US stocks rose on Friday, May 2, as the S&P 500, Dow Jones Industrial Average, and the tech-heavy Nasdaq all posted impressive gains. The S&P 500 added nearly 1.5% and this marked the ninth straight day of gains to mark the longest winning streak for the S&P 500 since November 2004. The Dow rose 1.4% to also report a ninth winning day in a row. Meanwhile, the Nasdaq gained roughly 1.5%.
READ ALSO: 13 Best Aggressive Growth Stocks to Buy Now and 14 Best American Tech Stocks To Buy Now.
The rally comes after China signaled openness to trade talks and a better-than-expected monthly US jobs report. In April, the US economy added 177,000 nonfarm payrolls, which was more than the 138,000 economists had expected. The unemployment rate remained steady at 4.2%. This data indicated resiliency in the labor market despite stock market uncertainty in April due to tariff concerns.
Investors were also encouraged by indications that the US-China trade war could be easing. On Friday, China said it is evaluating recent US proposals for trade talks to see how serious Trump’s administration is about a change in policy stance. China’s commerce minister stated that the “door is open” if the US would agree to pull back on reciprocal tariffs. These comments helped reduce concerns about the risk of an economic slowdown by the tariffs.
Overall, hopes for improved US-China relations combined with solid job growth helped boost confidence on Wall Street.
With this background in mind, let’s take a look at the 10 most profitable cheap stocks to buy now.
A portfolio manager, confident in her analysis, inspecting several stocks on her laptop screen.
Our Methodology
To compile our list of the 10 most profitable cheap stocks to buy now, we used the Finviz stock screener to find stocks with a forward P/E ratio of less than 15. We sorted our results based on market capitalization and picked the top 25 cheap stocks trading at under 15 times their forward earnings as of April 29, 2025. Next, we focused on profitability and narrowed our choices to stocks that had trailing twelve-month (TTM) net income of more than $1 billion. Finally, we focused on the top 10 profitable stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q4 2024 database of more than 1,000 elite hedge funds. The 10 most profitable cheap stocks to buy now were then ranked in ascending order based on the number of hedge funds holding stakes in them as of Q4 2024.
Why do we care about what hedge funds do? 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).
10 Most Profitable Cheap Stocks to Buy Now
10. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E: 8.33
TTM Net Income: $15.18 Billion
Number of Hedge Fund Holders: 85
PDD Holdings Inc. (NASDAQ:PDD), formerly Pinduoduo Inc., is a Chinese company that operates as a multinational commerce group. It owns and operates a range of businesses and it is primarily known for its e-commerce platforms, Pinduoduo and Temu. Temu is a global platform that is growing rapidly. It offers a wide variety of products at competitive prices. PDD Holdings Inc. (NASDAQ:PDD) has also built an impressive network of sourcing, logistics, and fulfillment capabilities to support its businesses. PDD ranks among the most profitable stocks to buy now.
On April 28, Citi lowered its price target on PDD Holdings Inc. (NASDAQ:PDD) from $150 to $127 and maintained a “Neutral” rating. The firm expects the company to report its first-quarter results by the end of May and sees “several uncertainties.” Citi’s analyst believes that before new tariffs take effect, there is a possibility of a temporary boost in US sales due to buyers trying to make purchases before the price hike takes effect. The firm noted that PDD Holdings Inc. (NASDAQ:PDD) is shifting from a fully managed to a semi-managed business model and this could affect its transaction service revenue growth. Citi expects PDD’s share price to remain within a certain range until there is some clarity about how the new tariffs will affect the business and until investors receive reassurance that concerns related to delisting are being addressed.
9. Merck & Co., Inc. (NYSE:MRK)
Forward P/E: 9.45
TTM Net Income: $17.11 Billion
Number of Hedge Fund Holders: 91
Merck & Co., Inc. (NYSE:MRK), known as MSD outside the United States and Canada, is one of the largest pharmaceutical companies in the world. It offers innovative health solutions through its prescription medicines, vaccines, biologic therapies, and animal health products. Merck & Co., Inc. (NYSE:MRK) is one of the most profitable stocks to invest in.
The company is actively working to expand and diversify its pipeline and increase its manufacturing capacity for next-generation therapies. In March 2025, Merck & Co., Inc. (NYSE:MRK) announced the completion of a $1 billion, 225,000-square-foot state-of-the-art facility in Durham, North Carolina. The new manufacturing facility, aimed at enhancing the company’s vaccine production capacity, uses the best practices from the company’s manufacturing network and includes new technologies and digital capabilities like data analytics, generative AI, and 3D printing. On April 29, Merck & Co., Inc. (NYSE:MRK) announced the start of construction for another $1 billion, 470,000-square-foot biologics center of excellence in Wilmington, Delaware. The new center will have laboratory, manufacturing, and warehouse capabilities to support the development and production of next-generation biologics and therapies including potent antibody-drug conjugates (ADCs). The Wilmington Biotech site will also have the capability to produce KEYTRUDA (pembrolizumab). Merck & Co., Inc. (NYSE:MRK) aims to establish the site as the future home in the US for manufacturing KEYTRUDA for patients in the US. The site’s laboratory component is expected to be fully operational by 2028 and the production of investigational compounds is expected to start by 2030.
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