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In this article, we shall discuss the 10 best bargain stocks to buy right now. To read our comprehensive analysis of the global economic outlook in 2022, go directly and see 5 Best Bargain Stocks To Buy Right Now.
As of October 2022, the global economy is plummeting towards a recession, with investors incurring massive losses and financial setbacks. According to the October 2022 World Economic Outlook by the IMF, global economic growth is set to slow down from 3.2% to 2.7% in 2023. The report further ascertains that the global deceleration is likely to be broad-based, with the 2023 projection accounting for less than half of 2022's 6% expansion. Countries which currently account for more than a third of the global economy are expected to suffer a two-quarter contraction in their real GDP in 2023. The report predicts that the future does not seem any less grim. With the Russia-Ukraine conflict showing no signs of resolution, central banks tightening monetary policies in advanced economies to counter rising inflation, and with China's zero-COVID policy and fragile housing market dominating the macroeconomic plains, the International Monetary Fund predicts a one-in-four probability that global growth will fall below 2% in 2023, with a 15% likelihood of it dropping below 1% in 2024.
This is what Pierre Olivier Gourinchas, the IMF's chief economist, had to say about the global economic condition in an interview with the Financial Times:
"We are not in a crisis yet, but things are really not looking good. 2023 will probably be the darkest hour for the global economy. As the global economy is headed for stormy waters, financial turmoil may well erupt, prompting investors to seek the protection of safe-haven investments, such as US Treasuries, and pushing the dollar even higher..."
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As Gourinchas has suggested, investors are looking towards profitable and lucrative bargain stocks to shield themselves from the grim macroeconomic headwinds. Bargain stocks are typically stocks trading at exceptionally low valuations, which are not accurately indicative of the shares' intrinsic value in terms of fundamentals such as earnings, cash flow, and leverage. Some of the best bargain stocks to buy right now are Meta Platforms Inc. (NASDAQ:META), FedEx Corp. (NYSE:FDX), and Alibaba Group Holding Limited (NYSE:BABA). In this article, we shall underline 10 of the best bargain stocks to buy right now.
Our Methodology
For this article, we looked at stocks which are currently down more than 30% year-to-date, as of October 29. Then, we picked 10 stocks which have strong fundamentals, positive analyst ratings, favorable hedge fund sentiment, and are likely to rebound in 2023 or later. The stocks have been arranged based on the number of hedge funds which hold stakes in them, from lowest to highest.
Insider Monkey's database tracking 895 elite hedge funds in Q2 2022 was used to gauge hedge fund sentiment around each stock.
Best Bargain Stocks To Buy Right Now
10. Coursera Inc. (NYSE:COUR)
Number of Hedge Fund Holdings: 20 YTD Decline (As of October 29): 48.20%
Based in California, Coursera Inc. (NYSE:COUR) is an American open online platform which, in collaboration with multiple universities and other organizations, provides online courses, certifications, and degrees in a variety of subjects. On October 26, Coursera Inc. (NYSE:COUR) posted Q3 2022 earnings, with the company beating EPS estimates of -$0.11 by $0.05, posting earnings of -$0.06 per share. Coursera Inc. (NYSE:COUR) posted a total revenue of $136.4 million in Q3 2022, beating consensus $128.3 million. Like Meta Platforms Inc. (NASDAQ:META), FedEx Corp. (NYSE:FDX), and Alibaba Group Holding Limited (NYSE:BABA), Coursera Inc. (NYSE:COUR) is one of the best bargain stocks to buy right now.
On October 28, Truist analyst Terry Tillman lowered the price target on Coursera Inc. (NYSE:COUR) to $17 from $20, maintaining a Buy rating on the shares. The analyst noted that although the company is currently dealing with macro issues in its North American and European markets, the professional certificate demand in Consumer business, Coursera for Government, and Coursera for Campus segments are going particularly strong, with the analyst expecting strong results for the company through 2026. Furthermore, Tillman contends that the company's Massive Open Online Course market has immense growth potential and multiple tailwinds. Despite a dismal Q2 2022 performance, Tillman contends that the company's fundamentals remain relatively strong and the headwinds faced by the company are strictly temporary.
