Investors looking for stocks with the greatest growth potential often look toward undervalued stocks. Those are companies who, for one reason or another, are trading for less than industry peers or their own underlying value.
When identified and evaluated correctly, undervalued stocks can provide great potential for those investors patient enough to hold on until these hidden bargains ultimately pay off.
Stocks that are trading far below the underlying value of a company offer tremendous upside potential to patient investors. This type of investing often requires you to stand apart from the crowd – and resist the urge to chase popular trends – but has proven to pay off consistently for decades.
Following is a list of 5 undervalued stocks that offer the potential to deliver significant returns in the months ahead, and are well positioned to deliver high upside to investors over the next 12 to 18 months.
As always, be sure to do your own due diligence before investing in any stock to make sure it’s right for your financial situation and that it is consistent with your acceptable level of risk.
Undervalued Stock #1: Valero Energy Corporation (NYSE: VLO)
Valero Energy Corporation (NYSE: VLO) is America’s largest independent refining company. The company offers 15 cutting-edge locations and is among the most cost-efficient operators in the refining industry.
Valero Energy Corporation operates through three segments: Refining, Renewable Diesel, and Ethanol. The company produces California Reformulated Gasoline Blendstock for Oxygenate Blending and Conventional Blendstock for Oxygenate Blending gasolines, CARB diesel, diesel, jet fuel, and asphalt; aromatics; and sulfur crude oils.
It sells its refined products through wholesale rack and bulk markets; and through approximately outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco brands. The company also produces and sells ethanol, dry distiller grains, syrup, and inedible corn oil primarily to animal feed customers.
In addition, it owns and operates crude oil and refined petroleum products pipelines, terminals, tanks, marine docks, truck rack bays, and other logistics assets; and owns and operates a plant that processes animal fats, used cooking oils, and inedible distillers corn oils.
The company trades at a Price-to-Earnings ratio of just 4.90 and is well-positioned to not only continue its success in the refining space but also potentially become a giant in the sustainable energy industry.
As of this writing, Valero Energy has a consensus rating of “Moderate Buy” based on 11 buy ratings, 2 hold ratings and one sell rating among analysts. The analysts’ consensus price target of $155.13 represents a gain of 9.28% from the current price of $141.95 per share.
Undervalued Stock #2: Qualcomm Incorporated (Nasdaq: QCOM)
Qualcomm Incorporated (Nasdaq: QCOM) is a key player in the wireless technology landscape, holding patents central to CDMA and OFDMA technologies – the backbone of 3G, 4G, and 5G networks.
Nearly every wireless device manufacturer licenses Qualcomm’s intellectual property in one form or another. The company is also the world’s largest wireless chip vendor and supplies leading-edge processors to premier handset makers.
Qualcomm’s operations extend to selling RF-front end modules for smartphones and chips for automotive and Internet of Things markets.
The company currently trades at an attractive PE ratio of 14.34 and pays an attractive dividend of 3.20%.
As of this writing, Qualcomm Incorporated has a consensus rating of “Moderate Buy” based on 14 buy ratings, 5 hold ratings and one sell rating. The analysts’ consensus price target of $141.06 represents a gain of 28.7% from the current price of $109.60 per share.
Undervalued Stock #3: Wells Fargo & Company (NYSE: WFC)
Wells Fargo & Company (NYSE: WFC) is one of the largest banks in the United States with approximately $1.9 trillion in balance sheet assets.
The company provides banking, investment, mortgage, and consumer and commercial finance products and services in the United States and internationally. It operates through four segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management.
Following a scandal involving fake accounts more than a decade ago, the company paid massive fines and replaced its management team but its share price appears to still be feeling the aftereffects of the scandal.
Shares are trading around the same price they did a decade ago, even as the bank has grown its size and earnings power considerably – and that presents a significant undervalued opportunity for investors.
As of this writing, Wells Fargo & Company has a consensus rating of “Moderate Buy” based on 8 buy ratings, 8 hold ratings and no sell ratings. The analysts’ consensus price target of $48.02 represents a gain of 18.9% from the current price of $40.40 per share.
Undervalued Stock #4: American Airlines Group Inc. (Nasdaq: AAL)
American Airlines Group Inc. (Nasdaq: AAL), through its subsidiaries, operates as a network air carrier.
The company provides scheduled air transportation services for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C., as well as through partner gateways in London, Doha, Madrid, Seattle/Tacoma, Sydney, and Tokyo. As of December 31, 2022, it operated a mainline fleet of 925 aircraft.
The company’s Q2 2023 earnings were strong, highlighted by a net income of $1.34 billion – an increase of 181% year over year. In addition, American Airlines’ reported EPS of $1.92 beat expectations by 20.43%.
In spite of a challenging economic landscape over the past two years, American Airlines Group has delivered impressive financial performance. Yet for a variety of reasons this performance has not been reflected in the company’s share price, making this one of the most potentially attractive undervalued opportunities for investors.
As of this writing, the analysts’ consensus price target of $18.85 represents a gain of 47.9% from the current price of $12.74 per share.
Undervalued Stock #5: Albemarle Corporation (NYSE: ALB)
Albemarle Corporation (NYSE: ALB) is one of the world’s most widely-known lithium stocks and is one of the leading producers in the United States.
The market for lithium batteries is anticipated to increase by over $130 billion at a 14.2% compound annual growth rate to reach $187.1 billion. This market has grown due to increasing technological advancements in automated vehicles such as elevating equipment, industrial trucks, and EVs.
With lithium demand projected to continue growing substantially, the company is well positioned to capitalize on this ongoing megatrend.
Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. It operates through three segments: Lithium, Bromine, and Catalysts.
As of this writing, Albemarle Corporation has a consensus rating of “Moderate Buy” based on 14 buy ratings, 5 hold ratings and 2 sell ratings. The analysts’ consensus price target of $273.76 represents a gain of 67.93% from the current price of $163.02 per share.
