In this article, we will take a detailed look at the 12 Stocks to Buy at a Discount Now.
Despite the Dow hitting an all-time high earlier this month and many technology stocks like Salesforce Inc (NYSE:CRM), Alphabet Inc Class A (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT) extending their gains from the past year, several analysts believe the stock market has a lot of room to run. Possible rate cuts is one of the reasons behind this optimism.
Bank of America’s analyst Michael Hartnett earlier this month said in his note that this is still a buy the dip market as he believes the market is still pricing in 140 bps of rate cuts from the Fed this year and the first half of 2024 upside is “bigger than downside.”
If executed smartly, the strategy involving buying stocks on the dip has proven to post higher returns in the past. A 2018 report by S&P Global took a look at the efficiency of the ‘Buy the Dip’ strategy by analyzing historical returns. The report said that between 2002 and 2017, buying stocks that lost about 10% or more relative to the broader market index, during a single day, significantly outperformed the index. The report said that individual stock declines are usually triggered by weak earnings reports or disappointing guidance chances. But ‘Buy the Dip’ strategy, according to the report, is still profitable when we exclude the effect of these events and short-term news.
Photo by Marga Santoso on Unsplash
Methodology
For this article we first used a stock screener to identify stocks with PE ratios less than 15 and year-to-date stock price decline of 5% and above through January 16. From these stocks we selected 12 stocks with the highest number of hedge fund investors. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12. Cenovus Energy Inc (NYSE:CVE)
Number of Hedge Fund Investors: 41
Cenovus Energy Inc (NYSE:CVE) ranks 12th in our list of the stocks to buy at a discount now according to hedge funds. The stock has lost about 5.8% year to date through January 16.
As of the end of the third quarter of 2023, 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Cenovus Energy Inc.
L1 Long Short Fund made the following comment about Cenovus Energy Inc. in its Q3 2023 investor letter:
“Cenovus Energy Inc. (NYSE:CVE) (Long +23%) shares rallied as WTI oil prices rose to ~US$91/bbl over the month, the highest level since November 2022. The company also had tailwinds from higher refinery margins, particularly in North America which remains their key exposure. Cenovus continues to generate strong free cash flow at current oil price levels, with the long-life nature of its oil sands assets and its low cost of production providing a break-even oil price at around ~US$40/bbl. We estimate the company can reach its net debt target in early CY24, enabling a step-up in shareholder returns through on-market share buybacks.”
11. Ford Motor Co (NYSE:F)
Number of Hedge Fund Investors: 43
Ford Motor Co (NYSE:F) shares are down by about 5.7% year to date through January 16. But it is one of the most popular car stocks among elite hedge funds tracked by Insider Monkey. As of the end the third quarter of 2023, 43 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Ford Motor Co. Ford is one of the best stocks to buy at a discount now.
The biggest hedge fund stakeholder of Ford Motor Co during this period was Ken Fisher’s Fisher Asset Management which owns a $691 million stake in Ford Motor Co.
During the fourth quarter of 2023 Ford sold 25,937 EVs, up about 24% on a year-over-year basis.
10. Baidu Inc (NASDAQ:BIDU)
Number of Hedge Fund Investors: 44
Chinese technology stock Baidu Inc (NASDAQ:BIDU) is popular among elite money managers. As of the end of the third quarter of 2023, 44 hedge funds tracked by Insider Monkey had stakes in Baidu Inc. The most notable hedge fund stakeholder of Baidu Inc during this period was Panayotis Takis Sparaggis’s Alkeon Capital Management which owns a $332 million stake in Baidu Inc.
Earlier this month, UBS published a report listing stocks for the next five years and labeled them as “Enabling Tech” companies. Baidu Inc made it to the list as UBS praised Baidu Inc’s (NASDAQ:BIDU) valuation and said its non-tech business could be its long-term catalyst.
Ariel Global Fund made the following comment about Baidu, Inc. in its Q2 2023 investor letter:
“By comparison, after a strong run last quarter, China’s internet search and online community leader, Baidu, Inc. (NASDAQ:BIDU) declined alongside a correction in Chinese stocks attributed to weak gross domestic product. We believe this price action runs counter to the company’s solid business fundamentals. Baidu delivered a top- and bottom-line earnings beat in the period, driven by a recovery in ad and cloud revenues. The company continues to invest heavily in Artificial Intelligence (AI) and is launching a generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
9. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Investors: 47
MGM Resorts International (NYSE:MGM) shares are down by about 6% year to date through January 16. During the third quarter, MGM’s EPS came in at $0.64, beating estimates by $0.15. Revenue in the quarter jumped 16.1% year over year to $3.97 billion, surpassing estimates by $80 million.
