Currently, big tech and high-growth stocks dominate the stock market, making up a much larger share of the broader market than they have historically. This means many investors may be missing out on value stocks, which are companies that are priced lower but have strong fundamentals. In the past, when this gap between growth and value stocks was this wide, value stocks ended up performing better over the next few years. In case the market changes its tide, investors who are too focused on growth stocks could face higher risks.
Recently, value stocks have started to show signs of a comeback. However, after trailing growth stocks by almost 10% in 2024, value stocks took the lead in January, with the Morningstar US Value Index rising 4.5%, outperforming the 3.9% gain of the Morningstar US Growth Index. The boost came mainly from healthcare stocks, which jumped 6.8%, and financial services stocks, which surged 6.7%. Among different stock categories, mid-sized growth stocks performed the best, rising 6.1%, followed by small growth stocks at 5.1% and large value stocks at 5%. Looking at history, value stocks have performed better than growth stocks in 46% of months over the past 20 years, showing that the market shifts between favoring one type over the other.
Market experts see opportunities in undervalued parts of the market. Ben Inker, a portfolio manager at GMO, is staying cautious as markets hit extreme highs, with Bitcoin topping $100,000 and mega-cap tech stocks driving the broader market’s rally. With so much uncertainty in the economic and policy landscape, he remains skeptical of making bets based on long-term predictions.
Instead, Inker is focusing on “deep value” stocks, which are the cheapest 20% of the US market. He sees some of the biggest discounts in that market segment. He is also looking at small-cap stocks in Japan, especially as US stocks trade at record-high premiums compared to global markets. Inker favors the cheaper equal-weighted S&P index as well, which has historically delivered better long-term returns than the standard market cap-weighted version. Let’s take a look at some of the best cash-rich undervalued stocks below.
Our Methodology
For this article, we used the Finviz stock screener to identify cash-rich undervalued stocks. We applied a filter to select companies with P/E ratios under 15. Additionally, we used a current ratio (CR) filter of over 2 to identify stocks with strong current assets. CR is a company’s current assets divided by its current liabilities. If the CR is over 1, it means the company has more assets than liabilities, usually because of high cash reserves, receivables, or inventory. After filtering, we manually searched for companies with TTM operating cash flow exceeding $2 billion as of December 31, 2024, and selected 10 stocks with the highest cash reserves. The list below is ranked in ascending order based on TTM operating cash flow. We have also included hedge fund sentiment as of Insider Monkey’s Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a state-of-the-art semiconductor wafer foundry.
United Microelectronics Corporation (NYSE:UMC)
P/E Ratio as of March 3: 10.24
TTM Operating Cash Flow as of December 31, 2024: $87,111,640,000
Number of Hedge Fund Holders: 18
United Microelectronics Corporation (NYSE:UMC) is a Taiwanese semiconductor foundry that manufactures and sells integrated circuits globally. It offers backend and design support services for the mobile communications, IoT, computing, and automotive industries. UMC is one of the best cash rich stocks to watch, with a whopping $87 billion in TTM operating cash flow as of December 31, 2024. UMC earned the highest ‘A’ rating in Climate Change and Water Security from CDP for the third year in a row. The company aims for net-zero emissions by 2050 and 100% renewable energy use.
United Microelectronics Corporation (NYSE:UMC) brought in NT$60.39 billion in revenue for Q4 2024, staying nearly flat from the previous quarter but up 9.9% from last year. The company maintained a solid 30.4% gross margin and reported NT$8.50 billion in net income, with earnings per share at NT$0.68. Cash flow from operations hit NT$32.98 billion, while capital spending reached NT$18.93 billion, leaving NT$14.04 billion in free cash flow. UMC had a net cash inflow of NT$1.59 billion and it plans to repay NT$5.53 billion in bank loans over the next year.
According to Insider Monkey’s fourth quarter database, 18 hedge funds were bullish on United Microelectronics Corporation (NYSE:UMC), compared to 11 funds in the last quarter. Israel Englander’s Millennium Management was the leading stakeholder of the company, with 14.3 million shares worth $93 million.
Overall UMC ranks 1st on our list of the best cash-rich undervalued stocks to buy. While we acknowledge the potential of UMC as an investment, our conviction lies in the belief that certain 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 UMC 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.