In this article, we will look at the 13 Undervalued Cyclical Stocks to Buy According to Hedge Funds.
On August 15, Charles Bobrinskoy, Vice Chairman of Ariel Investments, joined CNBC Television for an interview to discuss cyclical sectors, such as housing, in the current market scenario. Earlier, Bobrinskoy released a note stating that value has been quietly outperforming growth this month, and he sees value in the housing sector. He noted that investors typically buy cyclical sectors, such as housing, when earnings are down and P/E multiples are high. However, right now, investors can buy when there are low, depressed earnings, but at very low multiples.
Bobrinskoy acknowledged that the inflation is high and the labor market is also expensive, which is making it difficult for people to buy new homes. However, he emphasized that even if the market gets to a normal housing environment where consumers are only repairing and remodeling their houses, there are a lot of housing stocks that look attractive.
While answering concerns related to inflation and interest rates being a challenge for even a repair and remodeling situation. Bobrinskoy argues that these challenges make him more optimistic because if the consumers are not able to buy new houses, they would look to upgrade their current residences, which would bring the market to a repair and remodel environment.
Lastly, Bobrinskoy remains a little uncertain regarding the impact of the tariff on the cyclical sector. He noted that companies have been wanting to increase prices but have been waiting for tariffs to consolidate. Now that most of the tariff news is out, Bobrinskoy believes it is going to show up as a shock in this quarter’s earnings.
With that, let’s take a look at the 13 undervalued cyclical stocks to buy according to hedge funds.
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Our Methodology
To compile the list of 13 undervalued cyclical stocks to buy according to hedge funds, we used the Finviz stock screener and Seeking Alpha as our sources. First, we aggregated a list of cyclical stocks trading below the forward P/E of 15. Next, we cross-checked the P/E ratio of each stock from Seeking Alpha and ranked the stocks in ascending order of the number of hedge fund holders sourced from Insider Monkey’s Q1 2025 database.
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).
13 Undervalued Cyclical Stocks to Buy According to Hedge Funds
13. Ford Motor Company (NYSE:F)
Forward P/E Ratio: 9.82
Number of Hedge Fund Holders: 39
Ford Motor Company (NYSE:F) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 12, Federico Merendi from Bank of America Securities reiterated a Buy rating on Ford Motor Company (NYSE:F) with a price target of $14.
The analyst highlighted the company’s strategic moves in the electric vehicle industry, noting the recent launch of Universal Vehicle Platform at “Our Next Model T Moment”. The company with a $2 billion investment Louisville plant aims to revolutionize the production of EVs. Management noted during the event that its first vehicle on the platform will be affordable pickups, which are expected by 2027, with a starting price of almost $30,000.
The analyst noted that Ford Motor Company’s (NYSE:F) strength in the commercial vehicle segment supports this plan. The company is taking on its competitors in the market and learning from leading EV players by simplifying its production, reducing vehicle weight, and cutting down costs. The analyst believes that these steps position the company well in the electric vehicle market, both domestically and internationally.
Ford Motor Company (NYSE:F) designs, manufactures, and sells a range of vehicles, including trucks, SUVs, commercial vans, cars, and luxury Lincoln vehicles.
12. Aptiv PLC (NYSE:APTV)
Forward P/E Ratio: 9.58
Number of Hedge Fund Holders: 39
Aptiv PLC (NYSE:APTV) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 8, Oppenheimer analyst Colin Rusch raised the firm’s price target on Aptiv PLC (NYSE:APTV) from $84 to $88, while keeping an Outperform rating on the stock.
The bullish sentiment follows the company’s strong second-quarter 2025 results. The analyst noted that the company is making progress in its non-light-duty vehicle areas and its AI solutions ecosystem. Rusch highlighted that while Aptiv PLC (NYSE:APTV) faces challenges from changing policies and fluctuating currency, its investment in emerging technologies is expected to keep the company a key player for vehicle makers.
Moreover, the company’s position in the aerospace, industrials, and commercial vehicles gives it valuable insights regarding new technological opportunities in the LDV space.
Aptiv PLC (NYSE:APTV) is a global technology company that creates connected solutions for a sustainable future in mobility.
11. Amcor plc (NYSE:AMCR)
Forward P/E Ratio: 13.54
Number of Hedge Fund Holders: 40
Amcor plc (NYSE:AMCR) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 14, Amcor plc (NYSE:AMCR) released its fiscal Q4 2025 results.
Management highlighted its all-stock acquisition of Berry Global, which was completed on April 30. This move expanded the company’s portfolio and led the net sales to reach $5.08 billion, up 43% year-over-year. Moreover, the adjusted EBITDA rose 43% during the same time to reach $789 million.
For the full year, Amcor plc (NYSE:AMCR) delivered net sales of $15 billion, up 11% year-over-year. Looking ahead, management expects adjusted EPS between $0.8 and $0.83, reflecting a 12% to 17% increase. Moreover, the free cash flow is projected to be between $1.8 billion and $1.9 billion.
