11 Most Undervalued High Quality Stocks to Buy According to Hedge Funds

In this article, we will look at the 11 Most Undervalued High Quality Stocks to Buy According to Hedge Funds.

On July 15, Sevasti Balafas, CEO of GoalVest Advisory, joined CNBC Television for an interview. She believes that US exceptionalism remains intact, and investment and emphasis on AI infrastructure continue. The market is currently buoyed by the positive news from the President, which enables chipmakers to sell their products in China. Balafas notes that she is excited about the AI investment and infrastructure; however, she fears that the market is vulnerable at the same time.

Balafas elaborated that, while she remains bullish on the market overall, she also believes that the market is vulnerable. This is mainly because the stocks are expensive, trading at a forward P/E of 22 while the historic averages are at 17. Not only this, the market still has a moving target related to tariffs, with no estimation regarding its landing. She noted that although President Trump eases after talking tough, uncertainty remains regarding the tariffs.

With that, let’s take a look at the 11 most undervalued high-quality stocks to buy according to hedge funds.

A trader at a stock exchange, vigorously watching the stocks’ trends in the stock market.

Our Methodology 

To curate the list of 11 most undervalued high-quality stocks to buy according to hedge funds, we used the iShares MSCI USA Quality Factor ETF. Using the ETF, we aggregated a list of undervalued stocks trading below the Average forward P/E ratio of the S&P 500, which is at 24.69 as per data from the Wall Street Journal. Next, we ranked these stocks based on the number of hedge fund holders sourced from Insider Monkey’s Q1 2025 database.

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).

11 Most Undervalued High Quality Stocks to Buy According to Hedge Funds

11. 3M Company (NYSE:MMM)

Forward P/E Ratio: 20.27

Number of Hedge Fund Holders: 69

3M Company (NYSE:MMM) is one of the Most Undervalued High Quality Stocks to Buy According to Hedge Funds. On July 9, Barclays raised the firm’s price target on 3M Company (NYSE:MMM) from $164 to $170, while keeping an Overweight rating on the stock.

The increased price target shows analysts’ improved sentiment around the company as it gets close to releasing its Q2 2025 earnings report. The firm noted that there are high investor expectations for companies in the multi-industry sector as they approach Q2 earnings reports. Many firms, including 3M Company (NYSE:MMM), are seen as well-positioned to beat current earnings estimates and possibly raise future guidance.

Moreover, the positive outlook comes despite soft consumer demand, highlighting the sector’s ability to navigate a muted demand environment. The company, during its fiscal Q1 2025 results, provided a full-year outlook. Management expects the Adjusted EPS to be in the range of $7.60 to $7.90, with an additional tariff sensitivity of $0.20 to $0.40 per share.

3M Company (NYSE:MMM) is a diversified technology and manufacturing company specializing in innovative products across multiple industries. Its operations span safety and industrial goods, transportation and electronics, and consumer products.