In this article, we will look at the 9 Most Undervalued High Quality Stocks to Buy Now.
On May 7, Tom Lee from Fundstrat appeared on a CNBC Television interview to discuss his view of the stock market. He notes that the risk-reward profile for equities remains favorable, even as stocks rally. Lee noted that stocks are rising for all the right reasons, including positive earnings revisions and the scarcity of compute and supply chain capacity for AI.
Lee added that the important point to note is that, despite the rally, the market has not yet declared semiconductor and other related AI sectors as expensive. He added that the forward price-to-earnings ratio of semiconductor stocks is only 22 times. Lee highlighted that while the P/E ratio of 22 might seem high, the sector has reached the highs of 35 times over the last 20 years. Lee believes that this makes the risk-reward balanced, and with a lot of money on the sidelines, there are some good buying opportunities in the market.
With that, let’s take a look at the 9 Most Undervalued High Quality Stocks to Buy Now.
Our Methodology
To curate the list of Most Undervalued High Quality Stocks to Buy Now, we used the Quality Factor ETFs and Finviz stock screener. Using the ETFs, we aggregated a list of quality stocks and shortlisted stocks that are trading below the forward price to earnings of 15. Next, we cross-checked the P/E ratio from Seeking Alpha and ranked the stocks in ascending order of the number of hedge fund holders. We have limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
9 Most Undervalued High Quality Stocks to Buy Now
9. Ameriprise Financial, Inc. (NYSE:AMP)
Forward Price to Earnings Ratio: 10.64
Number of Hedge Fund Holders: 50
Ameriprise Financial, Inc. (NYSE:AMP) is one of the Most Undervalued High Quality Stocks to Buy Now. On May 4, Piper Sandler analyst Crispin Love raised the firm’s price target on the stock from $460 to $471, while maintaining a Neutral rating on the shares. Earlier, on April 26, Ryan Krueger from KBW reiterated a Hold rating on the stock with a price target of $515.
The ratings follow Ameriprise’s fiscal Q1 2026 earnings, released on April 23. During the quarter, the company reported $4.77 billion in revenue, reflecting 10.79% year-over-year growth and topping expectations by $75.36 million. The non-GAAP EPS of $11.26 also exceeded the consensus by $1.05. Management attributed the performance to its Advice & Wealth Management segment, which grew pretax adjusted operating earnings by 20% to reach $951 million. Moreover, the assets under management also grew 12% year-over-year to reach $1.7 trillion.
Analyst Crispin from Piper Sandler noted that the company posted strong results driven by revenue growth and strong operating margins of 28%. Both metrics topped the firm’s expectations, hence the firm increased its price target.
Ameriprise Financial, Inc. operates as a diversified financial services company. Its segments include Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other.
8. Devon Energy Corporation (NYSE:DVN)
Forward Price to Earnings Ratio: 9.52
Number of Hedge Fund Holders: 50
Devon Energy Corporation (NYSE:DVN) trades at a forward price to earnings ratio of 9.52, well below the price to earnings ratio of the S&P 500, which stands at 26.05. Moreover, 78% of the 32 analysts covering the stock have a Buy rating on the stock, making it one of our Most Undervalued High Quality Stocks to Buy Now.
On May 5, Raymond James upgraded Devon Energy Corporation from Outperform to Strong Buy and also raised the price target from $62 to $72. The upgrade follows the closing of the company’s merger with Coterra Energy. The analyst views it as an important development as it will open several ways for the company to close its valuation gap with its peers.
Moreover, looking ahead, the firm is confident in the company’s ability to optimize its portfolio. Raymond James described Devon as operating from a position of strength, emphasizing that management has numerous levers available to drive value creation.
That said, Devon Energy Corporation released its fiscal Q1 2026 earnings on May 5. The company posted $3.81 billion in revenue, down 14.49% year-over-year and short of expectations by $138.66 million. The GAAP EPS of $0.19 also missed expectations by $0.88.
Devon Energy Corporation is an independent U.S.-based energy company. It focuses on the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs). The company specializes in horizontal drilling and hydraulic fracturing. Its core operations are in the Delaware Basin, Eagle Ford, Anadarko, Williston, and Powder River basins.
7. Arch Capital Group Ltd. (NASDAQ:ACGL)
Forward Price to Earnings Ratio: 10.07
Number of Hedge Fund Holders: 51
Arch Capital Group Ltd. (NASDAQ:ACGL) currently trades at a forward price to earnings ratio of 10.07, below the sector median of 10.55 and 26.05 of the S&P 500. The stock also ranks among our Most Undervalued High Quality Stocks to Buy Now.
