7 Best Undervalued Stocks to Buy Now

1. Arch Capital Group Ltd. (NASDAQ:ACGL)

Number of Hedge Fund Holders: 46

Forward P/E as on June 10: ~11.9x

Arch Capital Group Ltd. (NASDAQ:ACGL) is one of the 7 best undervalued stocks to buy now. On June 10, Jefferies analyst Andrew Andersen downgraded Arch Capital Group Ltd. (NASDAQ:ACGL)’s stock from “Buy” to “Hold,” reducing the price target to $100 from the previous target of $106. The analyst pointed to expected challenges in the property catastrophe insurance segment. Despite the attractive pricing, the analyst opines that anticipations of mid-year softening can curb growth and potentially impact the returns.

Furthermore, the analyst believes that higher competition in the P-CAT and Specialty lines can weigh on the growth estimates. That being said, the primary Casualty segment can offer some support to Arch Capital Group Ltd. (NASDAQ:ACGL)’s revenue. As per the analyst, Arch Capital Group Ltd. (NASDAQ:ACGL) is expected to adopt a more cautious approach to growth in H2 2025 and into 2026. The company might become selective amidst the evolving market dynamics.

Gross premiums written by the insurance segment in Q1 2025 increased 24.4% YoY (4.8% excluding the MCE Acquisition), while net premiums written were 25.4% higher as compared to Q1 2024 (1.2% excluding the MCE Acquisition). The growth in net premiums written, excluding the impact of the MCE acquisition, demonstrated a rise in commercial automobile and other liability.

Arch Capital Group Ltd. (NASDAQ:ACGL) is engaged in providing insurance, reinsurance, and mortgage insurance products. Baron Funds, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:

“Shares of specialty insurer Arch Capital Group Ltd. (NASDAQ:ACGL) rebounded from weakness in the prior quarter due to favorable operating trends and the relative stability of insurance stocks in a risk-off market. In the most recent quarter, the company reported better-than-expected earnings, and returns on equity remained strong in the high teens despite elevated catastrophe losses from Hurricane Milton. Management targets a 15% return on equity over a full cycle and expects to exceed the target in 2025 given firm market conditions. We continue to own the stock due to Arch’s strong management team and our expectation of significant growth in earnings and book value.”

While we acknowledge the potential of ACGL to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk.  If you are looking for an AI stock that is more promising than ACGL and that has 100x upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.