On January 21, Morgan Stanley shared its 2026 market outlook, highlighting key catalysts and risk factors. The firm’s Global Investment Committee has projected almost double‑digit returns for the S&P 500 Index, marking the fourth consecutive year of bullish momentum.
Despite AI-driven prospects and expectations of an additional 50 basis points of rate cuts by the Fed, which would fuel market growth, the firm highlighted headwinds. It noted that political and geopolitical risks should not be ignored by investors. It also attributed some complacency in forecasts to currently stretched valuations, which need to be factored in. The report highlights:
“At the heart of investor optimism is a highly bullish forecast: Analysts are projecting 14% to 16% annual earnings-per-share (EPS) growth in 2026. To put that in perspective, for the 493 stocks in the S&P 500 other than “Magnificent 7” mega-cap tech companies, this estimate would represent a doubling in the pace of earnings growth compared to 2025.” It further states, “That sets a very high bar and leaves the market with a razor‑thin margin for error. With equity valuations already rich and the 10 largest stocks in the index accounting for about 40% of its total value, any disappointment in earnings could quickly knock markets off balance.”
While risks exist, Morgan Stanley’s Global Investment Committee advised focusing on quality stocks in sectors such as financials, healthcare, and materials.
That said, without a doubt, conventional financial services businesses, such as retail & wholesale banks, AMCs, and insurance houses, offer distinct advantages for investors. The sector is known for attractive payouts and relative outperformance during good economic times. But with looming uncertainties, many investors have been liquidating their holdings of underlying stocks. This creates attractive entry points across the segment.
With that background, let’s explore our 12 Oversold Financial Stocks to Invest In According to Hedge Funds.
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Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed financial companies with market capitalizations above $2 billion and with share prices above $5. We further narrowed our search to stocks with a Relative Strength Index (RSI) below 30 and shortlisted those with at least 15% upside potential according to TipRanks consensus, as of the February 13 closing.
In the final part of the screening, we identified the number of hedge funds that held positions in these stocks as of the end of the third quarter of 2025. Finally, we selected 12 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.
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. Assurant Incorporated (NYSE:AIZ)
Number of Hedge Fund Holders: 32
Assurant Incorporated (NYSE:AIZ) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 12, Charlie Lederer from BMO Capital maintained his Outperform rating on Assurant Incorporated (NYSE:AIZ). He reduced the price target from $255 to $246, following the company’s fourth quarter announcement and guidance. The analyst believes that management’s guidance won’t lead to substantial adjustments to prior estimates.
On February 11, Assurant Incorporated (NYSE:AIZ) announced $3.35 billion in revenue for the fourth quarter, beating the market expectation of $3.28B. Assurant’s President and CEO, Keith Demmings, stated:
“Our 2025 performance underscores the position of strength from which Assurant Incorporated (NYSE:AIZ) continues to operate, delivering our ninth consecutive year of profitable growth. The strength and resilience of our results reflect the power of our diversified business model and our relentless focus on serving clients and creating value for shareholders. Sustained investments in innovation have transformed our operations and product offerings, supporting our partners, driving efficiencies and elevating the customer experience. The results are clear: new and expanded partnerships with leading global brands; differentiated, technology-enabled solutions; and continued growth in attractive, expanding markets – including the recent launch of Assurant Home Warranty – all underpinned by strong financial outperformance.”
Assurant Incorporated (NYSE:AIZ) delivers protection and support services to connected devices, homes, and automobiles. It offers mobile device protection, financial services, insurance products, vehicle protection, and other related services. The company also engages with leading brands for device lifecycle management and property technology solutions.
11. Willis Towers Watson (NASDAQ:WTW)
Number of Hedge Fund Holders: 39
Willis Towers Watson (NASDAQ:WTW) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 4, Elyse Greenspan from Wells Fargo maintained her Overweight rating on Willis Towers Watson (NASDAQ:WTW). She also raised the price target from $366 to $379, which now offers a revised upside potential of almost 32%.
Greenspan highlighted the recent bullish trend in share price following quarterly results that showed impressive organic growth. She emphasized impressive figures across the company’s Corporate Risk & Broking (CRB) segment. She also noted a favorable market reaction towards the overall Risk & Broking (R&B) segment outlook, which is expected to deliver growth in mid-single to high-single digit.
On February 4, Mark Hughes from Truist Financial also reaffirmed his Buy rating for Willis Towers Watson (NASDAQ:WTW). He has predicted a 39% upside potential on the stock, after raising the target price from $380 to $400.
Hughes also reflected on the company’s fourth quarter results that outperformed relative to consensus estimates. He acknowledged the management’s optimistic forecast for the Risk & Broking segment, which is expected to deliver organic growth in mid-to-high single digits. Apart from that, growth across the Health, Wealth & Career segment is also projected in mid-single-digits.
