2 Best Value Stocks to Buy, According to Hedge Funds

For value investing, TipRanks offers a perfect comparison tool: Best Value Stocks. Using the tool, value investors can also compare and contrast the different parameters of stocks, including analyst price targets, hedge fund signals, blogger opinions, and Smart Scores, to name a few.

An uncertain market often results in more investors becoming risk-averse and preferring to invest in value stocks. These stocks generally have stable financials and trade at a discount to their intrinsic value.

To add confidence in the stock selection, we zeroed in on the value stocks that hedge fund managers have bought recently. You can easily find this information on our Hedge Fund Trading Activity tool for every stock. The tool accumulates data from Form 13-Fs released by about 483 hedge funds, and shows which stocks hedge funds are buying and selling. 

According to these screeners, Duke Energy (NYSE:DUK) and Block (NYSE:SQ) are among the stocks with reasonable valuation that are also hedge fund managers’ favorites.

Let’s look at these two stocks in detail.

Duke Energy

TipRanks data shows that hedge funds bought 121,400 shares of Duke Energy last quarter. Several hedge fund managers increased their holdings in the stock, including Joel Greenblatt of Gotham Asset Management and Bridgewater Associates’ Ray Dalio. Overall, the Hedge Fund Confidence Signal on DUK is currently Very Positive.

Greenblatt is ranked #247 among all the hedge funds managers covered by TipRanks and he disclosed having increased his holding of the stock by 104.4%. As for Dalio, he ranks #188 on TipRanks and added 41.3% of DUK stock to his portfolio last quarter.

Duke Energy is a North Carolina-based energy company, engaged in the distribution of natural gas and energy-related services. The company’s efforts to cut costs and offload businesses that might perform poorly in a high-rate environment are likely to support long-term growth. DUK’s investments in building electric vehicle charging infrastructure is another positive factor.

Moving on to valuation, DUK shares trade at 2.66x sales, which is below its five-year average of 2.79x. The company also has an impressive dividend yield of 4.1%, which compares favorably with the sector’s average of 3%.

Is DUK a Buy or Sell?

DUK stock has received three Buys and six Holds for a Moderate Buy consensus rating. Further, analysts’ average price target of $108.44 implies 15% upside potential. The stock is down 5% over the past three months.

Block

SQ stock has a very positive signal from hedge funds, who bought 5.7M shares of the company in the last quarter. Fisher Asset Management’s Ken Fisher and Greg Poole of Echo Street Capital Management are among the managers who added the stock to their portfolios.

With a rank of #286, Fisher increased exposure to the stock by 148.7%. Further, Poole, who holds a #27 rank on TipRanks, added 133.3% of CVE stock to the hedge fund’s portfolio.

Square is a financial technology company. Its Cash App, a one-stop financial service solution for all customers’ needs, is one of the biggest growth drivers for the company. Also, its Afterpay Buy Now, Pay Later platform is witnessing improving trends.

Shares trade at 3.1x sales, much below SQ’s five-year average of 7.2. This discounted valuation makes SQ stock an attractive buy option.

Is SQ a Buy, Sell, or Hold?

Block scores Wall Street’s Strong Buy consensus rating based on 19 Buys and six Holds. The average SQ stock price target of $97.35 implies nearly 27% upside potential. In the past three months, shares have rallied over 10%. 

Concluding Thoughts

Analysts are expecting considerable upside in these two stocks. Moreover, hedge funds are showing interest in these two stocks from very different sectors. Thus, a value investor might well consider these two stocks for further research.

Find out which stock the biggest hedge fund managers are buying right now. 

Disclosure