In this article, we will look at 5 best undervalued stocks to buy now. If you want to explore similar stocks, you can also read 11 Best Undervalued Stocks to Buy Now.
5. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
PE Ratio as of June 24: 14.48
Since the beginning of 2022, Exxon Mobil Corporation (NYSE:XOM) has returned investors 36.76%. As of June 24, the stock has a price-to-earnings ratio of 14.48 and a forward dividend yield of 4.13%, factors that make it rank among our top 5 undervalued stock picks.
As of June 21, Credit Suisse analyst Manav Gupta has a $125 price target and buy-side Outperform rating on Exxon Mobil Corporation (NYSE:XOM).
Hedge funds are raising their stakes in Exxon Mobil Corporation (NYSE:XOM) and the hedge fund sentiment around the stock is positive. At the end of Q1 2022, 83 hedge funds held stakes in the company which totaled $8.55 billion. Comparing this to Q4 2021, 71 hedge funds held stakes in the company which amounted to $5.38 billion.
As of March 31, GQG Partners is the most bullish hedge fund investor on Exxon Mobil Corporation (NYSE:XOM). Rajiv Jain’s hedge fund has stakes worth $4.27 billion in the company.
Saturna Capital shared its insights on Exxon Mobil Corporation (NYSE:XOM) in the firm’s Q4 2021 investor letter. Here is what experts at Saturna Capital think:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
4. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 61
PE Ratio as of June 24: 9.89
Morgan Stanley (NYSE:MS) is among our top undervalued stock picks from the financial services sector. As of June 24, the stock has a PE ratio of 9.89 and a dividend yield of 3.75%. Morgan Stanley (NYSE:MS) is proactive with M&A activity and on June 22, announced that its workplace solutions business, Morgan Stanley at Work, has successfully acquired American Financial Systems. With this move, Morgan Stanley (NYSE:MS) anticipates delivering value to plan sponsors and their participants.
As of May 3, Oppenheimer analyst Chris Kotowski has a $111 price target and buy-side Outperform rating on Morgan Stanley (NYSE:MS).
Insider Monkey found 61 hedge funds bullish on Morgan Stanley (NYSE:MS) at the close of Q1 2022. The total stakes of the hedge funds were valued at $3.25 billion.
As of March 31, Eagle Capital Management is the top shareholder in Morgan Stanley (NYSE:MS) and holds stakes of $1.23 billion in the major bank.
Artisan Partners mentioned Morgan Stanley (NYSE:MS) in its Q3 2021 investor letter, Here is what the firm said:
“MorganStanley, a leading global financial services company, came into the portfolio in late 2020 as a result of its purchase of E*TRADE. The acquisition is a great fit for Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily derisked the business by adding less volatile fee streams to complement its leading positions in cyclical businesses such as advisory, equities and FICC (fixed income, currencies and commodities). We believe the company will prove its resiliency and value over the long term.”
3. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 71
PE Ratio as of June 24: 5.85
Insider Monkey spotted 71 hedge funds bullish on Goldman Sachs Group, Inc. (NYSE:GS) at the close of Q1 2022. These funds held collective stakes worth $4.59 billion in the company. Of these, $1.12 billion were of Eagle Capital Management, the largest shareholder in the company.
As of June 24, Goldman Sachs Group, Inc. (NYSE:GS) has a forward dividend yield of 2.80%, a PE ratio of 5.85, and is trading at $302.75 a share, making now the time to buy the undervalued dividend-paying bank stock.
As of this May, Oppenheimer analyst Chris Kotowski has a $519 price target and Outperform rating on Goldman Sachs Group, Inc. (NYSE:GS).
Ariel Investments, an investment management firm, mentioned Goldman Sachs Group, Inc. (NYSE:GS) in its Q4 2021 investor letter. Here is what the firm said:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. The Goldman Sachs Group, Inc. (GS) jumped +47.59% for the year and +1.73% in the quarter.”
2. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 93
PE Ratio as of June 24: 8.41
On June 24, Raymond James analyst David Long slashed his price target on Wells Fargo & Company (NYSE:WFC) to $50 from $60 but reiterated an Outperform rating on the shares. The analyst is bullish on the stock and sees near-term tailwinds fueling the profitability of Wells Fargo & Company (NYSE:WFC) which include accelerated loan growth, initiatives in multiyear expense rationalization, and increased asset sensitivity, among others.
As of June 24, Wells Fargo & Company (NYSE:WFC) has a PE ratio of 8.41 and is trading at $40.76 a share, which makes it rank high among the top undervalued stocks to buy now.
At the end of Q1 2022, 93 hedge funds were long Wells Fargo & Company (NYSE:WFC) with stakes worth $6.86 billion. This is compared to 94 positions in the previous quarter with stakes worth $6.11 billion.
As of March 31, Theleme Partners is the most prominent shareholder in Wells Fargo & Company (NYSE:WFC) with stakes of $884.71 million.
Here is what Davis Funds said about Wells Fargo & Company (NYSE:WFC) in its fourth-quarter 2021 investor letter:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Wells Fargo.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
PE Ratio as of June 24: 8.67
At the close of Q1 2022, 110 hedge funds were bullish on JPMorgan Chase & Co. (NYSE:JPM) and held stakes of $5.05 billion in the major bank. Of these $1.05 billion was attributed to Ken Fisher’s hedge fund. Fisher Asset Management raised its stakes in JPMorgan Chase & Co. (NYSE:JPM) by 5% in the first quarter of 2022 and is the top hedge fund investor in the company.
As of this May, Societe Generale analyst Andrew Lim has a $150 price target and Buy rating on JPMorgan Chase & Co. (NYSE:JPM).
As of June 24, JPMorgan Chase & Co. (NYSE:JPM) has a PE ratio of 8.67 and a dividend yield of 3.54%.
Here is what ClearBridge Investments said about JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2021 investor letter:
“Our energy and financials holdings kept pace in the 2021 rally. In financials, JPMorgan benefited from strong economic growth, a rise in Treasury yields, and a benign credit environment.”
You can also take a look at 10 Undervalued Dividend Kings To Buy In 2022 and 10 Undervalued Dividend Aristocrats to Buy in 2022.