Willis Towers Watson (NASDAQ:WTW) is a global provider of advisory, broking, and risk solutions. Their service offerings include actuarial support, broking, strategy consulting, plan management support, and more. They also engage in administrative support for life, medical, disability, voluntary, and other benefit programs.
10. OneMain Holdings (NYSE:OMF)
Number of Hedge Fund Holders: 41
OneMain Holdings (NYSE:OMF) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 6, the price target on OneMain Holdings (NYSE:OMF) was reduced from $75 to $70 by Wells Fargo analyst Donald Fandetti, who maintained his Equal Weight rating on the stock. Following this downward revision, the stock now offers a 23% upside.
Fandetti’s pessimism around OneMain Holdings (NYSE:OMF) stems from a lackluster consumer sentiment, inflationary pressures, and macroeconomic uncertainty. Despite these headwinds, he anticipates some NCO improvement for the company with better results projected for the second half of 2026.
On February 6, Kyle Joseph from Stephens reaffirmed his Overweight rating for OneMain Holdings (NYSE:OMF). Joseph also reduced the price target from $90 to $76, yielding a revised upside potential of over 33%.
Joseph based his stance on the management’s guidance for 2026. As per the estimates, trends in loan growth, net charge off, and operating expenses seem fairly aligned with projections made by Stephens. However, he expressed concerns relating to the macroeconomic outlook, which appears to be challenging for OneMain Holdings (NYSE:OMF).
OneMain Holdings (NYSE:OMF) is a holding company with an emphasis on financial services, including consumer finance and insurance services. They engage in origination, underwriting, and servicing of personal loans, secured auto finance, and credit products to nonprime consumers. They also offer optional and non-optional credit insurance products.
9. Unum Group (NYSE:UNM)
Number of Hedge Fund Holders: 42
Unum Group (NYSE:UNM) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 6, the price target on Unum Group (UNM) was lowered from $105 to $103 by Thomas Gallagher from Evercore ISI. The analyst maintained an Outperform rating on the stock, which offers almost 44% upside potential at the current level. Gallagher’s downward revision in price target comes after a weak quarterly report, which he labelled as “rough disability quarter on an apples-to-apples basis.” The analyst also noted the company’s 2026 guidance, which is approximately 1%-2% lower, reflecting a modest outlook.
On February 6, Jimmy Bhullar of J.P. Morgan reiterated his Neutral rating on Unum Group (UNM) and also reduced his price target from $92 to $90. Following this revision, Bhullar’s estimates yield an upside potential of almost 26%. His rating is also based on the company’s recent quarterly announcement, which did not inspire too much confidence.
Unum Group (NYSE:UNM) delivers financial protection benefit solutions with a focus on accident, critical illness, disability, life, and vision insurance. It offers both long-term and short-term plans for individuals and groups, backed by supplemental and voluntary offerings. Other services include reinsurance pools, workplace benefits, management operations, and leave management.
8. Arthur J. Gallagher & Company (NYSE:AJG)
Number of Hedge Fund Holders: 49
Arthur J. Gallagher & Company (NYSE:AJG) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On January 30, Paul Newsome from Piper Sandler maintained his Neutral rating on Arthur J. Gallagher & Company (NYSE:AJG). The analyst, however, reduced the price target from $272 to $249, which now leads to an upside potential of around 20%.
Newsome acknowledged Arthur J. Gallagher & Company’s (NYSE:AJG) acquisition revenues and other items that led to “better-than-expected” profitability in the recent announcement. He noted management’s continued optimism about future organic topline growth. However, the analyst expressed his concerns on weakening business environment and ongoing competitive pressures.
On January 30, the price target on Arthur J. Gallagher & Company (NYSE:AJG) was lowered from $311 to $298 by Wells Fargo analyst Elyse Greenspan, who maintained an Overweight rating on the stock.
Greenspan’s revised projections offer an upside potential of 43%. She highlighted the company’s fourth quarter EPS of $2.38, which beat Wells Fargo’s $2.33 and the street’s $2.35 estimates due to higher Brokerage profitability margins. Organic growth across the Brokerage segment was reported at 5%.
Arthur J. Gallagher & Company (NYSE:AJG) delivers insurance brokerage, reinsurance, risk management, consulting, and third-party claims settlement services, covering both individuals and corporate clients. Some of its offerings include insurance placement, underwriting management, wholesale insurance, and reinsurance negotiating services. Through its operations, it caters to commercial, industrial, public sector, and non-profit clients.
7. MSCI Incorporated (NYSE:MSCI)
Number of Hedge Fund Holders: 50
MSCI Incorporated (NYSE:MSCI) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On January 29, Jason Haas from Wells Fargo reaffirmed his Equal Weight rating on MSCI Incorporated (NYSE:MSCI). The analyst also raised the price target from $590 to $618, which indicates an upside of almost 18%.
