On July 31, Nadia Lovell, UBS senior equity strategist, joined ‘The Exchange’ on CNBC to discuss why she believes this rally has staying power, and to suggest that investors stay up in quality on secular growth stories. In discussing what would give staying power to the current market levels, especially as the S&P was approaching Lovell’s firm’s upside scenario of 6700, she responded by stating that the continued pickup in the tech sector is the key factor. She emphasized a selective approach to investing, with a focus on secular growth stories within tech. She explained that tech is where the growth momentum is, with CapEx spending continuing to increase. She also highlighted the AI and electrification trends in utilities and industrials, as well as the financials sector, as other areas where investors should focus. She also noted that the IPO market is beginning to open up again.
On asking to differentiate between overheating in the market and healthy, warranted excitement, pointing to the re-emergence of meme stocks and the recent performance of crypto, Lovell responded by saying that these signs indicate an increase in investors’ risk appetite. She clarified that while there is some pickup in the meme stock trade, it is not at the same levels as a few years ago, which could present both upside and downside risk. She reiterated that investors should remain focused on where the growth is, which is in companies like the MAG7 that are delivering strong earnings growth and increasing CapEx spending.
That being said, we’re here with a list of the 12 most undervalued quality stocks to buy according to hedge funds.
A financial adviser looking over a portfolio of securities and 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 August 7. We then selected the 12 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 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).
12 Most Undervalued Quality Stocks to Buy According to Hedge Funds
12. Exelixis Inc. (NASDAQ:EXEL)
Forward P/E Ratio as of August 7: 17.06
Number of Hedge Fund Holders: 38
Exelixis Inc. (NASDAQ:EXEL) is one of the most undervalued quality stocks to buy according to hedge funds. On July 24, Exelixis announced that its partner Ipsen received approval from the European Commission/EC for CABOMETYX (cabozantinib) to treat adults with unresectable or metastatic, well-differentiated pancreatic/pNET and extra-pancreatic/epNET neuroendocrine tumors.
The approval applies to patients who have progressed after at least one prior systemic therapy, excluding somatostatin analogues. This decision allows for the marketing of CABOMETYX in all 27 member states of the European Union, as well as Norway, Liechtenstein, and Iceland. The approval follows a positive opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use in June this year.
The EC’s approval is based on the results of the phase 3 CABINET pivotal trial. The trial evaluated CABOMETYX against a placebo in 2 groups of patients with previously treated neuroendocrine tumors: advanced pNET and advanced epNET. The trial demonstrated a statistically significant and clinically meaningful improvement in progression-free survival for patients treated with CABOMETYX.
Exelixis Inc. (NASDAQ:EXEL) is an oncology company that discovers, develops, and commercializes new medicines for difficult-to-treat cancers in the US.
11. Ameriprise Financial Inc. (NYSE:AMP)
Forward P/E Ratio as of August 7: 13.51
Number of Hedge Fund Holders: 40
Ameriprise Financial Inc. (NYSE:AMP) is one of the most undervalued quality stocks to buy according to hedge funds. On August 7, Ameriprise Financial announced that financial advisor Vince Abio joined S&T Financial Services, which is a financial advisory practice within the Ameriprise Financial Institutions Group/AFIG. Abio is an industry veteran with 28 years of experience and was previously with Merrill Lynch, where he managed over $120 million in client assets.
Abio chose to join Ameriprise and S&T Financial Services, which serves S&T Bank clients in Pennsylvania and Ohio. He cited the combination of Ameriprise’s financial planning capabilities and a trading platform with the scale to provide sophisticated solutions, along with S&T Bank’s community focus and clear vision for its retirement plan business as the perfect fit.
S&T Financial Services is the investment program of S&T Bank and is comprised of 15 financial advisors and 4 support staff members. The team manages a combined brokerage asset total of more than $1.4 billion. S&T Bank’s parent company, S&T Bancorp Inc. (NASDAQ:STBA), is a $9.8 billion bank holding company headquartered in Indiana, Pennsylvania.
Ameriprise Financial Inc. (NYSE:AMP) is a diversified financial services company in the US and internationally. The company operates through Advice & Wealth Management, Asset Management, and Retirement & Protection Solutions segments.