As of the end of the third quarter of 2023, 47 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in the casino and entertainment giant MGM Resorts International. MGM ranks 7th in our list of the best stocks to buy at a discount now.
Longleaf Partners Fund stated the following regarding MGM Resorts International in its fourth quarter 2023 investor letter:
“MGM Resorts International (NYSE:MGM) & Hyatt – Hospitality companies MGM Resorts and Hyatt were both strong performers in the fourth quarter and for the year, outperforming expectations that the post-COVID travel rebound would ease in 2023. Casino and online gaming company MGM saw double-digit revenue growth and strong 2023 bookings in Las Vegas in the first half, which moderated in the second half but remained solid. A cybersecurity attack negatively impacted 3Q results, but MGM does not expect the $100 million hit to have a material effect on its financial condition and operational results for the year. MGM bought back discounted shares at a 15% annualized rate and authorized another $2 billion buyback in 4Q, which represents another 15% of the company.”
8. Noble Corporation PLC (NYSE:NE)
Number of Hedge Fund Investors: 48
Offshore drilling company Noble Corporation PLC (NYSE:NE) shares are down by about 7% year to date. The stock has a dividend yield of about 3.5% as of January 16. In December, analyst firm started covering the stock with a Neutral rating and $52 price target. The firm praised Noble Corporation PLC’s (NYSE:NE) concentration of ultra-deepwater assets that are highly in demand in the current market.
As of the end of the third quarter of 2023, 48 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Noble Corporation PLC. The most notable stakeholder of Noble Corporation PLC was William B. Gray’s Orbis Investment Management which owns a $178 million stake in Noble Corporation PLC. In addition to Noble, hedge funds are also buying Salesforce Inc, Alphabet Inc Class A and Microsoft Corp.
Carillon Scout Mid Cap Fund made the following comment about Noble Corporation Plc in its Q3 2023 investor letter:
“Noble Corporation Plc (NYSE:NE), an offshore contract driller, benefited from improved sentiment regarding the offshore drilling business as higher day rates, the all-in daily costs of renting a drilling rig, were reported across the industry. The supply and demand for offshore rigs has tightened considerably.”
7. Devon Energy Corp (NYSE:DVN)
Number of Hedge Fund Investors: 52
With a PE ratio of 7.2 and a dividend yield of over 6%, Devon Energy Corp (NYSE:DVN) is one of the best stocks to buy at a discount according to hedge fund managers. A total of 52 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Devon Energy Corp. The biggest hedge fund stakeholder of Devon Energy Corp during this period was Donald Yacktman’s Yacktman Asset Management which had a $145.2 million stake in the company.
In December, Goldman Sachs talked about five large-cap energy stocks it believes could rebound in 2024. Goldman’s analysts believe Devon Energy Corp will regain operational momentum through capital spending and production strategy. The investment firm has a $51 price target on the stock.
6. JD.Com Inc (NASDAQ:JD)
Number of Hedge Fund Investors: 53
Chinese ecommerce company JD.Com Inc (NASDAQ:JD) shares have lost about 9% year to date through January 16. Over the past one year the stock has lost a whopping 58%. In December, JD.Com Inc founder Richard Liu reportedly commented at an internal forum that JD.Com Inc has become “bloated” and needs changes. In November JD.Com Inc posted better-than-expected Q3 earnings. JD is one of the best stocks to buy at a discount now according to smart money investors.
As of the end of the third quarter of 2023, 53 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in JD.Com Inc. In addition to JD, some other stocks hedge funds are buying include Salesforce Inc, Alphabet Inc Class A and Microsoft Corp.
5. ON Semiconductor Corp (NASDAQ:ON)
Number of Hedge Fund Investors: 53
With a low PE ratio, 9% YTD decline in stock price and positive hedge fund sentiment, ON Semiconductor Corp (NASDAQ:ON) ranks fifth in our list of the top stocks to buy at a discount now according to hedge funds.
In November, Goldman Sachs published a list of stocks it recommends to buy on the back of sales growth, balance sheet strength and high return on equity. On Semiconductor made it to the list.
As of the end of the third quarter of 2023, 53 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in ON Semiconductor Corp. The biggest stakeholder of ON Semiconductor Corp was Ken Griffin’s Citadel Investment Group which owns a $232 million stake in ON Semiconductor Corp.
ClearBridge Sustainability Leaders Strategy made the following comment about ON Semiconductor Corporation in its Q2 2023 investor letter:
“To fund our purchase of Lam Research, we exited ON Semiconductor Corporation (NASDAQ:ON), preferring Lam at this point in the semiconductor cycle, and as we are also cautious on automotive demand, a key end market for ON Semiconductor.”
