Below we presented the list of 5 Best Undervalued Stocks to Buy Now. For our detailed discussion and a more comprehensive list please see 15 Best Undervalued Stocks to Buy Now.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the best undervalued stocks to buy:
5. Exact Sciences, Corporation (NASDAQ:EXAS)
No of HFs: 35
Total Value of HF Holdings: $1.11 Billion
Check out an article where RiverPark Advisors, LLC mentioned the stock in its Q3 2020 investor letter.
“Exact Sciences: EXAS shares were our next top contributor for the quarter, as management disclosed for the first time significant and compelling data for its multi-cancer liquid biopsy screening test. The test for six different cancer types from its decade-long collaboration with the Mayo Clinic showed high overall cancer detection sensitivity of 86%, with 95% specificity (only a 5% false-positive rate).
Up until management’s liquid biopsy announcement, investors had been focused solely on the company’s long-term growth prospects of its Cologuard franchise in the $18 billion annual colon cancer screening market and the company’s November 2019 acquisition of Genomic Health with its precision oncology tests and pipeline, primarily for breast cancer. The announcement highlights a third leg of growth in the emerging multi-cancer liquid biopsy market in which the company can be a major competitor.”
4. Bluebird Bio, Inc. (NASDAQ:BLUE)
No of HFs: 35
Total Value of HF Holdings: $322 Million
BLUE develops gene therapies for severe genetic diseases and cancers. Bluebird bio’s stock was trading at $98 a year ago. Since then, BLUE lost nearly half of its value and is now trading at $50.21. During the third quarter of 2020, the company reported a revenue of $19.27 million.
Follow Bluebird Bio Inc. (NASDAQ:BLUE)
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3. Acuity Brands, Inc (NYSE:AYI)
No of HFs: 38
Total Value of HF Holdings: $836 Million
According to S&P Global Market Intelligence, AYI fell 12.7% in February. However, the fall was acknowledged by CEO Vernon Nagel,
“was greater than previously forecasted due to weaker than expected market demand, which we estimate declined in the low-to-mid single digit range, with the decline in large projects even greater.” Nagel would go on to say that he was “cautious about overall market conditions within the lighting industry for the remainder of our fiscal 2020.”
However, during the third quarter of 2020, the company reported a cash and cash equivalent of $520.6 million.
The top hedge fund holder of this stock is David Blood and Al Gore’s Generation Investment Corporation, which had $365 million invested in the stock at the end of September. An insider purchased 2 shares at around $99. The stock is up more than 17% since then.
Miller Value Partners mentioned in their Q3 investor letter that the stock has historically generated attractive returns on capital,
“Acuity Brands is a leader in the lighting space. It has historically generated attractive returns on capital. We grew interested when the new CEO Neil Ashe, who we knew from his prior days at CNet and Wal-Mart.com, arrived. The company generates significant free cash flow with sustainable levels of roughly $400M per year (10% yield). While end markets are currently under pressure, Ashe’s vision is to drive a digital transformation in the business. There’s improvement potential from end market recovery along with internal business improvement. We think the stock is worth significantly more than where it’s trading.”
2. Aaron’s Co, Inc (NYSE:AAN)
No of HFs: 39
Total Value of HF Holdings: $387 Million
AAN specializes in retail and leases consumer products such as furniture, electronics, appliances, and computers. During the third quarter of 2020, the company reported a 9.2% increase over the same period a year ago to $1.052 billion in revenue.
The top hedge fund holder of this stock is Parag Vora’s HG Vora Capital Management, which had $62 million invested in the stock at the end of September. An insider recently purchased 2,000 shares at around $63. The stock is down more than 66% since then.
In an article, Diamond Hill Capital mentioned that the COVID-19 crises may impact the stock but it should be in position to gain additional market share when market conditions stabilize.
“We added shares of rental and leasing services company Aaron’s, Inc. after selling the previous Aaron position in late summer 2019, when the stock price reached our estimate of intrinsic value. Weak revenue trends in Aaron’s brick and mortar stores during the fourth quarter of 2019 drove the stock price down sharply. However, its Progressive business, which processes lease-to-own transactions for third-party retail customers, is still growing revenue around a 20% rate, and it recently signed large retail customers Best Buy and Home Depot. Although Aaron’s will be negatively impacted by the COVID-19 crisis, it should be in a position to gain additional market share when market conditions stabilize.”
1. Heico Corporation (NYSE:HEI)
No of HFs: 43
Total Value of HF Holdings: $712 Million
The top undervalued stock to buy now is HEI. The company is focused on the manufacturing of jet engine and aircraft component replacement parts. The pandemic has taken a toll in the aerospace industry although HEI was able to hold up better than most. During the third quarter of 2020, the company reported a non-flight business growth of 4%. The aerospace industry may be facing difficulties but Eric A. Mendelson, Heico’s co-president and head of its flight support group mentioned that their cost-saving solutions and product development programs will increase market share.
“We believe demand for our favorably priced commercial aviation products and services will return in advance of the overall market recovery. Furthermore, we believe our cost-saving solutions and robust product development programs will enable us to potentially increase market share and emerge with a stronger presence within the commercial aviation market.”
The top hedge fund holder of this stock is Robert Joseph Caruso’s Select Equity Group, which had $88 million invested in the stock at the end of September. An insider purchased 978 shares at around $111. The stock is up more than 24% since then.
Disclosure: No positions.