We recently published a list of 12 Most Undervalued Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Delta Air Lines Inc. (NYSE:DAL) stands against other most undervalued large cap stocks to buy now.
On March 4, David Katz, Chief Investment Officer at Matrix Asset Advisors, joined ‘The Exchange’ on CNBC to share his perspective on the current state of the bull market and what February’s mixed action and sector rotation might signal for the rest of the year. Katz acknowledged that while people might not want to hear it, the volatility seen in February is likely to persist throughout the year, with both upside and downside movements. He emphasized that this creates opportunities for investors but also necessitates caution. Katz highlighted several positive factors supporting the market, which included a strong economy and solid corporate performance. However, he expressed concerns about certain policies from the administration, such as tariffs, immigration, and the relationship with the Fed. While these issues have been largely ignored by the market so far, Katz warned that they could eventually lead to a 3-5% correction. Despite this, he remained optimistic about the economy’s ability to navigate these challenges and recommended buying into market dips rather than chasing rallies.
To support his sentiment, Katz pointed to companies that have already experienced significant corrections and are positioned to perform well regardless of broader market movements. He highlighted their strong fundamentals, attractive valuations (most trading at under 13-14 times earnings), and good outlooks. He also noted that last year’s market leaders have slowed significantly, while sectors that underperformed are beginning to show meaningful improvement, a trend he expects to continue. This sector rotation suggests that investors should be prepared to adapt their strategies as different sectors gain momentum throughout the year.
Methodology
We used the Finviz stock screener to compile a list of the top stocks trading between $10 billion and $200 billion. We then selected stocks with a forward P/E ratio under 15 and made a list of 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An aerial view of a commercial aircraft taking off from a coastal hub.
Delta Air Lines Inc. (NYSE:DAL)
Forward Price-to-Earnings Ratio as of March 4: 7.99
Number of Hedge Fund Holders: 84
Delta Air Lines Inc. (NYSE:DAL) provides scheduled air transportation for passengers and cargo both domestically and internationally. It operates through two segments, Airline and Refinery. It has a robust network centered on core hubs in the US and significant international hubs, which offers tickets through various channels and provides additional services like aircraft maintenance and vacation packages.
Its customer loyalty strategy is centered on SkyMiles (a frequent flyer program) and its American Express partnership. It contributed $7.4 billion in 2024 revenues with plans to reach $10 billion in the long-term. The company is investing in technology and introduced AI-powered Delta Concierge to simplify travel. It partnered with YouTube for enhanced in-flight entertainment, and collaborated with Uber to expand SkyMiles’ earning opportunities beyond flights.
The company’s full-year 2024 revenue reached a record $57 billion, which was a 4% increase from 2023. Delta Air Lines Inc. (NYSE:DAL) now projects revenue growth of 7% to 9% for 2025. It also expects to generate over $4 billion in free cash flow. It’s focused on improving efficiency through better fleet utilization and workforce optimization, which will contribute to its financial goals.
Oakmark Fund views Delta Air Lines Inc. (NYSE:DAL) as a competitively advantaged, premium brand with strong fundamentals and an attractive valuation, even within a currently out-of-favor industry. It stated the following regarding the company in its first quarter 2024 investor letter:
“Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline. Of the big three U.S.-based airlines (Delta, United and American), we see Delta as the most competitively advantaged. We believe the company’s years of industry-leading operational performance and investments in the customer experience have established Delta as the premium brand in the industry. We also think its geographically optimal hubs, high local market share, robust loyalty program and unique corporate culture all support healthy returns on capital. Delta currently trades at 6x our estimate of normalized earnings per share. We believe this is an attractive valuation for a competitively advantaged and growing business in an out-of-favor industry.”
Overall, DAL ranks 4th on our list of most undervalued large cap stocks to buy now. While we acknowledge the growth potential of DAL as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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