Amcor plc (NYSE:AMCR) provides packaging solutions for consumer and healthcare products. It makes sustainable, flexible, and rigid packaging for food, beverages, pharmaceuticals, and personal care items.
10. PulteGroup, Inc. (NYSE:PHM)
Forward P/E Ratio: 10.85
Number of Hedge Fund Holders: 42
PulteGroup, Inc. (NYSE:PHM) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 7, PulteGroup, Inc. (NYSE:PHM) announced that it has begun construction on Del Webb Lost Pines, which is the first 55+ active adult community in the Austin area in over thirty years.
Management noted that the community will offer over 500 homes on 160 acres and targets the growing retiree market in Texas, which now ranks as the top state for retirees. The first phase of this project includes 260 homes with sales and opening expected in early 2026.
The houses are expected to follow single-story layouts, open floor plans, and energy-efficient designs. Management highlighted that the goal is to provide wellness-focused living for adults seeking health and social connections.
PulteGroup, Inc. (NYSE:PHM) is a leading homebuilder in the United States that develops and constructs residential properties across six regional segments.
9. lululemon athletica inc. (NASDAQ:LULU)
Forward P/E Ratio: 13.11
Number of Hedge Fund Holders: 48
lululemon athletica inc. (NASDAQ:LULU) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 4, Wells Fargo analyst Ike Boruchow lowered the firm’s price target on lululemon athletica inc. (NASDAQ:LULU) from $270 to $225 and maintained an Equal Weight rating on the stock.
The analyst believes that the story for lululemon athletica inc. (NASDAQ:LULU) remains tough, noting three main concerns. The first challenge for the company is its uncertain US comparable sales, along with an uncertain growth in China. On top of these challenges, the second half of the year is anticipated to be tougher due to tariff and markdown pressures.
Management released its second quarter 2025 outlook during its first quarter earnings call. The company expects net revenue to be in the range of $2.535 billion to $2.560 billion, reflecting 7% to 8% growth.
lululemon athletica inc. (NASDAQ:LULU) designs and sells technical athletic apparel, footwear, and accessories.
8. Expedia Group, Inc. (NASDAQ:EXPE)
Forward P/E Ratio: 14.31
Number of Hedge Fund Holders: 54
Expedia Group, Inc. (NASDAQ:EXPE) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 13, Citi raised the firm’s price target on Expedia Group, Inc. (NASDAQ:EXPE) from $177 to $206, while keeping a Neutral rating on the stock.
The improved sentiment follows the company’s strong second-quarter results for 2025. The company delivered $3.79 billion, up 6.41% year-over-year and ahead of estimates by $76.04 million. The EPS of $4.24 also beat expectations by $0.11. The analyst noted Expedia Group, Inc. (NASDAQ:EXPE) delivered better than expected results with gross bookings 2% above consensus, driven by a 7% increase in room nights. The firm also noted an improved demand from the US in July, which benefited the company.
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel company offering a wide range of travel services through consumer brands like Expedia.com, Hotels.com, Vrbo, and others.
7. Carnival Corporation & plc (NYSE:CCL)
Forward P/E Ratio: 14.82
Number of Hedge Fund Holders: 55
Carnival Corporation & plc (NYSE:CCL) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On July 29, Ivan Feinseth from Tigress Financial reiterated a Buy rating on Carnival Corporation & plc (NYSE:CCL) with a price target of $38.
The analyst noted that the company has shown strong consumer demand and booking trends, which point towards a healthy growth potential. In addition, Carnival Corporation & plc (NYSE:CCL) is also managing its fleet and capacity by expanding and upgrading ships. Feinseth highlighted that the management has been focused on operational efficiency to drive revenue and cash flow growth.
Financially speaking, the analyst highlighted that the company has been aggressively reducing debt to enhance shareholder value. Lastly, Feinseth believes that these strategic moves enhance the company’s ability to capitalise on the growing travel market valued at more than $2 billion.
Carnival Corporation & plc (NYSE:CCL) is a global cruise and leisure travel company. It operates multiple cruise lines, including Carnival Cruise Line, Princess Cruises, and Holland America Line.
6. Lennar Corporation (NYSE:LEN)
Forward P/E Ratio: 13.92
Number of Hedge Fund Holders: 62
Lennar Corporation (NYSE:LEN) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 8, Lennar Corporation (NYSE:LEN) announced the launch of two new home collections in Anderson Farms, Arizona, called Dream and Cottage.
Management noted that these collections aim to make homeownership more accessible for both first-time buyers and existing residents looking for affordability and quality. The Dream Collection offers four single-family floor plans with homes ranging from 814 to 1,120 square feet, featuring two or three bedrooms and two bathrooms. The prices start in the mid $200,000s.
On the other hand, the Cottage Collection features three floor plans. Homes in this series range from 969 to 1,232 square feet and include two or three bedrooms with two bathrooms, along with Bay garages to accommodate one to two vehicles. The pricing for this series begins in the high $200,000s.
