In this article, we will discuss the 10 Most Oversold S&P 500 Stocks in 2024.
Strong economic growth and the prospect of declining interest rates continue to support gains in global equities. That being said, elevated valuations over the past 2 years, mainly in the US, have put global stocks in a vulnerable position, opines Goldman Sachs Research. By the close of last year, the S&P 500 saw one of its strongest 2-year periods of returns since the year 1928. Much of this increase demonstrates better fundamental growth than investors had expected, with higher valuations acting as a significant contributor.
Diversification Remains the Key, Says Morgan Stanley
As per Morgan Stanley, while several investors continue to favour recently successful approaches, like passive exposure to the broader S&P 500 Index, a more diversified investment strategy might provide better risk-adjusted returns. The benchmark US equity index remains richly priced and excessively concentrated. The 10 biggest stocks in the S&P 500 index make up for ~40% of its total market capitalization, making it excessively dependent on certain mega-cap tech companies continuing to exceed ambitious performance forecasts.
With the S&P 500 anticipated to post a marginal 7% return in 2025, other regions, sectors, and asset classes might become more attractive, says Morgan Stanley. Generally, the stocks and bonds have an inverse relation, offering a natural hedge in diversified portfolios. However, the current trends have demonstrated that such assets are moving in tandem, with both witnessing losses simultaneously, as was seen in 2022. Morgan Stanley believes that the higher bond yields and lower bond prices have been coinciding with lower stock prices. This trend highlights the importance of diversifying beyond traditional asset classes to mitigate risks.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Lies Ahead for the S&P 500?
While there are expectations of equity markets making further progress over the year as a whole — largely fueled by earnings — they have become vulnerable to a correction either due to higher bond yields and/or disappointments on growth in economic data or earnings, says Goldman Sachs. A fall in interest rates has been related to robust equity returns. In the US, the US Fed’s rate-cutting cycles have often coincided with higher stock prices as long as the broader economy avoids recession.
Amidst a favorable backdrop, Goldman believes that 3 main factors complicate the outlook for the stock rally. First, the pace of recent gains reflects much of the optimism the analysts expect regarding economic growth. Second, elevated valuations might limit the forward returns. Finally, the third factor is the unusually high market concentration. As per Peter Oppenheimer, chief global equity strategist and head of Macro Research in Europe, equities tend to be more vulnerable to growth disappointments due to increased concentration of equity market returns.
Therefore, investors are required to focus on companies trading at reasonable valuations, and that have strong fundamentals. Amidst such trends, let us now have a look at the 10 Most Oversold S&P 500 Stocks in 2024.
A large computer terminal full of complex calculations tracking the company’s cash flow and investment management decisions.
Our Methodology
To list the 10 Most Oversold S&P 500 Stocks in 2024, we used a screener and filtered out the stocks present in the S&P 500 Index. Next, we shortlisted the ones that have declined significantly over the past year. Finally, we mentioned the hedge fund sentiment around each stock, as of Q3 2024. The stocks are arranged in ascending order of their hedge fund sentiments.
At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Oversold S&P 500 Stocks in 2024
10) Celanese Corporation (NYSE:CE)
% Decline In 1 Year: ~54.0%
Number of Hedge Fund Holders: 15
Celanese Corporation (NYSE:CE) is a chemical and specialty materials company, which is engaged in manufacturing and selling high-performance engineered polymers. The automotive and industrial markets, end-markets critical for the company, witnessed a significant slowdown. Furthermore, there have been concerns regarding prolonged softness in demand, which can result in further production curtailments and inventory build-up, weighing over profit margins. Notably, Celanese Corporation (NYSE:CE)’s stock has seen a decline of ~54% over the past year.
However, the M&M acquisition can act as a growth catalyst for the company over the long term. The expansion in product portfolio and market presence enhanced with the help of this acquisition place Celanese Corporation (NYSE:CE) well as a more comprehensive solutions provider in high-growth end markets. The company remains focused on driving continued improvement in earnings and cash generation via strategic actions.
