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.
8. Pfizer Inc. (NYSE:PFE)
Forward P/E: 8.09
TTM Net Income: $8.03 Billion
Number of Hedge Fund Holders: 92
Pfizer Inc. (NYSE:PFE) is an American multinational biopharmaceutical company that specializes in the discovery, development, and manufacture of healthcare products, including innovative medicines and vaccines. The company focuses on immunology, oncology, cardiology, endocrinology, and neurology. It has ambitious plans to develop 8 cancer breakthroughs by 2030. Pfizer Inc. (NYSE:PFE) ranks among the most profitable stocks to buy.
The company is currently focused on a comprehensive cost-cutting strategy and is on track to achieve operating margin expansion through its ongoing cost realignment program with about $4.5 billion in net cost savings by the end of 2025. Pfizer Inc. (NYSE:PFE) has also announced that it expects to achieve an additional $1.2 billion in savings by 2027, primarily in selling, informational, and administrative expenses. The company will be leveraging digital enablement, automation, AI, and simplification of business processes. Additionally, Pfizer Inc. (NYSE:PFE) announced plans to reorganize its R&D operations to deliver cost savings of about $500 million by the end of 2026. These savings are expected to be reinvested in the company’s product pipeline.
7. Wells Fargo & Company (NYSE:WFC)
Forward P/E: 12.52
TTM Net Income: $18.91 Billion
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC) is an American multinational financial services company that provides a wide range of banking, investment, and mortgage products and services. The company also specializes in consumer and commercial finance. It operates through 4 segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth & Investment Management. Wells Fargo & Company (NYSE:WFC) is one of the most profitable cheap stocks to buy now.
Phillip Securities upgraded its rating on Wells Fargo & Company (NYSE:WFC) from “Accumulate” to “Buy” but reduced the price target from $85 to $75. This decision follows the bank’s recent stock performance after its Q1 2025 earnings report. Phillip Securities expects 2025 to be a “slow but stable” year for Wells Fargo & Company (NYSE:WFC). The firm’s analyst predicts that net interest income will recover in fiscal 2025 and ongoing efficiency initiatives will result in lower expenses.
6. Johnson & Johnson (NYSE:JNJ)
Forward P/E: 14.73
TTM Net Income: $21.81 Billion
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) is an American multinational healthcare company that specializes in pharmaceuticals and medical technologies. The company is focused on medicine and MedTech to innovate and deliver breakthroughs in healthcare solutions. Johnson & Johnson (NYSE:JNJ) ranks among the most profitable stocks to buy now.
During the first quarter of 2025, the company made good progress in its research and product development and advanced its pipeline with new developments like TREMFYA for inflammatory bowel disease, RYBREVANT plus LAZCLUZE for non-small-cell lung cancer, and OTTAVA, a soft tissue surgical robotic system. Additionally, Johnson & Johnson (NYSE:JNJ) further enhanced its neuroscience portfolio through the acquisition of Intra-Cellular Therapies. In March 2025, the company announced plans to invest more than $55 billion in the US over the next four years. Johnson & Johnson (NYSE:JNJ) is focused on driving innovation and maintaining its leadership in medical technology. The investment will be used to build three new advanced manufacturing facilities and expand several existing sites across the company’s Innovative Medicine and MedTech businesses. Increased investments in technology will help Johnson & Johnson (NYSE:JNJ) speed up drug discovery and development, support workforce training, and improve business operations.
5. Citigroup Inc. (NYSE:C)
Forward P/E: 9.38
TTM Net Income: $12.15 Billion
Number of Hedge Fund Holders: 101
Citigroup Inc. (NYSE:C), or simply Citi, is an American multinational investment bank and financial services company that operates as a global bank for institutions with cross-border needs, a global leader in wealth management, and a personal bank in the US. The company does business in over 180 countries and jurisdictions to serve individuals, investors, corporations, institutions, and governments with a wide range of financial products and services. Citigroup Inc. (NYSE:C) is one of the most profitable stocks to invest in.
On April 16, RBC Capital Markets reduced its price target on Citigroup Inc. (NYSE:C) from $85 to $78 but maintained an “Outperform” rating. This decision came after the company’s latest quarterly earnings beat both RBC Capital’s and the broader market’s expectations. RBC analyst Gerard Cassidy noted that Citigroup Inc. (NYSE:C) has managed well despite uncertain global market conditions and that the bank’s management is confident about achieving their medium-term financial goal, which is a return on tangible common equity (ROTCE) of 10-11% by 2026. This target will be an improvement compared to the 9.1% ROTCE reported in Q1 2025. The company’s Services division was the strongest as it boasted a 26% ROTCE, while other notable segments were Markets, US Personal Banking, Banking, and Wealth Management with ROTCEs of 14%, 13%, 11%, and 9.4%, respectively. Cassidy believes that for Citigroup Inc. (NYSE:C) to achieve its financial goals, it will depend on steady revenue growth and strict expense management. The analyst indicated that while the targets look achievable on paper, the key to success will depend on how well Citigroup Inc. (NYSE:C) executes its plans.
4. Exxon Mobil Corporation (NYSE:XOM)
Forward P/E: 14.10
TTM Net Income: $33.68 Billion
Number of Hedge Fund Holders: 104
Exxon Mobil Corporation (NYSE:XOM) is an American international energy and petrochemical company. The company holds an industry-leading portfolio of resources and its main businesses are Upstream, Energy Products, Chemical Products, and Specialty Products. Exxon Mobil Corporation (NYSE:XOM) also owns and operates the largest CO2 pipeline network in the US. It is one of the largest integrated fuels, lubricants, and chemical companies in the world. XOM ranks among the most profitable cheap stocks to buy now.