Recently, on May 5, Keefe Bruyette lowered the firm’s price target on the stock from $105 to $102, while keeping a Market Perform rating on the shares. On the same day, Mizuho Securities also reiterated a Hold rating on the shares and lowered the price target from $102 to $101.
Analyst at Keefe Bruyette noted that the near-term upside for the company appears to be limited due to a number of factors, including sustained property catastrophe reinsurance pricing softness, slowing primary insurance premium growth, and declining mortgage segment profitability.
The company also released its fiscal Q1 2026 earnings recently, on April 28. Arch Capital Group Ltd. posted Q1 2026 net premiums written of $4.35 billion, down 3.7% year-over-year. On the bright side, the GAAP EPS of $2.88 topped the consensus by $0.32.
Arch Capital Group Ltd. is a Bermuda-based insurance and reinsurance company. It provides property, casualty, and mortgage insurance solutions worldwide. The firm operates through three main segments: Insurance, Reinsurance, and Mortgage, with a strong presence in the US, Europe, and Bermuda.
6. The Travelers Companies, Inc. (NYSE:TRV)
Forward Price to Earnings Ratio: 10.72
Number of Hedge Fund Holders: 58
The Travelers Companies, Inc. (NYSE:TRV) ranks among our Most Undervalued High Quality Stocks to Buy Now. Last Month, on April 20, BMO Capital raised the firm’s price target on the stock from $297 to $314, while maintaining an Outperform rating on the shares.
The bullish rating is based on the firm’s expectations that Travelers’ earnings per share trajectory will surpass the Street’s estimates over the next couple of years. Analysts at BMO explained in a research note that the company has more conservative reserve loss-ratio profit margin assumptions, suggesting the company’s reserving practices position it well to deliver positive earnings surprises relative to broader market expectations.
Beyond the core underwriting, the firm identified additional drivers of earnings per share upside. BMO highlighted the favorable spread between new money rates and existing bond yields as a tailwind for net investment income. The firm also pointed to share buybacks as another lever for earnings growth, particularly as the broader business expansion moderates.
The Travelers Companies, Inc. provides property casualty insurance across auto, home, and business. It operates through Business Insurance, Bond & Specialty Insurance, and Personal Insurance segments.
5. D.R. Horton, Inc. (NYSE:DHI)
Forward Price to Earnings Ratio: 13.51
Number of Hedge Fund Holders: 58
D.R. Horton, Inc. (NYSE:DHI) currently trades at a forward price to earnings ratio of 13.51, which is below the sector median of 15.35. The stock also ranks among our Most Undervalued High Quality Stocks to Buy Now.
Recently, on April 22, Truist Securities raised its price target on D.R. Horton, Inc. from $140 to $150, while maintaining a Hold rating on the shares. The rating follows the company’s fiscal Q2 2026 earnings, released on April 21. During the quarter, D.R. Horton posted $7.56 billion in revenue, down 2.27% year-over-year and below expectations by $44.79 million. On the positive side, the GAAP EPS of $2.24 topped the consensus by $0.10.
The analyst at Truist noted that the company delivered 11% growth in new orders, which matched community count growth for the quarter. The firm finds this to be solid growth considering the macroeconomic backdrop.
Moreover, the stock responded positively, rising roughly 6% following the earnings release, a notable move given that the S&P 500 declined 0.5% on the same day. However, the firm also highlighted demand softness, noting its data suggested activity tapered off in March. The company pushed back on this, indicating demand remained consistent with typical seasonal patterns.
D.R. Horton, Inc. is a Texas-based homebuilding company that develops land, constructs, and sells single-family and multi-family homes.
4. Newmont Corporation (NYSE:NEM)
Forward Price to Earnings Ratio: 10.52
Number of Hedge Fund Holders: 69
Newmont Corporation (NYSE:NEM) ranks among our Most Undervalued High Quality Stocks to Buy Now. Wall Street has been bullish on Newmont Corporation (NYSE:NEM) since its fiscal Q1 2026 earnings report, announced on April 23.
During the quarter, the company posted $7.31 billion in revenue, reflecting 45.85% year-over-year growth and topping the consensus by $741.7 million. The GAAP EPS of $3 also exceeded expectations by $0.98. The performance was driven by 1.3 million ounces of gold produced during the quarter, supported by increased output at Cadia, Merian, and Ahafo South, as well as improvements at Yanacocha and Peñasquito.