Haas noted the company’s promising fourth quarter results, with EPS exceeding expectations. The company’s outlook for 2026 EBITDA expenses is aligned with the consensus. The analyst also pointed towards continued strength in the Index business, with momentum from the third quarter extending into the final quarter.
On January 29, David Motemaden from Evercore ISI reiterated his Outperform rating on MSCI Incorporated (NYSE:MSCI), after the company reported impressive fourth-quarter results. The analyst also increased the target price on the stock from $655 to $690, which offers a revised upside potential of more than 31%.
MSCI Incorporated (NYSE:MSCI) offers research-based data & analytics, and other decision support tools. These include indexes, portfolio monitoring tools, and ESG research for portfolio construction and risk management functions. It covers a wide array of financial vehicles, such as annuities, ETFs, futures, mutual funds, options, over-the-counter securities, and structured products.
6. Klarna Group (NYSE:KLAR)
Number of Hedge Fund Holders: 50
Klarna Group (NYSE:KLAR) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 6, Sanjay Sakhrani from Keefe Bruyette reaffirmed his Outperform rating on Klarna Group (NYSE:KLAR). He reduced the price target from $52 to $45, which still yields an impressive upside potential of close to 149%.
On February 2, Klarna Group (NYSE:KLAR) became part of the tech giant Google’s (GOOGL) Universal Commerce Protocol (UCP), an open industry standard aimed at enabling compatibility between AI systems and shopping platforms. The framework is designed to support the entire purchase lifecycle, allowing consumers to make purchases directly inside AI-powered chats from product discovery to payment and post-purchase support. This development expands Klarna’s earlier support for Google’s Agent Payments Protocol, highlighting both companies’ efforts to push industry frameworks as artificial intelligence becomes an integral part of consumers’ shopping experience. Google highlighted that such partnerships are crucial for ensuring security, consumer choice, and scalable AI commerce.
Klarna Group (NYSE:KLAR) is an AI-enabled fintech company that delivers digital banking and payments solutions worldwide. It engages with consumers and merchants to offer flexible payment plans, including Buy Now, Pay Later and other financing solutions.
5. Fidelity National Information Services (NYSE:FIS)
Number of Hedge Fund Holders: 57
Fidelity National Information Services (NYSE:FIS) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On January 20, the price target on Fidelity National Information Services (NYSE:FIS) was reduced from $70 to $69 by Truist analyst Matthew Coad. He maintained a Hold rating on the stock after an industry preview of fourth-quarter earnings in Fintech. The analyst expected results to be attractive, although a difficult annual comparison may limit upside surprises. Despite near-term caution, he remains optimistic on the sector’s outlook for 2026, while acknowledging that some companies may need to adjust their initial outlook to reset expectations.
On January 16, the price target on Fidelity National Information Services (NYSE:FIS) was reduced from $90 to $85 by Stephens analyst Charles Nabhan, who reaffirmed his Buy rating on the stock. Despite the downward revision, his estimates still yield an impressive upside of almost 82%.
Nabhan’s rating was based on Stephens’ 2026 outlook for the Financial Technology segment. Following a difficult ride during 2025, the firm anticipates a more favorable investor sentiment for the Payments and IT Services sector during the coming year.
Fidelity National Information Services (NYSE:FIS) is a fintech solutions provider that delivers various services to financial institutions and enterprises around the globe. It offers Banking, Capital Markets, and Corporate services. These include online banking, risk management, card and retail payment, funds transfer, wealth management, syndicated lending, and treasury solutions.
4. Nasdaq Incorporated (NASDAQ:NDAQ)
Number of Hedge Fund Holders: 58
Nasdaq Incorporated (NASDAQ:NDAQ) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On January 30, Michael Cyprys from Morgan Stanley maintained his Overweight rating on Nasdaq Incorporated (NASDAQ:NDAQ). The analyst also raised his target price on the stock from $113 to $116, implying 46% upside.
Cyprys appreciates secular tailwinds for Nasdaq Incorporated (NASDAQ:NDAQ), which are likely to persist. For 2026-27, he expects cyclical catalysts to kick in as well, which will drive revenue acceleration across the Solutions segment.
On January 30, William Katz from TD Cowen maintained a Hold rating on Nasdaq Incorporated (NASDAQ:NDAQ). The analyst increased his price target on the stock from $104 to $105, leading to a revised upside potential of more than 32%.
Katz’s rating is based on TD Cowen’s adjustments following the recent earnings announcements, with investor focus now shifting to the upcoming investor day on February 25.
Nasdaq Incorporated (NASDAQ:NDAQ) is a technology company that was established as the world’s first electronic stock market in 1971. It serves capital markets and other industries through its Capital Access Platforms, Financial Technology, and Market Services segments. It offers real-time market data, indices, investor relations & governance solutions, sustainability products, workflow solutions, and more.
