Table of Contents:
- Introduction
- Albemarle (ALB) – The Lithium Stock You Can’t Afford to Miss
- Pfizer (PFE) – An Underappreciated Pharma Giant
- NextEra Energy (NEE) – Green Utility Set to Surge
- Snowflake (SNOW) – This AI Stock’s Time to Shine is Coming
- Johnson Controls (JCI) – Overlooked Smart Building Innovator
- Duke Energy (DUK) – Cash Cow Utility Ready to Electrify Returns
- Cisco (CSCO) – Networking Leader Primed for the Future
- Summary and Final Thoughts
- FAQ
Introduction
In the world of investing, finding undervalued sleeper stocks with the potential for major gains is like discovering hidden treasure. While flashy, high-flying stocks grab headlines, overlooked diamonds in the rough offer the savvy investor quiet opportunities to buy low and sell high.
This article highlights 7 most undervalued sleeper stocks that smart money is buying up now while they remain on sale. These stocks all have solid fundamentals and growth roadmaps combined with compelling risk-reward ratios at current beaten down prices.
Keep reading to discover why these 7 stocks deserve a spot on your watchlist and in your portfolio before they leave bargain territory behind.
Albemarle (ALB) – The Lithium Stock You Can’t Afford to Miss
Albemarle is the largest lithium producer in the U.S. and a core player in feeding the rapidly growing electric vehicle (EV) battery market. Yet despite surging lithium demand, ALB stock trades nearly 50% below its 2021 highs presenting a discounted buying opportunity.
The recent pullback is mainly attributed to short-term factors like China lockdowns disrupting supply chains and softness in EV sales. But the secular shift towards EVs and energy storage is very real and lithium demand trajectories remain highly favorable.
Despite the challenging environment, Albemarle grew Q2 2022 revenues 10% year-over-year (YOY) and reaffirmed full-year guidance expecting up to 35% growth. The company is investing heavily to double lithium production by 2026.
Albemarle’s lithium leadership and EV growth tailwinds position it for major upside as conditions improve. The stock trades at just 9x forward earnings presenting a bargain buy for investors before sentiment shifts.
Focus keyword: Albemarle Related keywords: lithium stocks, lithium demand, electric vehicles, EV batteries
Pfizer (PFE) – An Underappreciated Pharma Giant
Pfizer stock remains down over 25% from pandemic highs presenting an overlooked buying opportunity. Investors are focused on near-term Covid revenue declines as the crisis fades. But Pfizer’s robust pipeline and pandemic war chest are being overlooked.
The company is flush with over $27 billion in Covid-related profits to fund strategic acquisitions and robust R&D. Pfizer is advancing 89 potential blockbuster medicines over the next few years including for high-value indications like cancer, immunology, neuroscience, and vaccines.
The recent acquisition of cancer specialist Seagen further boosts this pipeline. And Pfizer expects over 20 major drug launches by 2025 fueling growth for years to come.
At just 7x forward earnings and with a 3.5% dividend yield, PFE stock is clearly undervalued considering its projections. Pfizer remains a powerhouse pharma stock to buy at a bargain and hold long term.
Focus keywords: Pfizer stock, pharma stock, undervalued stock
Related keywords: Covid revenues, drug pipeline, acquisitions, dividends
NextEra Energy (NEE) – Green Utility Set to Surge
NextEra Energy operates Florida Power & Light, the largest rate-regulated electric utility in the U.S. But it also has a fast-growing renewable energy subsidiary NextEra Resources which together make it a unique “green utility” play.
While utilities were hit in 2022 by rising bond yields making their dividends look less attractive, NextEra is poised for outperformance as yields decline. It offers the stability of an essential utility serving 5 million+ homes and businesses combined with strong growth from being North America’s largest producer of wind and solar energy.
NextEra reaffirmed guidance for annual earnings growth of 6-8% through 2025 supported by its $120 billion capital investment program in grid strengthening and renewable projects. It also targets dividend growth of 9-11% annually through at least 2024 – far above other utilities.
Trading at 21x forward earnings, NEE stock provides compelling value for its premium growth and income profile. NextEra’s green energy leadership and sound fundamentals make it a strong utility play for today’s market.
Focus keywords: NextEra stock, undervalued utility stocks, green utility stocks Related keywords: Florida Power & Light, renewable energy, earnings growth, dividend growth
Snowflake (SNOW) – This AI Stock’s Time to Shine is Coming
Snowflake operates a leading cloud data platform that enables customers to unite siloed data and perform advanced analytics. Its disruptive technology and explosive growth potential are obscured by its stretched valuation in 2021 and the 2022 tech wreck.
However, with strong execution and tailwinds from the mass migration of data to the cloud, Snowflake still has huge upside ahead. Revenue grew 69% in Q3 2022 topping expectations. Its net revenue retention rate remains best-in-class at 158% per Forbes.
Despite the growth story remaining intact, at 25x sales SNOW now trades 70% below its 2021 peak sales multiple of 83x presenting a much more compelling entry point at today’s deflated valuation.
With $1.2 billion in cash, no debt, and the ability to tap surging demand for cloud data analytics, Snowflake still holds elite growth stock potential as investment horizons extend again.