Following the results on April 27, TD Securities analyst Steven Green raised the firm’s price target on Newmont Corporation, while maintaining a Hold rating on the shares. The firm noted that they updated the valuation model after the company posted strong Q1 results.
Based in Colorado, Newmont Corporation is an American multinational mining company. Newmont is best known for its gold mining operations, but it also mines silver, zinc, copper, and lead. In addition to the US, Canada, and Mexico, the company operates mines in Australia, Peru, Ghana, and other countries.
3. PayPal Holdings, Inc. (NASDAQ:PYPL)
Forward Price to Earnings Ratio: 9.5
Number of Hedge Fund Holders: 78
PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the Most Undervalued High Quality Stocks to Buy Now. The company posted its fiscal Q1 2026 earnings on May 5. During the quarter, it posted $8.35 billion in revenue, up 7.21% year-over-year and ahead of expectations by $296.78 million. However, the GAAP EPS of $1.21 fell short of the expectations by $0.03.
Although the Total Payment Volume rose 11% at spot rates to $464 billion, the payment transactions per active account decreased 1% on a trailing 12-month basis. Looking ahead, management expects low single-digit revenue growth for Q2 2026 and a low single-digit decline in transaction margin dollars. The full year 2026 guidance was reiterated at a year-over-year flat transaction margin dollars and 3% growth in non-transaction operating expense.
Following the release, on May 6, Robert W. Baird lowered the price target on PayPal Holdings, Inc. from $52 to $50, while keeping a Hold rating. On the same day, Monness also reiterated a Hold rating on the stock with a $50 price target. Robert W. Baird noted updating the firm’s updated model following the Q1 results, which led to a reduced price target on the stock.
PayPal Holdings Inc. operates a technology platform that enables digital payments for merchants and consumers worldwide. The company operates a two-sided network at scale that connects merchants and consumers.
2. The Progressive Corporation (NYSE:PGR)
Forward Price to Earnings Ratio: 12.23
Number of Hedge Fund Holders: 82
The Progressive Corporation (NYSE:PGR) is one of the Most Undervalued High Quality Stocks to Buy Now. On May 5, Michael Zaremski from BMO Capital reiterated a Hold rating on the shares and raised the price target from $199.31 to $221. On the same day, Evercore ISI reiterated a Hold rating on shares with a price target of $230.
One month ago, on April 15, the company released its fiscal Q1 2026 earnings. During the quarter, the company posted $23.64 billion in revenue, up 6.46% year-over-year and ahead of expectations by $437.20 million. While the GAAP EPS of $4.80 missed the consensus by $0.05, the normalized EPS topped estimates by $0.08.
According to The Progressive Corporation’s March 2026 financial results, the net premiums written for the quarter came in at $23.641 billion, reflecting 6% year-over-year increase. Moreover, the net premium written for the month grew 10% compared to the same month last year. Net income also grew 10% for the quarter and 36% for the month year-over-year.
Analysts at BMO Capital noted that they expect productivity benefits to materialize over the next two years. The firm expects these gains to prevent the company’s combined ratio from deteriorating to the extent it has in previous soft-cycles.
The Progressive Corporation is an insurance holding company that provides residential property insurance, personal and commercial auto insurance, and other specialty property-casualty insurance and related services.
1. Adobe Inc. (NASDAQ:ADBE)
Forward Price to Earnings Ratio: 10.81
Number of Hedge Fund Holders: 91
Adobe Inc. (NASDAQ:ADBE) currently trades at a forward price to earnings ratio of 10.81, significantly lower than the sector average of 24.07. Wall Street also expects around 24% upside from the current level over the next 12-months. The stock ranks among our Most Undervalued High Quality Stocks to Buy Now.
Recently, analysts have differing views on Adobe Inc.. On April 27, Mizuho downgraded the stock from Outperform to Neutral and lowered the price target from $315 to $270. The firm noted that they became more cautious on Adobe since October 2025 due to intensifying competition from small businesses threatening the company’s long-term terminal value. Mizuho highlighted that they don’t see any clear catalysts for the stock but believe that management is making meaningful progress towards AI monetization.
Earlier, on April 22, DA Davidson had reiterated a Buy rating on the stock with a price target of $300. Contrary to Mizuho, Davidson believes that Adobe would be able to maintain its competitive advantage and capture market share despite increased competition due to its incremental increase in AI spending.
Adobe Inc provides multimedia and digital marketing software such as Photoshop, Illustrator, and InDesign, among others. It also offers AI products such as Adobe FireFly and Adobe Sensei.
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