On February 24, Kayne Anderson Rudnick chief market strategist Julie Biel joined ‘The Exchange’ on CNBC to discuss her thoughts on how good quality companies can ride out turbulence in the market. Just like Warren Buffett and Charlie Munger, Biel also suggests inaction as an investment principle and believes that holding high-quality companies can help investors deal with market volatility. She emphasized conviction in investing instead of impulsive decision-making. Biel also noted the general resilience of the US economy, which mainly comes from a robust jobs market as it fuels the consumer-driven economy. She also expressed unease over the limited tools available to address a potential recession that could come from high levels of deficit spending. She thinks inefficient businesses should be allowed to fail while protecting employees during economic cycles.
Biel addressed small-cap stocks and explained that they struggle due to their higher leverage and sensitivity to prolonged higher interest rates. They often include significant exposure to real estate and banking sectors and have a high proportion of non-earning companies. She then emphasized that even if one were to invest in small caps, the ideal approach would be to look at high-quality small-cap companies that can yield strong results. Biel’s stock picks are quality companies that focus on tangible and physical solutions instead of those with foundations in hyped technologies like AI. While she acknowledged AI’s potential, she argued that it’s becoming standard and can no longer be categorized as a differentiator.
That being said, we’re here with a list of the 11 most undervalued quality stocks to buy now.
An overhead view of a bustling stock exchange, with brokers and traders exchanging stocks.
Our Methodology
We sifted through the Vanguard U.S. Quality Factor ETF holdings to compile a list of the top stocks that had a forward P/E ratio under 15 as of April 14. We then selected the 11 undervalued stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
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 Quality Stocks to Buy Now
11. Ameriprise Financial Inc. (NYSE:AMP)
Forward P/E Ratio as of April 14: 12.47
Number of Hedge Fund Holders: 47
Ameriprise Financial Inc. (NYSE:AMP) is a diversified financial services company that offers financial planning and advice services to individual and institutional clients. It operates through Advice & Wealth Management, Asset Management, and Retirement & Protection Solutions segments. It was formerly known as American Express Financial Corporation until September 2005.
In 2024, the company’s Wealth Management segment had its client assets hit $1 trillion. This was a record for the segment and marked an improvement of 14% year-over-year. It was fueled by the wrap asset platform, which now manages $574 billion. This marks an 18% increase and makes it one of the largest in the industry. Transactional activity is also up 17% year-over-year due to increased client engagement.
Ameriprise Financial Inc. (NYSE:AMP) is seeing a shift of client money from term products to wrap products. It’s actively investing in its technology platform, such as digital tools, CRM, and data analytics to enhance advisor productivity and client relationships. The company also attracted 91 experienced advisors in Q4 2024. This expansion is expected to continue throughout 2025.
Aristotle Value Equity Strategy applauded the company’s strong financial performance and made the following comment about Ameriprise Financial, Inc. (NYSE:AMP) in its Q4 2022 investor letter:
“Ameriprise Financial, Inc. (NYSE:AMP), the investment management firm, was a top contributor for the quarter. During our time as shareholders, Ameriprise has continued to execute on its transformation into an important player in the asset and wealth management industry (and away from insurance products). Today the Advice & Wealth Management segment, combined with the Asset Management segment, account for nearly 80% of the company’s revenues. This has served to de-risk its business model, unlock excess capital (of which it returned $632 million to shareholders during the quarter) and improve returns on equity, which are now in excess of 47%. In addition, the company takes pride in its ability to attract and retain financial advisors, providing them the tools to build relationships with clients. The market volatility during the year, in our view, has given ample opportunity for Ameriprise’s advisors to demonstrate the value their services can provide for clients.”
10. Equitable Holdings Inc. (NYSE:EQH)
Forward P/E Ratio as of April 14: 6.22
Number of Hedge Fund Holders: 47
Equitable Holdings Inc. (NYSE:EQH) is a diversified financial services company that operates through six segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. The company was formerly known as AXA Equitable Holdings Inc. until January 2020.
The company’s Wealth Management segment was marked by record Assets Under Advisement (AUA) and net flows in 2024. The segment saw $4 billion in net inflows for the full year. This is attributed to the segment’s ‘supported independence’ model, which resonates with both advisors and clients. This model in wealth management allows financial advisors to operate with some extent of autonomy. So they essentially operate like independent contractors, but have access to the resources, technology, and support of a larger firm.
The Wealth and Asset Management segments together contributed to over 50% of the $1.5 billion in cash flow generated to the holding company. There was a 10% increase in the wealth planner count at the company. This was because of a record number of experienced advisors joining Equitable Holdings Inc. (NYSE:EQH) in 2024. A new Head of Business Development was also brought on board to enhance recruitment strategies.
Hedge Fund Resource Center