4. Caesars Entertainment Inc (NASDAQ:CZR)
Number of Hedge Fund Investors: 56
Casino and entertainment company Caesars Entertainment Inc (NASDAQ:CZR) ranks fourth in our list of the best stocks to buy at a discount according to hedge funds. Earlier this month, JMP started covering the stock with a Market Perform rating as it expects the stock to rise due to strengths in its brick-and-mortar casinos.
As of the end of the third quarter of 2023, 56 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Caesars Entertainment Inc.
Baron Real Estate Fund stated the following regarding Caesars Entertainment, Inc. in its fourth quarter 2023 investor letter:
“In the most recent quarter, we acquired additional shares in Caesars Entertainment, Inc. (NASDAQ:CZR), the largest casino-entertainment company in the U.S. and one of the world’s most diversified casino-entertainment providers. We are big fans of CEO Tom Reeg and remain optimistic about the long-term prospects for the company.
The company operates primarily under the Caesars, Harrah’s, Horseshoe, and Eldorado brand names. The company generates approximately 50% of its cash flow from Las Vegas and 50% from regional destination markets. The company owns approximately half of its real estate and leases the other half from gaming REIT companies – Gaming and Leisure Properties, Inc. and VICI Properties Inc…” (Click here to read the full article)
3. Charter Communications Inc (NASDAQ:CHTR)
Number of Hedge Fund Investors: 73
Charter Communications Inc (NASDAQ:CHTR) has a PE ratio of 11.9 as of January 16. The stock has lost about 6.8% year to date through December 16.
As of the end of the third quarter of 2023, 73 hedge funds tracked by Insider Monkey had stakes in Charter Communications Inc. The most significant stakeholder of Charter Communications Inc was Natixis Global Asset Management’s Harris Associates which owns a $2.3 billion stake in Charter Communications Inc.
Here is what Weitz Conservative Allocation Fund has to say about Charter Communications, Inc. in its Q3 2023 investor letter:
“We swapped the Fund’s Liberty Broadband Corporation (NASDAQ:LBRDK) shares back to Charter Communications, Inc. (Charter is by far Liberty Broadband’s largest asset), and the combined position was the most notable quarterly contributor. Investor sentiment around broadband’s competitive position became less negative, and the stocks rebounded nicely from what we considered oversold levels.”
2. Teck Resources Ltd Class B (NYSE:TECK)
Number of Hedge Fund Investors: 75
Canadian-based natural resources company Teck Resources Ltd Class B (NYSE:TECK) ranks second in our list of the best stocks to buy at a discount now. The stock is down by about 7.1% in 2024 so far through January 16.
As of the end of the third quarter of 2023, 75 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Teck Resources Ltd Class B.
1. Alibaba Group Holding Ltd – ADR (NYSE:BABA)
Number of Hedge Fund Investors: 110
Alibaba Group Holding Ltd – ADR (NYSE:BABA) has been struggling amid an unfriendly business environment in China and the rise of competitors in the country. But many analysts believe the stock will rebound thanks to its long-term growth catalysts and size of ecommerce operations. In December, Baird analyst Colin Sebastian said Alibaba Group Holding Ltd – ADR could be one of the stocks to benefit in 2024 due to AI and increased operating efficiencies. The analyst, however, decreased his price target on the stock to $95.
The analyst said some catalysts for Alibaba Group Holding Ltd – ADR are “ecommerce competition, corporate reorganization, shareholder returns, [generative AI] initiatives, and Alicloud trends.”
L1 Long Short Fund made the following comment about Alibaba Group Holding Limited in its second quarter 2023 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) (Long -18%) shares weakened in recent months as Chinese reopening strength faded and macro-economic datapoints began sequentially declining. Nevertheless, we believe the Chinese government will use consumption as a key lever to reinvigorate the economy post-COVID lockdowns. Alibaba remains a high-quality business with leading positions in both eCommerce and Public Cloud, and management is taking proactive steps to unlock shareholder value. It has announced plans to split into six major business groups – Cloud Intelligence, Taobao Tmall, Local Services, Global Digital, Cainiao Smart Logistics and Digital Media, and Entertainment Group. Each group will be managed independently, with a separate CEO and board, have the flexibility to raise external capital and potentially pursue separate IPOs. We believe this restructure will be a strong positive catalyst to unlock the sum-of-the-parts valuation upside in the company.”
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Disclosure. None. 12 Stocks to Buy at a Discount Now was initially published on Insider Monkey.
