In this article, we will take a look at the 11 most undervalued financial stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued Financial Stocks To Buy According To Hedge Funds.
Financial stocks are wavering as chances of recession mount amid expectations that the Federal Reserve will have to continue being aggressive to tame inflation. Earnings from major banks also showed that the rising interest rate environment is taking a toll on banks’ earnings. Major banks are also allocating huge sums of money for loan-loss provisions in anticipation of a recession.
According to a Bloomberg report, Morgan Stanley’s Michael Wilson believes the S&P 500 could fall 26% in the first half of 2023. The analyst said that the rally during the start of the year made US equities expensive. The analyst reportedly said that the US stocks’ measure of equity risk premium has entered the “death zone.” Wilson thinks that while the US economy might dodge a full-blown recession, the Federal Reserve’s hawkish policy is far from being over. He also said that the risk-reward for equities is now “very poor.”
“Continued Volatility Through Year-End”
A strong jobs report and data pointing to stubborn inflation has forced investors to keep their optimism in check. Carol Schleif, chief investment officer at BMO Family Office, said that investors are still trying to adjust to the reality that the Federal Reserve is unlikely to change its hawkish stance and instead will focus on fighting inflation, according to Bloomberg. That, according to Schleif, means we will experience “continued volatility through year-end.”
For this article, we used the Finviz stock screener to identify stocks from the Financial sector with PE ratios under 15 as of February 22. After this first check we got a long list of stocks. From this list we chose top 11 stocks that have the highest number of hedge fund investors as of the end of 2022. For this metric we used Insider Monkey’s proprietary database of 943 hedge funds’ holdings as of the end of the fourth quarter of 2022.