In this article we will take a look at the 10 best undervalued stocks to buy now according to Reddit.
The stock market has been on a wild ride since the start of the year with stock volatility, influx of retail investors that strategize on social media, and stimulus packages designed to jumpstart the economy all factoring into major market highs and lows so far. Investors on internet platform Reddit have been by far the most influential in shaping market dynamics through this uncertain period. At the turn of the year, these young investors drove a record 140% rally in the stock of video game retailer GameStop Corp. (NYSE: GME).
The GameStop Corp. (NYSE: GME) saga led to a regulatory probe in the United States and caught several well established financial institutions off-guard. Months after the historic rally, it would be fair to say that this new dynamic in global market trading has proved more resilient than initially thought. Young investors now routinely spoil hedge fund bets by banding together through Reddit groups and use collective action to spur stock rallies and crashes. These groups are public and the conversations on them make for interesting reading.
For example, Reddit users have been sharing their thoughts on undervalued stocks in recent days. One of the top picks in this category seems to be Alibaba Group Holding Limited (NYSE: BABA), the Chinese technology firm. Despite being the largest online retailer in China, perhaps the biggest internet market in the world, Alibaba Group Holding Limited (NYSE: BABA) shares are moderately priced compared to international competitors and have been hit recently by rumors of Chinese government restrictions on the founder of the firm.
Another interesting pick on Reddit forums in the undervalued list is steelmaker Cleveland-Cliffs Inc. (NYSE: CLF), one of the largest steel manufacturers in the United States that has a lot to gain from recent government plans to pour hundreds of billions into American infrastructure. Cleveland-Cliffs Inc. (NYSE: CLF) has also seen share price climb in recent weeks on the back of increasing prices because of a Chinese government crackdown on steel producers. There has also been speculation on the removal of favorable tariffs imposed on the industry in 2017.
With the vaccine rollout slowly allowing for the reopening of bars and restaurants, it is perhaps no surprise that Molson Coors Beverage Company (NYSE: TAP) is also being touted as an undervalued stock for the post-pandemic economy. Molson Coors Beverage Company (NYSE: TAP) sells beer and other alcoholic drinks and recently beat market estimates on revenue and earnings per share for the first quarter of 2021, detailing that it also expected to reinstate dividend payments in the second half of 2021 on the back of improved sales numbers.
There is no doubt that the finance world will have to contend with the new economic force that is retail investors who are rewriting the rules of trade through social media activism. Their battle with hedge funds in the next few years will probably have far-reaching consequences. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Adam Nowakowski on Unsplash
With this context in mind, here is our list of the 10 best undervalued stocks to buy now according to Reddit.
Best Undervalued Stocks to Buy Now According to Reddit
10. Teladoc Health, Inc. (NYSE: TDOC)
Number of Hedge Fund Holders: 50
Teladoc Health, Inc. (NYSE: TDOC) is a New York-based telemedicine company founded in 2002. It is placed tenth on our list of 10 best undervalued stocks to buy now according to Reddit. Teladoc stock has offered investors returns close to 3% over the past week. The firm provides healthcare services for chronic and complicated cases like cancer and congestive heart failure, among others. It also markets telehealth solutions, chronic condition management, expert medical services, and behavioral health solutions.
On May 7, Teladoc Health, Inc. (NYSE: TDOC) stock was given a Buy rating with a price target of $300 by investment advisory BTIG. In a note, BTIG analyst David Larsen said that the telehealth vendors were being consolidated and the market was very competitive.
At the end of the fourth quarter of 2020, 50 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Teladoc Health, Inc. (NYSE: TDOC), up from 47 in the preceding quarter worth $997 million.
In its Q4 2020 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE: TDOC) was one of them. Here is what the fund said:
“Teladoc Health offers remote physician access to patients at home. After experiencing incredible levels of growth throughout the early stages of the pandemic as its unique value proposition rose to the forefront of the healthcare industry, the firm’s shares cooled off a bit as optimistic vaccine data slightly curtailed investor expectations for the firm’s future growth potential. We sold the stock.”
9. Verizon Communications Inc. (NYSE: VZ)
Number of Hedge Fund Holders: 67
Verizon Communications Inc. (NYSE: VZ) is a New York-based multinational telecommunication firm. It was founded in 1983 and is ranked ninth on our list of 10 best undervalued stocks to buy now according to Reddit. The firm is one of the biggest telecom firms in the world with a market cap of over $235 billion. Verizon stock has returned more than 5% to investors over the course of the past year. The company has tens of millions of customers availing the wireless and wired internet services it offers across the United States.
On April 27, investment advisory MoffettNathanson downgraded Verizon Communications Inc. (NYSE: VZ) stock to Neutral from Buy with a revised price target of $57 from $62 on the back of pricing pressures from competitors.
Out of the hedge funds being tracked by Insider Monkey, Nebraska-based investment firm Berkshire Hathaway is a leading shareholder in Verizon Communications Inc. (NYSE: VZ) with 158 million shares worth more than $9 billion.