In December 2024, the company announced its plans through 2030 to build on its unique strengths and generate an additional $20 billion in earnings potential and $30 billion in cash flow potential over the next six years. Exxon Mobil Corporation (NYSE:XOM) expects to grow its earnings at a compound annual growth rate (CAGR) of 10% and cash flow at 8%. The company will also be looking to make strategic moves to achieve $7 billion in structural cost savings by streamlining business processes, optimizing supply chains, improving maintenance turnaround processes, and upgrading technology and data systems. Following its acquisition of Pioneer in 2024, Exxon Mobil Corporation (NYSE:XOM) has announced plans to increase annual synergies by over 50% to more than $3 billion. With this acquisition, the company has the largest contiguous acreage position in the Permian Basin with twice the number of low-cost drilling locations compared to its closest competitor. In 2024, the company reported that it achieved record production from both its original and newly acquired Permian assets. Exxon Mobil Corporation (NYSE:XOM) is investing in technology to make operations more efficient and aims to roughly double production in the Permian Basin to approximately 2.3 million barrels of oil equivalent per day by 2030.
3. Alibaba Group Holding Limited (NYSE:BABA)
Forward P/E: 11.99
TTM Net Income: $16.77 Billion
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA), or simply Alibaba, is a Chinese multinational technology company that ranks among the most profitable cheap stocks to buy now. The company owns a wide range of businesses across e-commerce, retail, local consumer services, cloud, internet, and digital media and entertainment.
On April 14, Barclays reiterated its “Overweight” rating on Alibaba Group Holding Limited (NYSE:BABA) and maintained a price target of $180. The firm’s analyst highlighted the rapid growth of the company’s cloud business, which is expected to grow throughout the remainder of the year. Barclays believes that cloud margins will likely remain stable as Alibaba Group Holding Limited (NYSE:BABA) is currently focused on improving customer adoption of AI during what they call the industry’s “land grab” phase. China’s AI industry is shifting from training large language models (LLMs) to inferencing and then to edge AI. As a result, Alibaba Group Holding Limited (NYSE:BABA) is set to benefit early since it is the largest AI infrastructure provider in China. Barclays also noted that the company’s cloud business generates about $20 billion in revenue and $2 billion in EBITA annually, with growth rates picking up pace. The firm believes that the true value of Alibaba Group’s (NYSE:BABA) cloud division is not fully reflected in the current share price.
2. Bank of America Corporation (NYSE:BAC)
Forward P/E: 10.88
TTM Net Income: $26.35 Billion
Number of Hedge Fund Holders: 113
Bank of America Corporation (NYSE:BAC) is an American multinational banking and financial services corporation that serves individuals, small and middle-market businesses, and large enterprises with a comprehensive range of banking, investing, asset management, and other financial and risk management products and services. The company also specializes in wealth management, corporate and investment banking, and trading across a wide range of asset classes. Bank of America Corporation (NYSE:BAC) ranks among the most profitable stocks to buy.
The corporation had an impressive Q1 2025 and reported a net income of $7.4 billion, or 0.90 per diluted share, up from $6.7 billion, or $0.76 per share, in Q1 2024. Bank of America Corporation (NYSE:BAC) added about 250,000 net new consumer checking accounts in its consumer banking division to mark the 25th consecutive quarter of growth. Additionally, average deposits grew for the seventh consecutive quarter to nearly $2 trillion. Bank of America Corporation (NYSE:BAC) reported that net interest income (NII) for the quarter was $14.4 billion, and on a fully taxable equivalent basis, NII was $14.6 billion, up 3% year-over-year. The corporation also allocated more capital to its Global Markets business and expanded both consumer and commercial loans. Notably, Bank of America Corporation (NYSE:BAC) bought an $8 billion high-quality residential loan portfolio. This is expected to add just over $100 million in net interest income annually.
During Q1 2025, Bank of America Corporation (NYSE:BAC) returned $6.5 billion to shareholders through $2 billion in common dividends and $4.5 billion in share repurchases. UBS raised its price target on Bank of America Corporation (NYSE:BAC) and maintained a “Buy” rating after the company “leaps over lowered bar” with its Q1 results.
1. JPMorgan Chase & Co. (NYSE:JPM)
Forward P/E: 13.35
TTM Net Income: $58.24 Billion
Number of Hedge Fund Holders: 123
JPMorgan Chase & Co. (NYSE:JPM) is an American financial services and banking corporation with operations worldwide. The company specializes in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. Through its J.P. Morgan and Chase brands, it serves customers in the US and many prominent corporate, institutional, and government clients around the world. JPMorgan Chase & Co. (NYSE:JPM) is one of the most profitable stocks to consider investing in.
On April 17, UBS raised its price target on JPMorgan Chase & Co. (NYSE:JPM) from $277 to $305 and maintained a “Buy” rating after the banking company’s strong first-quarter 2025 results. UBS analyst Erika Najarian noted that the company flexed its earnings muscle and delivered better-than-expected trading-driven revenue. JPMorgan Chase & Co. (NYSE:JPM) also raised its consolidated net interest income guidance by $500 million. UBS updated its estimates and said that the company’s stronger revenues and more aggressive share buybacks in Q1 balanced out the impact of higher provisions. Najarian raised her 2025 EPS estimate for JPMorgan Chase & Co. (NYSE:JPM) from $18.46 to $19.37. She also raised her 2026 EPS forecast from $18.90 to $20.14 mainly because of the strong revenue momentum and the acceleration of the buildup of reserves into 2025.
Overall, JPM ranks first among the 10 most profitable cheap stocks to buy now. While we acknowledge the potential of these most profitable stocks, our conviction lies in the belief that some 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 an AI stock that is more promising than JPM but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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