Focus keywords: Snowflake stock, AI stock Related keywords: cloud data, revenue growth, valuation, growth stock
Johnson Controls (JCI) – Overlooked Smart Building Innovator
Johnson Controls provides essential products and services related to smart climate control, fire/security systems, and energy storage solutions for large facilities and buildings.
JCI stock gradually returned 90%+ over the past 5 years but still remains overlooked and undervalued for its key role enabling the future of smart, connected buildings and cities.
With its market-leading OpenBlue digital platform, JCI is at the intersection of major technology trends including smart infrastructure, energy efficiency, and the Internet of Things (IoT). Its innovation drives solutions like predictive maintenance, remote performance monitoring, and AI-enhanced security.
JCI targets 7-10% annual sales growth through 2025 to tap surging demand as buildings get smarter. Yet the stock trades at just 18x earnings presenting an opportune entry point.
As a key enabler of connected, net zero cities of the future, JCI has wide room for continued upside. This overlooked stock offers savvy investors both growth and value today.
Focus keywords: Johnson Controls stock Related keywords: Smart buildings, IoT, Smart cities, Growth stock
Duke Energy (DUK) – Cash Cow Utility Ready to Electrify Returns
With operations spanning the Carolinas, Florida, Midwest, and Western U.S., Duke Energy stands out as one of the largest electric utilities in America. But despite its entrenched position serving 7.2 million customers, DUK stock still offers income investors value trading at just 19x forward earnings.
Demand for electricity and natural gas remains highly stable given changing lifestyles and extreme weather driving increased energy use. Duke Energy has poured over $60 billion into modernizing infrastructure, and it targets continued investment exceeding $140 billion over the next 10 years.
Duke plans to maintain dividend growth of 5-7% yearly through 2027 having not cut its dividend since 2007. Its stock now yields over 4% presenting an attractive income opportunity.
For a stalwart utility delivering consistent earnings, revenue, and dividend growth, DUK stock is clearly mispriced today and presents strong value relative to bonds. Income investors can lock in an above-average and highly safe yield on cost here.
Focus keywords: Duke Energy stock, utility stocks Related keywords: Dividends, earnings growth, undervalued stocks
Cisco Systems (CSCO) – Networking Leader Primed for the Future
Cisco Systems, though not flashy, remains a dominant enterprise technology company enabling the networking backbone of the modern economy. But its slow-and-steady nature causes CSCO stock to fly under the radar of most growth investors.
The company grew revenues 11% in FY 2022 and returned $10.6 billion to shareholders through dividends and buybacks. Cisco is evolving network architectures to capture major opportunities in cloud computing, 5G, Wi-Fi 6, and 400G upgrades presenting a long runway for growth.
Its recurring software and services revenues now make up 37% of total sales providing stability. At just 12x forward earnings and with a 3.5% dividend yield, Cisco stock offers a cash-rich industry leader at a bargain valuation.
Despite not being the flashiest name, Cisco remains essential to worldwide digital transformations, and its stock presents savvy investors excellent value today.
Focus keywords: Cisco stock Related keywords: Networking, undervalued stocks, cloud computing
Summary and Final Thoughts
The 7 undervalued sleeper stocks highlighted in this article present compelling opportunities at their currently discounted valuations. While some face near-term macro headwinds, their long-term growth prospects remain strong.
Their upside potential is obscured by negative sentiment creating a chance to buy low now before the crowd catches on. Each offers deep value trading below historical multiples and growth rate projections.
But for patient investors with a medium to long-term horizon, these stocks represent likely outperformers. Building positions in these underappreciated names before widespread positive outlooks return could yield massive future gains.
The current environment requires selectivity, but for those able to look past the gloom, hidden gems await. Now is the time to spring on these most undervalued sleeper stocks before their days of trading on sale end.
Frequently Asked Questions
Q: What are the key criteria for identifying undervalued sleeper stocks?
A: The key factors are low valuation multiples like P/E and P/S ratios compared to historical norms and projected growth rates along with underappreciated strengths. Temporarily distressed industries, undiscovered innovation potential, and macro-driven pessimism can all obscure strong stocks.
Q: How can individual investors find hidden gem stocks trading on the cheap?
A: Screeners can help uncover stocks with attractive fundamentals coupled with low multiples. But also look for great companies weighed down by industry pressures. Identify likely turnaround stories or secular growth tails amidst negativity.
Q: Are undervalued stocks riskier investments?
A: Not necessarily – their valuations are low due to temporary issues or lack of hype, not poor fundamentals. However, unloved stocks can be volatile. But downside is limited if investing based on sound financials versus chasing high flyers.
Q: How much research is required to invest successfully in value stocks?
A: Extensive research is critical before investing in any stock. Understand the underlying company strengths as well as issues pressuring the stock lower. Ensure there is a plausible path for multiple expansion. Value alone is insufficient – the business fundamentals and growth outlook must support a higher valuation.
Q: What time horizon is appropriate when investing in underappreciated stocks?
A: Value stocks can sometimes remain overlooked for extended periods. A 3 to 5 year outlook is often suitable before fundamental strengths are recognized again. Near-term patience and conviction are required. Value investing is best paired with a long-term mindset.