8. Ford Motor Company (NYSE: F)
Number of Hedge Fund Holders: 41
Ford Motor Company (NYSE: F) is a Michigan-based multinational automaker founded in 1903. It is placed eighth on our list of 10 best undervalued stocks to buy now according to Reddit. Ford stock has returned more than 125% to investors in the past twelve months. The company makes and sells trucks, cars, sport utility vehicles, electric vehicles, and luxury vehicles. Ford has stepped up investment in electric vehicles in recent years as sales of EVs skyrocket across the world. Like GameStop Corp. (NYSE: GME), Alibaba Group Holding Limited (NYSE: BABA) and Cleveland-Cliffs Inc. (NYSE: CLF), Ford is one of the most famous stocks on Reddit.
Ford Motor Company (NYSE: F) recently announced the new electric F-150 vehicle. Ford stock has surged since the announcement despite supply chain worries dominating the industry and leading to a fall in value for most auto stocks.
At the end of the fourth quarter of 2020, 41 hedge funds in the database of Insider Monkey held stakes worth $1.6 billion in Ford Motor Company (NYSE: F), up from 38 in the preceding quarter worth $1 billion.
7. Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG)
Number of Hedge Fund Holders: 16
Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG) is a Texas-based online gaming and digital sports entertainment company. It is ranked seventh on our list of 10 best undervalued stocks to buy now according to Reddit and was founded in 2015. Golden Nugget stock has returned more than 27% to investors in the past year. Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG), looking to gain customers, offers new users a sizable deposit bonus, a lucrative rewards program, and features more games on the platform than other competitors. Like GameStop Corp. (NYSE: GME), Alibaba Group Holding Limited (NYSE: BABA) and Cleveland-Cliffs Inc. (NYSE: CLF), GNOG is one of the most famous stocks on Reddit.
On April 12, investment advisory Jefferies reiterated a Buy rating on Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG) stock with a price target of $28, calling the online gaming firm underappreciated despite upside potential for the digital gaming industry.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm BlueCrest Capital Mgmt. was a leading shareholder in Golden Nugget Online Gaming, Inc. (NASDAQ: GNOG) with 939,963 shares worth more than $13 million.
6. Raytheon Technologies Corporation (NYSE: RTX)
Number of Hedge Fund Holders: 59
Raytheon Technologies Corporation (NYSE: RTX) is a Massachusetts-based defense manufacturer. It was founded in 1922 and is placed sixth on our list of 10 best undervalued stocks to buy now according to Reddit. Raytheon Technologies Corporation (NYSE: RTX) has returned more than 43% to investors over the past year. The firm develops and sells aerospace systems, offers intelligence and space products, and markets missiles and other military electronic hardware. It has contracts with several governments around the world.
On May 18, Raytheon Technologies Corporation (NYSE: RTX) announced financial outlook for the fiscal year 2021, reiterating adjusted earnings per share of up to $3.70 and revenue of up to $65.4 billion. Raytheon Technologies Corporation (NYSE: RTX) also projected more than $10 billion in annual free cash flow by 2025. Like GameStop Corp. (NYSE: GME), Alibaba Group Holding Limited (NYSE: BABA) and Cleveland-Cliffs Inc. (NYSE: CLF), RTX is one of the most famous stocks on Reddit.
At the end of the fourth quarter of 2020, 59 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in Raytheon Technologies Corporation (NYSE: RTX), up from 55 in the preceding quarter worth $2.9 billion.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Raytheon Technologies Corporation (NYSE: RTX) was one of them. Here is what the fund said:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
Best Undervalued Stocks to Buy Now
5. Merck & Co., Inc. (NYSE: MRK)
Number of Hedge Fund Holders: 82
Merck & Co., Inc. (NYSE: MRK) is a New Jersey-based multinational pharmaceutical company. It was founded in 1891 and is placed fifth on our list of 10 best undervalued stocks to buy now according to Reddit. Merck stock has returned more than 7% to investors over the past three months. The company offers products for oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes, among others. The company also has agreements to develop treatments for HIV in collaboration with other pharma companies.
On May 20, investment advisory Argus downgraded Merck & Co., Inc. (NYSE: MRK) stock to Hold from Buy on the back of next month’s spinoff of the Organon division of the firm and the effect it might have on the bottom line.
Out of the hedge funds being tracked by Insider Monkey, Nebraska-based investment firm Berkshire Hathaway is a leading shareholder in Merck & Co., Inc. (NYSE: MRK) with 17 million shares worth more than $1.3 billion.
4. ArcelorMittal (NYSE: MT)
Number of Hedge Fund Holders: 18
ArcelorMittal (NYSE: MT) is a Luxembourg-based multinational steel manufacturing firm. It is ranked fourth on our list of 10 best undervalued stocks to buy now according to Reddit. It was founded in 1976. Arcelor stock has returned more than 243% to investors over the course of the past twelve months. In addition to making and selling steel products, the firm has iron mining interests in Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, and Ukraine, as well as coal mining activities in Kazakhstan.
In earnings results for the first quarter of 2021, posted earlier this month, ArcelorMittal (NYSE: MT) reported earnings per share of $1.93 and a revenue of over $16 billion. The earnings per share beat market estimates by $0.36.