These actions include implementing additional cost reduction programs anticipated to realize incremental savings of over $75 million by 2025 end. The focus of the programs will be on fueling productivity in SG&A costs. Also, Celanese Corporation (NYSE:CE) continues to focus on efficiently and stringently deploying capital. The company has been emphasizing earnings growth, cost reductions, FCF expansion, and deleveraging to remain well-placed for long-term shareholder value creation.
9) Skyworks Solutions, Inc. (NASDAQ:SWKS)
% Decline In 1 Year: ~37.7%
Number of Hedge Fund Holders: 31
Skyworks Solutions, Inc. (NASDAQ:SWKS) is engaged in designing, developing, manufacturing, and marketing proprietary semiconductor products. The company’s stock has faced recent hurdles as a result of declining demand from its automotive and industrial clients. This is mainly because of slower EV sales and surplus inventories being managed by customers. However, Skyworks Solutions, Inc. (NASDAQ:SWKS) seems to be gaining the lost strength as it kicked off the new fiscal year with solid results, growing revenue 4% sequentially and surpassing the midpoint of its guidance. In Q1 2025, its revenues came in at $1.068 billion. On a GAAP basis, operating income was $181 million with diluted EPS of $1.00.
Skyworks Solutions, Inc. (NASDAQ:SWKS) has seen consistent improvement in demand indicators within Broad Markets, while it has successfully supported several new product launches in Mobile. Notably, it has secured 5G content for premium Android smartphones for Samsung Galaxy, Xiaomi, and Asus. Skyworks Solutions, Inc. (NASDAQ:SWKS) has expanded its design win pipeline in automotive with cellular connectivity and power management solutions.
Fitch Ratings has highlighted that Skyworks Solutions, Inc. (NASDAQ:SWKS) is diversifying its long-term revenue with the growth of connectivity solutions in a wide range of applications apart from smartphones. These consist of data centers, IoT, industrial, and automotive applications.
8) Constellation Brands, Inc. (NYSE:STZ)
% Decline In 1 Year: ~33.4%
Number of Hedge Fund Holders: 36
Constellation Brands, Inc. (NYSE:STZ) is engaged in producing, importing, marketing, and selling beer, wine, and spirits. The company’s stock has seen the impact of the slowing beer market. Furthermore, there are concerns related to the potential changes in immigration policies which can impact labor availability and costs in the broader agriculture sector, potentially weighing over its supply chain and production costs. Despite these challenges, Morgan Stanley analyst Dara Mohsenian maintained a “Buy” rating on Constellation Brands, Inc. (NYSE:STZ)’s stock, setting a price target of $280.00.
This Buy rating stems from a combination of factors such as its operations and market position which offer long-term value. As per the analyst, Constellation Brands, Inc. (NYSE:STZ) remains proactive in its capital allocation strategy, enhanced by its stock repurchase activities, which can improve shareholder value. Such strategic moves, together with its strong brand portfolio, support the optimistic view. As per Constellation Brands, Inc. (NYSE:STZ)’s EVP and CFO, the company’s strong YTD cash flow generation in fiscal 2025 enabled the company to return more than $1.2 billion to shareholders in dividends and share repurchases, and to continue advancing brewery investments in a disciplined and agile manner.
Furthermore, Constellation Brands, Inc. (NYSE:STZ)’s efforts to optimize production and distribution networks can result in further efficiency gains and cost savings. Coho Partners, an investment management company released its Q2 2024 investor letter. Here is what the fund said:
“We also eliminated Conagra (CAG) in favor of a better risk/return for Constellation Brands, Inc. (NYSE:STZ). We are encouraged by the Constellation Board’s decision to eliminate the dual voting share class and reprioritize capital allocation away from acquisitions and towards returns to shareholders. With capital spending expected to decline and leverage near the company’s target, more cash flow should be available for shareholders. STZ is now focused on the higher growth and the higher margin premium beer category, which they dominate with Corona Extra, Modelo Especial and Pacifico. Additionally, the Wine and Spirits business, which has been disappointing is no longer a meaningful part of STZ’s business as it now accounts for less than 10% of overall earnings. We expect STZ to deliver low double-digit growth in both earnings and dividends for many years to come, which is consistent with the Board’s recent approval of a 13.5% dividend hike.”
Hedge Fund Resource Center