On July 17, Lori Calvasina, RBC Capital Markets head of US equity strategy, joined ‘Closing Bell’ on CNBC to discuss whether the market is fully valued at present levels. Calvasina explained that whenever the topic of the Fed’s independence and external pressure arises, she consults her rate strategist. He consistently reiterates that the Fed operates as a committee and not a single decision-maker to emphasize its collective nature. However, she also highlighted that international investors are wary of such chatter. While they may not be the largest owners of US equities, they are significant, and fund flow data shows that these international investors have been actively moving in recent years and entered H2 2025 feeling skittish. Calvasina noted that these investors have expressed concern recently about valuation levels in the US market, which is a sentiment she does not typically hear from US-based stock pickers. Calvasina observed that the market, having experienced a strong rally, is currently pricing in a lot of positive news, is eager to move past tariff concerns, and is focused on a projected strong year in 2026.
When asked if the market is fully valued, Calvasina stated that it depends on the model being used. Based on her own valuation and earnings analysis, the market has blown past fully valued when considering 2025 projections. In a conversation regarding which sector appears most mispriced heading into earnings, Calvasina revealed that RBC Capital Markets had recently upgraded materials about a week and a half prior. She explained that while materials were not super cheap, they compare favorably to the industrial sector, which is highly favored due to reshoring narratives but is trading at extremely high valuations. While acknowledging the strong fundamentals in industrials, she argued that the materials sector should benefit from many of the same drivers but offers very reasonable valuations and is experiencing a shift from negative to positive earnings revisions.
That being said, we’re here with a list of the 10 most undervalued stocks to buy and hold for 3 years.
A portfolio manager in front of their computer screen, evaluating a variety of mid-cap stocks.
Methodology
We sifted through the Finviz stock screener and financial media reports to compile a list of the top undervalued stocks (with a forward P/E ratio under 20 as of July 22) to buy and hold for the next 3 years. We then selected 10 stocks with a 3-year revenue CAGR of over 15%. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q1 2025.
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).
10 Most Undervalued Stocks to Buy and Hold for 3 Years
10. Northern Oil and Gas Inc. (NYSE:NOG)
Forward P/E Ratio as of July 22: 7.25
3-Year Revenue CAGR: 20.68%
Number of Hedge Fund Holders: 34
Northern Oil and Gas Inc. (NYSE:NOG) is one of the most undervalued stocks to buy and hold for 3 years. On July 16, Mizuho lowered its price target for Northern Oil and Gas/NOG to $32 from $33, while maintaining a Neutral rating on the shares. The adjustment came as part of Mizuho’s Q2 preview, as the firm anticipates NOG will reduce its 2025 capital expenditure budget and volume guidance due to decreased activity.
The company achieved a record Adjusted EBITDA of ~$435 million in Q1 2025. Total average daily production reached ~ 135,000 BOE per day, which was a 2.5% increase sequentially and a 13% increase year-over-year. Oil production remained flat at ~79,000 barrels per day compared to the last quarter, while gas production contributed 42% to the mix, which was up 6.5% sequentially and 14% year-over-year.
Capital expenditures in Q1 were ~$250 million, with 57% allocated to the Permian Basin. Northern Oil and Gas operates with a flexible model for capital allocation and has demonstrated strong financial performance, including 21 consecutive quarters of positive free cash flow, which total over $1.7 billion since 2020. Over 60% of its expected 2025 production is hedged.
Northern Oil and Gas Inc. (NYSE:NOG) is an independent energy company that acquires, explores, exploites, develops, and produces crude oil and natural gas properties in the US.
9. RenaissanceRe Holdings Ltd. (NYSE:RNR)
Forward P/E Ratio as of July 22: 13.23
3-Year Revenue CAGR: 33.28%
Number of Hedge Fund Holders: 40
RenaissanceRe Holdings Ltd. (NYSE:RNR) is one of the most undervalued stocks to buy and hold for 3 years. On July 24, Barclays increased its price target for RenaissanceRe to $273 from $256, while maintaining an Equal Weight rating on the shares. The revision follows RenaissanceRe’s strong Q2 2025 earnings beat.
RenaissanceRe Holdings announced its financial results for Q2 2025 on July 23 in Pembroke, Bermuda. The company reported Net Income Available to Common Shareholders of $826.5 million and Operating Income Available to Common Shareholders of $594.6 million for Q2. This translates to $17.20 per diluted common share for net income and $12.29 per diluted common share for operating income.
RenaissanceRe actively engaged in share repurchases in this quarter. During Q2, ~1.6 million common shares were repurchased at an aggregate cost of $376.4 million, with an average price of $242.18 per common share. From July 1 through July 21, an additional 293.8 thousand common shares were repurchased at a total cost of $70.2 million and an average price of $239.03 per common share.
RenaissanceRe Holdings Ltd. (NYSE:RNR) provides reinsurance and insurance products in the US and internationally. It operates through the Property and Casualty & Specialty segments.
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