At the end of the fourth quarter of 2020, 18 hedge funds in the database of Insider Monkey held stakes worth $511 million in ArcelorMittal (NYSE: MT), down from 20 in the preceding quarter worth $309 million.
3. Cleveland-Cliffs Inc. (NYSE: CLF)
Number of Hedge Fund Holders: 27
Cleveland-Cliffs Inc. (NYSE: CLF) is an Ohio-based company that mines iron and markets steel products. It was founded in 1847 and is ranked third on our list of 10 best undervalued stocks to buy now according to Reddit. Cleveland stock has returned more than 297% to investors over the past year. The firm makes and sells various steel products to automotive, infrastructure, and manufacturing markets. The stock of the firm has soared in recent weeks in anticipation of increased government spending on infrastructure.
On May 4, investment advisory Credit Suisse upgraded Cleveland-Cliffs Inc. (NYSE: CLF) stock to Outperform from Underperform with a price target of $24. CLF stock surged over 7% after the ratings update.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Cleveland-Cliffs Inc. (NYSE: CLF) with 13 million shares worth more than $262 million.
2. Molson Coors Beverage Company (NYSE: TAP)
Number of Hedge Fund Holders: 39
Molson Coors Beverage Company (NYSE: TAP) is an Illinois-based beverage firm that is placed second on our list of 10 best undervalued stocks to buy now according to Reddit. It was founded in 1873. Molson stock has offered investors returns exceeding 55% in the past twelve months. Molson Coors primarily makes and sells beer and malt products in the United States and Canada. Some of the brands it owns include Blue Moon, Carling, Coors Banquet, Coors Light, George Killian’s Irish Red, Granville Island Brewing, and Hamm’s, among others.
On March 19, Molson Coors Beverage Company (NYSE: TAP) stock fell more than 2% as investment advisories JP Morgan and Deutsche Bank revised their price targets and added the stock to their sell lists because of disappointing earnings results for the first quarter of 2021.
At the end of the fourth quarter of 2020, 39 hedge funds in the database of Insider Monkey held stakes worth $386 million in Molson Coors Beverage Company (NYSE: TAP), up from 33 in the preceding quarter worth $316 million.
1. Alibaba Group Holding Limited (NYSE: BABA)
Number of Hedge Fund Holders: 156
Alibaba Group Holding Limited (NYSE: BABA) is a Chinese multinational technology company founded in 1999. It is ranked first on our list of 10 best undervalued stocks to buy now according to Reddit. Alibaba stock has returned more than 6% to investors over the course of the past year. The firm has interests in the ecommerce, artificial intelligence, cloud computing, and digital entertainment businesses. It is one of the largest technology companies in the world with a market capitalization of over $588 billion.
In earrings results for the fourth quarter of 2020, Alibaba Group Holding Limited (NYSE: BABA) reported earnings per share of RMB10.32, missing market predictions by RMB2.96. The total revenue over this period was RMB187 billion, up 63.9% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE: BABA) with 13.9 million shares worth more than $3.1 billion.
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE: BABA) was one of them. Here is what the fund said:
“In the case of Alibaba, two significant news events impacted the company’s shares in the last few months of 2020. First, the Chinese government intervened to halt–for an undetermined period of time–Ant Group’s IPO. Alibaba owns 33% of Ant Group, and Ant Group’s “Alipay” application facilitates financing and payments around the Alibaba ecosystem. Second, rumors of Chinese regulatory oversight in the internet space were solidified at the end of 2020 when China’s State Administration for Market Regulation announced an investigation under the nation’s AntiMonopoly Law. In combination, these events contributed to a selloff in BABA shares that resulted in a roughly 30% decline from highs in late October 2020.
We view Alibaba as arguably one of the most dominant businesses in the world.
We believe the company is also playing an integral role in China’s ambitions to reorient its economy from one that is export-driven to one that is domestically consumption-driven. Alibaba’s marketplaces—TaoBao and Tmall—in combination with its logistics capabilities may well provide the most efficient way to purchase and receive goods in many of China’s lower-tier cities. Important to the investment case, Alibaba’s core commerce business continues to compound at high rates while enjoying low total addressable market penetration and multiple competitive advantages, not the least of which consist of two-sided network effects between merchants and consumers. At approximately 19x next twelve month’s earnings, we think Alibaba will provide a favorable investment outcome even if it must pay fines or modify some business practices. We continue to expect earnings growth in excess of 20% over the next three to five years. Even if earnings growth were to fall to 15%, we think it would still result in a favorable outcome at the price at which we added to the position.”
You can also take a peek at Billionaire Izzy Englander’s Top 10 Stock Picks and Billionaire David Abrams’ Top Stock Picks.
Follow Insider Monkey on Twitter
Suggested articles:
- 10 Best Value Stocks To Buy Now
- 10 Best Value Stocks to Buy for 2021
- 10 Best Chinese Stocks To Buy Now
Disclosure: None. 10 Best Undervalued Stocks to Buy Now According to Reddit is originally published on Insider Monkey.
