On January 27, Sherry Paul, Morgan Stanley senior portfolio manager, joined CNBC’s ‘Closing Bell’ to discuss whether more volatility is ahead. Paul described a shift from pre-Davos optimism to a post-Davos market defined by volatility, a weak dollar, and a new world order. She explained that this new era demands urgent domestic AI advancement and supply chain restructuring. While volatility will persist, Paul views it as an emergent opportunity to move beyond the MAG7 toward magnificent thematics like AI automation, innovation, and longevity. Her core thesis for 2026 is that every company is now a tech company. Paul also rejected comparisons to the early 2000s dot-com bubble and asserted that the current technological race is fundamentally more substantial than the early internet land rush.
On January 6, Tim Seymour of Seymour Asset Management appeared on CNBC’s ‘The Exchange’ to discuss whether international markets may be able to sustain their 2025 outperformance through 2026. He argued that investors have not missed the move, as these are long-tail mean reversion trades. Seymour supported this by citing a combination of factors: attractive valuations, earnings growth, and a weaker dollar. He emphasized that the themes driving the US market, such as AI, defense spending, and infrastructure, are global. He concluded that if global growth remains in line with or exceeds expectations, international markets are positioned to outperform the US even further.
That being said, we’re here with a list of the 12 most undervalued Canadian stocks to buy according to hedge funds.
Our Methodology
We sifted through the Finviz stock screener to compile a list of undervalued Canadian stocks that had a forward P/E ratio under 15. We then selected 12 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 Q3 2025.
Note: All data was sourced on February 5.
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 Most Undervalued Canadian Stocks to Buy According to Hedge Funds
12. Magna International Inc. (NYSE:MGA)
Number of Hedge Fund Holders: 25
Magna International Inc. (NYSE:MGA) is one of the most undervalued Canadian stocks to buy according to hedge funds. On January 27, Scotiabank analyst Jonathan Goldman raised the price target for Magna to $57 from $52 while maintaining a Sector Perform rating. The firm observed that increased vehicle production costs resulting from tariffs may soon be passed on to consumers or suppliers in 2026. Additionally, the firm highlighted potential downside risks to production volumes, noting that these volumes serve as the primary factor in determining supplier earnings.
Furthermore, on January 23, Barclays analyst Dan Levy increased the firm’s price target for Magna to $58 from $52 with an Equal Weight rating. This adjustment was part of a broader review of the autos and mobility sector in anticipation of Q4 2025 results. Barclays continues to favor vehicle manufacturers over suppliers, noting that car makers are currently benefiting from stable production rates and a reduction in losses associated with electric vehicle programs.
On January 15, Goldman Sachs also increased the price target for Magna to $68 from $60 with a Sell rating on the shares. The revised target accounts for recent automotive sales data and various supplier comments made at conferences during the quarter regarding 2026 growth expectations. These updates reflect the firm’s assessment of current market performance and industry outlooks.
Magna International Inc. (NYSE:MGA) manufactures and supplies vehicle engineering, contract, and automotive space. It operates through four segments: Body Exteriors & Structures, Power & Vision, Seating Systems, and Complete Vehicles.
11. Gildan Activewear Inc. (NYSE:GIL)
Number of Hedge Fund Holders: 28
Gildan Activewear Inc. (NYSE:GIL) is one of the most undervalued Canadian stocks to buy according to hedge funds. On February 3, Scotiabank increased its price target for Gildan Activewear to $72 from $66 while maintaining an Outperform rating. The firm is updating its estimates for the company in anticipation of Q4 2025 results to account for the finalized deal with Hanesbrands. The firm remains constructive on Gildan, highlighting the company’s solid positioning within the apparel industry.
On January 27, TD Securities analyst Brian Morrison increased the firm’s price target for Gildan Activewear to $77 from $74 with a Buy rating as part of a Q4 2025 preview. The firm suggests that providing details on the Hanesbrands integration strategy should support investor confidence regarding Gildan’s capacity to capture market share and realize synergies.
On the same day, BMO Capital raised its price target for Gildan Activewear to $78 from $70 with an Outperform rating. Following the Impressions Expo, the firm expressed confidence in Gildan’s capacity to utilize its low-cost, vertically integrated manufacturing model to foster wholesale growth. This strategy is expected to help the company aggressively capture market share while sustaining higher margins.
Gildan Activewear Inc. (NYSE:GIL) manufactures and sells various apparel products. The company provides various activewear products and also offers hosiery products under Gildan, GoldToe, Signature Gold by GoldToe, GoldToe Edition, Peds, MediPeds, All Pro, and Powersox brands.
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