5 Best Undervalued Stocks to Buy Now

2. FirstEnergy Corp. (NYSE: FE)

Number of Hedge Fund Holders: 50

PE Ratio: 15

FirstEnergy Corp. (NYSE: FE) is an Ohio-based electric power company. The firm makes and distributes electricity in the states of Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, and New York. The firm has more than 6 million customers and runs more than 24,000 miles of overhead and underground transmission lines. It was founded in 1996 and is placed second on our list of 10 best undervalued stocks to buy now. The firm also provides energy management services to select consumers. 

FirstEnergy Corp. (NYSE: FE) reported quarterly results last week and posted a revenue of $2.7 billion, a 0.4% decrease from the same period last year. The earnings per share value stood at $0.69, beating estimates by $0.02. The firm said that it hoped to increase earnings to upto $315 million in the second quarter. 

At the end of the fourth quarter of 2020, 50 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in the firm, down from 59 in the preceding quarter worth $1.2 billion.

In their Q3 2020 investor letter, Heartland Advisors highlighted a few stocks and FirstEnergy Corp (NYSE:FE) is one of them. Here is what Heartland Advisors said:

“The portfolio’s Utility names lagged on a relative basis with the shortfall stemming from a stock-specific issue in the group. FirstEnergy (FE) is a business we’ve owned in the past and sold out of after shares had appreciated following its successful transition to a pure regulated utility through the divestiture of its merchant power unit.

We initiated a new stake in FirstEnergy in March after shares sold off due to concerns that the recession would have an outsized impact on the company’s industrial-oriented client base. Similar to our successful experience in the past, we felt that the company was attractive given its meaningful discount to its peers.

Subsequent to our investment, FirstEnergy was named in an investigation related to $60 million of payments made by the merchant power entity to Ohio politicians. Our initial reaction when news broke was to reduce our exposure to the company, however, we continued our due diligence on the matter and believe that market reaction overestimated the likely fallout from the investigation.

As shares fell in price, we added to our position in the belief that as the matter proceeds, some of the clouds casting a shadow on the business will subside.”