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. (NYSE:AMP) 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 (NYSE:DVN) 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 (NYSE:DVN) 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 (NYSE:DVN) 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. (NASDAQ:ACGL) 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. (NASDAQ:ACGL) 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. (NYSE:TRV) provides property casualty insurance across auto, home, and business. It operates through Business Insurance, Bond & Specialty Insurance, and Personal Insurance segments.
While we acknowledge the potential of TRV 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 TRV and that has 100x upside potential, check out our report about the cheapest AI stock.
Click to continue reading and see the 5 Most Undervalued High Quality Stocks to Buy Now.
Disclosure: None. Follow Insider Monkey on Google News.
