The equities market continues to be incredibly volatile. Investors were optimistic following a robust rally in Jan.; all major U.S. indices are down since then. The ongoing churn is naturally vexing for investors but presents an excellent time for them to load up on the most undervalued stocks to buy.
Wall Street is feeling the jitters of the upcoming jobs report which could result in more aggressive interest rate hikes. The Federal Reserve is committed to controlling inflation even if it triggers a recession to maintain price stability and protect the long-term health of the economy. Hence, investors are likely to face more curveballs ahead but the bear market has created multiple buying opportunities ahead that could pay many dividends down the road. I have compiled a list of some of the most undervalued stocks to buy at this time using GuruFocus’s market screener. Have a read through the list and consider these opportunities for investment.
|AMD||Advanced Micro Devices||$82.67|
Most Undervalued Stocks: Pfizer (PFE)
% Below 52-Week High: 29.9%
Pfizer (NYSE:PFE) was a top pandemic stock for obvious reasons. Its blockbuster Covid vaccine helped it post a 95% bump in sales from 2020 to 2021 to a whopping $81.3 billion. However, its cash cow is fading fast, with more than 72% of the global population receiving a Covid vaccine.
As you’d imagine, Pfizer’s Covid vaccine effectively allowed the firm to build a colossal cash war chest. The $22.7 billion in its cash till has helped the firm acquire several biotech startups, including BioHaven Pharmaceutical, ReViral, and others. Additionally, its likely acquisition of cancer-drug maker Seagen could result in millions in new revenue for Pfizer. Its management guides for non-Covid revenues of up to a billion by the end of the current decade, indicating an impressive CAGR of 7% from fiscal 2019 through 2030.
Most Undervalued Stocks: Danaher (DHR)
Danaher (NYSE:DHR) is a leading healthcare firm offering a wide range of products and services through its four main segments, including diagnostics, biotech, life sciences, and environmental and applied solutions. The pandemic-led tailwinds resulted in over 30% growth in its top lines during the pandemic. However, as the pandemic effect wanes, its sales growth has slowed down substantially. Nevertheless, it continues to beat analyst estimates each quarter by sizeable margins. Danaher wants to spin off its environmental and applied solutions unit this year to focus on the more profitable life sciences and diagnostics business.
Over the years, DHR stock has been an excellent wealth compounder generating over 400% returns in the past decade. Moreover, it has grown its dividend payout by 12 consecutive years, making it one of the best dividend growth stocks. Despite its lofty stock price, DHR stock still has a 21.8% upside, according to Tipranks.
Most Undervalued Stocks: Cognizant Technology (CTSH)
Based in New Jersey, Cognizant Technology (NASDAQ:CTSH) operates as a top IT services and consulting business. With a market capitalization of $31.02 billion, Cognizant has established its leadership position across multiple niches in the professional services sector.
Over the years, it has grown its top line by double-digit margins profitably. In the past few years, though, sales growth has slowed down compared to its track record in the past. For instance, its 3-year revenue growth was 4.6% lower than its 10-year growth. Much is due to losing out on big deals to its top competitor, Infosys. Cognizant recently appointed a new CEO, Ravi Kumar, who is looking to correct the wrongs of the management’s past in winning large deals. In the firm’s most recent quarter, it acquired Austin CSI and Utegration and announced the acquisition of Mobica and OneSource Virtual. The level of aggressiveness in its merger and acquisition activity should bear fruit in gaining market share back from Infosys.
Valuation has always been a key talking point with Tesla (NASDAQ:TSLA) stock. Even its founder and CEO, Elon Musk, has talked about the stock being too high over the years. However, with the stock market rout last year, TSLA stock has shed a ton of value and now trades more than 50% lower than its 52-week highs. Moreover, it’s currently trading at a hefty discount across all core pricing metrics.
While TSLA stock continues to trade in the red, it’s killing it with its quarterlies. It recently posted record fourth-quarter sales of $24.3 billion, a 37.2% improvement from the same period last year. Musk downplayed concerns over a potential deceleration in demand, stating that the recently introduced price cuts have led to a substantial increase in volume. During the fourth quarter earnings call, he said, “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history.” Moreover, with Tesla’s new vehicles hitting the market soon and its recent price slash, expect the stock to snap back in the upcoming months.
Advanced Micro Devices (AMD)
Tech giant Advanced Micro Devices’s (NASDAQ:AMD) stock sold off last year with a weakening economic backdrop leading to a decline in PC sales. According to Gartner, PC shipments declined 16% from the prior year, which led to a dramatic slowdown in sales for AMD and its peers. However, according to IDC analytics, global personal computer shipments are likely to rise to start in late 2023 in line with disinflationary effects.
Conversely, the company’s embedded and data center segments continue to grow by double-digit margins over time. Moreover, its gross margins and net income margins over a trailing twelve-month period are at 51%, 7.5% higher than the 5-year average. Similarly, its EBITDA and FCF margins are at 19.9% and 16%, respectively, significantly higher than the 5-year average. Therefore, there are a lot of positives to take from AMD’s performance and long-term outlook. Consequently, AMD stock is also trading at a substantial discount to its historical pricing metrics, making it an attractive buy.
Diamondback Energy (FANG)
Texas-based Diamondback Energy (NASDAQ:FANG) is an active oil and natural gas business operating in the energy-rich Permian Basin. Robust fossil fuel prices last year led to Diamondback generating record margins. The company generated 48.3% net income margins in the past year, more than 250% higher than the sector median. Consequently, it repurchased over $1 billion of its stock last year, in addition to its hefty dividend payout. Dividend growth over a 12-month period is at 480%, more than 150% higher than the 5-year average. It set a new target to effectively return 75% of excess cash to its stockholders through the base, variable dividends, and stock buybacks. Having said that, FANG stock trades at just 2.8 times forward sales estimates, roughly 19% lower than its 5-year average.
Nokia’s operating performance in the past year has improved substantially on the back of its incredible execution, the massive growth in 5G, and its effective capital allocation policies. It continues to ink several lucrative new deals each quarter, leading to a healthy sales increase from all its core divisions. In its most recent quarter, its network infrastructure and mobile networks revenues grew by 14% and 3%, respectively. Additionally, net enterprise sales grew by 21% last year, generating €0.8 billion in free cash flows. As we advance, the firm expects to deliver another year of solid margins, aiming to end 2023 with 11.5% to 14% operating margins.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.