3. Robinhood Markets (NASDAQ:HOOD)
Number of Hedge Fund Holders: 77
Robinhood Markets (NASDAQ:HOOD) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 11, James Yaro of Goldman Sachs maintained a Buy rating on Robinhood Markets (NASDAQ:HOOD). However, he reduced the price target from $152 to $130, which leads to a revised upside of more than 71%.
Yaro reflected on the company’s core EPS of 61c, which missed consensus estimates by 4% amid slightly softer revenues, leading to a mixed market response. However, leadership remains optimistic about 2026 based on a notable acceleration in customer activity, rising deposits, impressive product expansion, and international momentum.
On February 11, the price target for Robinhood Markets (NASDAQ:HOOD) was reduced from $135 to $100 by Needham analyst John Todaro, who also maintained his Buy rating on the stock. This downward revision now leads to an upside potential of almost 32% from the prevailing level.
The analyst pointed towards the company’s promising fourth quarter results, which met expectations. Notably, Prediction markets showed exceptional momentum with January volumes reaching an all-time high of 3.5 billion contracts. Todaro predicted near-term weakness in crypto activity for the next two quarters, with a gradual recovery later in the year.
Robinhood Markets (NASDAQ:HOOD) is a financial technology platform that enables retail investors to make commission-free investments across diverse financial securities. These include ADRs, cryptocurrencies, ETFs, gold, options, and shares. It offers various services such as fractional trading, securities lending, margin trading, around-the-clock trading, joint investments, future contracts, and others.
2. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 87
Moody’s Corporation (NYSE:MCO) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On January 13, the rating on Moody’s Corporation (NYSE:MCO) was upgraded from Neutral to Outperform by Kazuya Nishimura from Daiwa. The analyst estimated a price target of $590, which yields an upside potential of more than 38% at the prevailing level.
Nishimura’s rating upgrade is based on Daiwa’s upward adjustments to the earnings forecasts for Moody’s Investors Service segment. Such adjustments reflect upon a more conducive issuance environment, uptick in activity across the merger market, and an elevating demand for credit ratings within private credit. In terms of medium-term profit growth, the firm expects Moody’s Corporation (NYSE:MCO) to outperform S&P Global.
On February 4, RBC Capital Markets shared its views on the recent GenAI-related selloff in Information Services and Exchanges stocks, which presents a compelling buying opportunity rather than a fundamental threat. The firm highlighted Moody’s Corporation (NYSE:MCO) as a stock likely to attract investor attention, citing the company’s limited exposure to GenAI disruption due to exclusive data assets and strong client integration. The firm also noted that the company has strong and lasting competitive advantages that AI models cannot easily duplicate, particularly in businesses such as credit ratings, indices, and risk analytics, which remain largely GenAI resistant.
Moody’s Corporation (NYSE:MCO) is an integrated risk assessment firm with global operations. It offers various products and services, such as credit ratings, economic data, risk management, analytics, and credit models, to support financial market participants. It also provides SaaS solutions to support banking, insurance, and KYC workflows.
1. S&P Global (NYSE:SPGI)
Number of Hedge Fund Holders: 110
S&P Global (NYSE:SPGI) is one of the 12 oversold financial stocks to invest in according to hedge funds.
On February 12, the price target on S&P Global (NYSE:SPGI) was reduced from $601 to $482 by BMO Capital analyst Jeffrey Silber, who maintained an Outperform rating on the stock after its minor earnings miss in the fourth quarter. His revised estimates still offer almost 18% upside potential from the current level.
Silber noted that the company’s 2026 outlook was below consensus, primarily due to softer expectations for Market Intelligence and Ratings revenue growth, along with slightly weaker margins. Despite the tempered outlook, the analyst stated that current valuation levels offer an attractive entry point.
On February 11, Stifel analyst Shlomo Rosenbaum maintained his Buy rating on S&P Global (NYSE:SPGI). The analyst lowered the price target from $599 to $489, which now results in an upside potential of over 19%. Even though the latest quarterly figures and 2026 guidance missed expectations, the analyst attributed the recent bearish trend in share price to ongoing AI-linked skepticism.
Rosenbaum views it as “a narrative that is tough to fight,” characterized with market’s overreaction. He acknowledged the impact of such sentiment, as it makes it more difficult for the stock to gain momentum in the short term.
S&P Global (NYSE:SPGI) is a provider of benchmarking solutions, financial intelligence, data & analytics, and ratings covering automotive, commodity, energy, and capital markets across the globe. The business is structured around 5 distinct segments, i.e., S&P Global Market Intelligence, S&P Global Ratings, S&P Global Energy, S&P Global Mobility, and S&P Dow Jones Indices.
While we acknowledge the potential of SPGI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SPGI and that has 100x upside potential, check out our report about this cheapest AI stock.
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