Lennar Corporation (NYSE:LEN) is a homebuilder that constructs and sells single-family homes and develops residential land.
5. JD.com, Inc. (NASDAQ:JD)
Forward P/E Ratio: 12.6
Number of Hedge Fund Holders: 66
JD.com, Inc. (NASDAQ:JD) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 14, Citi analyst Alicia Yap raised the firm’s price target on JD.com, Inc. (NASDAQ:JD) from $42 to $44, while maintaining a Buy rating on the stock.
The improved sentiment for the company follows its announcement of robust fiscal second-quarter 2025 results. JD.com, Inc. (NASDAQ:JD) delivered RMB356.7 billion in revenue for the quarter, up 22.4% year-over-year, exceeding Wall Street estimates. Management noted that its Retail segment showed solid performance with revenue growing 20.6% and operating margins improving 4.5%. This was its highest margin in any promotional quarter.
JD.com, Inc. (NASDAQ:JD) is an e-commerce company operating through its retail mobile apps and website, offering online retail and marketplace services.
4. D.R. Horton, Inc. (NYSE:DHI)
Forward P/E Ratio: 13.42
Number of Hedge Fund Holders: 67
D.R. Horton, Inc. (NYSE:DHI) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On July 29, D.R. Horton, Inc. (NYSE:DHI) announced that its Colorado division has launched Arcadia, a new paired home community in Denver’s Dayton Triangle neighborhood.
The sales for this community have already started. Arcadia features two-story paired homes sized between 1,480 and 1,514 square feet, and aims to cater to the growing demand for new homes in the city. The community is situated around 10 miles from downtown Denver, and residents can access parks, trails, and recreation spots like Cherry Creek State Park and Kennedy Golf Course.
D.R. Horton, Inc. (NYSE:DHI) is a homebuilding company that constructs and sells residential homes across multiple states in the United States.
3. General Motors Company (NYSE:GM)
Forward P/E Ratio: 5.8
Number of Hedge Fund Holders: 79
General Motors Company (NYSE:GM) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 6, General Motors Company (NYSE:GM), along with Hyundai Motor Company, announced their first five co-developed vehicles. This is the next step of the collaboration between the two companies to expand vehicles, supply chain, and clean energy.
These vehicles include compact SUVs, cars, and pick-up trucks. Four of these vehicles are aimed at Central and South America, while the fifth is an electric commercial van for North America. Both companies expect to sell over 800,000 vehicles a year once production increases. General Motors Company (NYSE:GM) will develop a mid-size truck platform, whereas Hyundai will develop compact SUVs and electric commercial vans.
General Motors Company (NYSE:GM) designs, manufactures, and sells vehicles and automobile parts worldwide.
2. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E Ratio: 13.78
Number of Hedge Fund Holders: 87
PDD Holdings Inc. (NASDAQ:PDD) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On June 27, Joyce Ju from Bank of America Securities maintained a Hold rating on PDD Holdings Inc. (NASDAQ:PDD) with a price target of $120.
The conservative outlook follows the company’s fiscal first-quarter results for 2025. The company posted mixed results for the quarter, with revenue growing 10.92% year-over-year but falling short of consensus by $1.05 billion. The EPS of $1.59 also missed estimates by $1.05. The profitability fell 38% year-over-year. Management noted that they made substantial investments to help merchants and consumers during a rapidly changing external environment, which led to a negative impact on short-term profitability.
PDD Holdings Inc. (NASDAQ:PDD) operates a range of digital commerce businesses that connect buyers, merchants, and manufacturers globally. The company’s platforms include Pinduoduo and Temu, which offer a wide variety of affordable products and engaging shopping experiences.
1. Alibaba Group Holding Limited (NYSE:BABA)
Forward P/E Ratio: 14.09
Number of Hedge Fund Holders: 125
Alibaba Group Holding Limited (NYSE:BABA) is one of the Undervalued Cyclical Stocks to Buy According to Hedge Funds. On August 14, Alibaba International, one of the seven segments of Alibaba Group Holding Limited (NYSE:BABA) announced the launch of Accio Agent, an AI-powered tool for global trade.
This new launch comes at a time when Accio has reached more than 2 million users. This new agent is built for small businesses and solo entrepreneurs. It automates 70% of manual workflows and covers product ideas prototyping, compliance checks, and supplier sourcing. Management noted that the AI agent is trained on one billion product listings and 50 million supplier profiles. It uses advanced models to analyze feedback, supplier performance, and business needs.
Alibaba Group Holding Limited (NYSE:BABA) provides technology infrastructure and marketing platforms across multiple business segments. It operates e-commerce platforms like Taobao, Tmall, Lazada, and AliExpress.
While we acknowledge the potential of BABA to grow, 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 BABA and that has 100x upside potential, check out our report about this cheapest AI stock.
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