10 Most Undervalued Mid Cap Stocks to Buy According to Hedge Funds

5. Comerica Inc. (NYSE:CMA)

Forward P/E Ratio as of March 5: 11.12

Number of Hedge Fund Holders: 50

Comerica Inc. (NYSE:CMA) is a diversified financial services company. It delivers a suite of banking and wealth management solutions across the US, Canada, and Mexico. It serves businesses, individuals, and high-net-worth clients.

Its Commercial Banking segment has a focus on middle-market and corporate lending. Despite industry-wide challenges in 2024, the company demonstrated strength in this segment in Q4 2024. Its focus on building and maintaining client relationships translates directly into loan growth potential. While overall loan demand was soft, Comerica Inc.’s (NYSE:CMA) projections indicate targeted growth with full-year average loans projected to be flat to up 1% in 2025, and 2% growth excluding commercial real estate.

In Q4, customer deposits grew by over $800 million, or over 1%. It projects full-year average customer deposits to grow 1% in 2025. This directly impacts the company’s Net Interest Income (NII), which is a core component of its profitability. The company projects a 6% to 7% increase in full-year 2025 NII due to its management of the loan and deposit mix, alongside careful interest rate risk mitigation.

Ariel Global Fund sees Comerica Inc. (NYSE:CMA) as a strong investment opportunity. The firm believes that it’s well-positioned to benefit from future economic growth and rate adjustments, despite current challenges. Here’s what it said in its Q3 2024 investor letter:

“We purchased Comerica Incorporated (NYSE:CMA) a financial holding company whose revenue is primarily generated across three business segments: the Commercial Bank, the Retail Bank and Wealth Management. The company offers a high-touch business model with an enhanced focus on long-term customer relationships. Lower deposit levels and declining demand for loans driven by the Fed’s quantitative tightening regime as well as deteriorating credit conditions presented an attractive entry point. Looking ahead, we believe the company is well-positioned to take advantage of economic growth, which should lead to enhanced deposit gathering and loan generation. Additionally, we expect more moderate rate cuts to allow for margin expansion and slower deposit cost increases. At today’s valuation, we believe the risk/reward is skewed to the upside.”