Kevin Warsh, Donald Trump’s pick to be the next chair of the Federal Reserve, could be good news for the stock market, at least in the near term. This claim is from Dan Niles, founder and portfolio manager at Niles Investment Management, in an interview with CNBC’s Money Movers on January 31.
Niles’s reasoning was simple. Warsh believes that AI will be a significant deflationary force (as Warsh wrote in his Wall Street Journal op-ed entitled “The Federal Reserve’s Broken Leadership”). Therefore, he might believe he can get away with lowering interest rates, since the productivity gains and deflationary pressures from adopting artificial intelligence will mitigate inflation. As such, Niles said that he would not be surprised to see another 100 basis points in rate cuts from the Federal Reserve in 2026. Lower rates would then lead to higher stock trading multiples.
Sam Altman echoed this sentiment regarding the deflationary impact of AI in an OpenAI town hall on January 27:
”Given, certainly, progress with work you can do in front of a computer, but also what looks like it will soon happen with robotics and a bunch of other things, we’re going to have massively deflationary pressure.”
Given the deflationary pressures from the broader adoption of AI, which would translate into lower interest rates and ultimately higher trading multiples, let us review 12 stocks that are currently trading at cheap P/E ratios.
Stock market data showing an upward trajectory. Photo by Burak The Weekender on Pexels
Our Methodology
We shortlisted stocks that trade in the US market with at least $2 billion in market cap, at least three analysts covering the stock, and are trading at less than 15x forward P/E. We then selected 12 stocks most favored by hedge funds based on Insider Monkey’s proprietary hedge fund database, which tracks 978 stocks as of Q3 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
12. ONEOK Inc. (NYSE:OKE)
Upside: 4.81%
Forward P/E Ratio: 13.23x
Number of Hedge Fund Holders: 42
ONEOK, Inc. (NYSE:OKE) is one of the Best Cheap Stocks to Buy Right Now.
From January 22 to 28, several firms updated their target prices on ONEOK. Jeremy Tonet at JPMorgan cut his target price on ONEOK to $84 (from $87) and downgraded the rating to “Neutral” (from “Overweight”), citing soft macroeconomic fundamentals. He also added that oil prices would likely need to rise before investor sentiment for this stock improves. Meanwhile, Robert Kad of Morgan Stanley also lowered their target price on ONEOK to $104 (from $107) but kept their “Overweight” rating. UBS also cut its target price to $103 (from $114) while keeping a “Buy” rating.
These target price adjustments followed ONEOK’s January 21 announcement that it will raise its quarterly dividend by ~4%, from $1.03 per share to $1.07 per share. On an annual basis, this comes out to $4.28 per share, implying a dividend yield of 4.81%. The company’s 2025 results will be released by 23 February 2026.
Despite recent cuts to the target price, analysts remain favorable on the stock. According to CNN’s data, 14 of 24 analysts (~58%) covering OKE have a “Buy” rating, while 10 (~42%) have a “Hold.” The median target price is $83 (with a high of $108), implying an upside of 4.81% (41.14% if using the highest estimate).
ONEOK, Inc. (NYSE:OKE) is a natural gas player based in Tulsa, Oklahoma. The company gathers, processes, transports, and stores natural gas in North Dakota, Montana, Wyoming, Kansas, Oklahoma, Texas, and New Mexico.
11. American Airlines Group Inc. (NASDAQ:AAL)
Upside: 27.30%
Forward P/E: 6.66x
Number of Hedge Fund Holders: 43
American Airlines Group Inc. (NASDAQ:AAL) is one of the Best Cheap Stocks to Buy Right Now.
American Airlines released its Q4-2025 results last January 27, which showed record fourth-quarter and full-year revenue of $14 billion and $54.6 billion, respectively. The strong numbers came despite an estimated $325 million hit from the government shutdown. In addition to higher revenue, the company was also able to reduce its net debt by $2.1 billion.
Moving forward, American Airlines’ CEO Robert Isom says the company is “positioned for significant upside in 2026.” He projects total revenue to grow 7-10% in the 1st quarter of 2026. As for earnings, EPS is expected to be ~$1.70 to $2.70 per share, which is 10x to 16x of 2025’s results.
The (1) above consensus Q4 results, (2) strong management guidance for 2026, and (3) reduction in debt were key reasons why BMO Capital raised its target price from $16.75 up to $17.00 on January 28. The firm also added that if the demand momentum from January continues, the top end of management’s 2026 guidance could be in play. On the same day, JP Morgan also raised their target price (from $20 to $22) after updating their model post earnings report.
Still on the topic of target prices, CNN’s data shows that 15 out of 28 analysts (~54%) covering AAL have a “Buy” rating on the company, 12 (~43%) have a “Hold” rating, with only one (~4%) having a “Sell” recommendation. The median target price is $17.32 (with a high of $22.00), implying an upside of 27.30% (61.65% if using the highest estimate).
American Airlines Group Inc. (NASDAQ:AAL), through its subsidiaries, offers passenger and cargo air transportation services in the United States, Latin America, the Atlantic, and the Pacific.
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