9. Blue Owl Capital Inc. (NYSE:OWL)
Number of Hedge Fund Holdings: 24 YTD Decline (As of October 29): 31.53%
Headquartered in New York City, Blue Owl Capital (NYSE:OWL) is an American alternative investment asset management firm. Hedge fund sentiment around Blue Owl Capital (NYSE:OWL) increased in the second quarter of 2022, with 24 hedge funds having stakes worth $608.3 million in the company. This was up from 23 hedge funds long the stock in the preceding quarter. In the second quarter of 2022, Blue Pool Capital was the largest shareholder in Blue Owl Capital (NYSE:OWL), having stakes worth $490.8 million in the company. Moreover, in Q2 2022, Blue Owl Capital (NYSE:OWL) posted an EPS of $0.13, beating estimates of $0.11 by $0.02.
On October 12, Deutsche Bank analyst Brian Bedell lowered the price target on Blue Owl Capital (NYSE:OWL) to $16 from $19, maintaining a Buy rating on the shares. According to Bedell, Blue Owl Capital (NYSE:OWL) is the best positioned alternative assets company to perform into the 2023 earnings prints. Overall, the analyst points out that the company's price declines in 2022 spell excellent long-term entry points. He also points out that the company has an excellent growth outlook, with the company's defensiveness and growth not showing in its current valuations.
8. Sony Group Corporation (NYSE:SONY)
Number of Hedge Fund Holdings: 26 YTD Decline (As of October 29): 34.61%
Headquartered in Minato, Tokyo, Sony Group Corp. (NYSE:SONY) is a Japanese multinational conglomerate corporation which manufactures consumer and professional electronic products, video game consoles, and is one of the largest video game publishers in the world. Sony Group Corp. (NYSE:SONY) managed to maintain hedge fund sentiment, with 26 hedge funds long the stock in both, Q1 and Q2 of 2022. As of the second quarter of 2022, GAMCO Investors is the largest stakeholder in the company, with total stakes valued at $146.5 million.
Although the video game landscape is incredibly cut-throat, Sony Group Corp. (NYSE:SONY) is navigating through the market headwinds fairly successfully. The company's video game publishing division is highly profitable, with games constantly topping charts and raking in big numbers. Despite its relatively smaller size, the company's Image and Sensing Solutions division is also quite promising. Although the large size of the company makes it unlikely for Sony (NYSE:SONY) to achieve any significant revenue growth, the business fundamentals outline a strong year for the company in 2023. Like Meta Platforms Inc. (NASDAQ:META), FedEx Corp. (NYSE:FDX), and Alibaba Group Holding Limited (NYSE:BABA), Sony's (NYSE:SONY) low valuation provides an excellent long-term entry point for investors.
Here is what Aristotle Capital Management had to say about Sony Group Corp. (NYSE:SONY) in their Q1 2022 investor letter:
“Sony (NYSE:SONY), maker of the PlayStation videogame console, was a leading detractor for the quarter. After a strong year in 2021, a shortfall in PlayStation 5 sales due to continued semiconductor shortages has dampened new console unit sales. Although there are likely to be continued limitations on the supply of components in the short term, consumer demand remains strong, and upcoming releases of major titles such as Horizon Forbidden West and Gran Turismo 7 are likely to further enhance demand. While Sony (NYSE:SONY) continues to manage supply-chain headwinds, the company has also again demonstrated its ability to build on the fundamental strength of its business across various segments. During the quarter, Sony (NYSE:SONY) acquired Bungie, a U.S.-based videogame developer known for the Destiny franchise and live game services; completed its initial equity investment in Japan Advanced Semiconductor Manufacturing, a foundry service subsidiary of Taiwan Semiconductor Manufacturing Company (TSMC); and acquired Brazilian music label Som Livre. Lastly, Sony (NYSE:SONY) announced a partnership with Honda Motor (NYSE:HMC) where the two companies expect to combine Honda’s expertise in manufacturing vehicles with Sony’s (NYSE:SONY) proficiency in imaging, sensing, telecommunication and network technologies to develop and commercialize electric vehicles. We feel these strategic actions demonstrate Sony’s (NYSE:SONY) ability to continue to improve on its market positions across its business segments with a long-term, forward-looking approach.”
7. Toast Inc. (NYSE:TOST)
Number of Hedge Fund Holdings: 40 YTD Decline (As of October 29): 32.88%
Based in Boston, Massachusetts, Toast Inc. (NYSE:TOST) is an American cloud-based restaurant management software company which provides an all-in-one point of sale system built on Android. As of the second quarter of 2022, the company beat EPS estimates of -$0.12 by $0.04, posting earnings of -$0.08 per share. Investor interest around Toast Inc. (NYSE:TOST) increased in the second quarter of 2022, with 40 hedge funds holding stakes in the company, up from 39 hedge funds in the preceding quarter. The company has been generating strong revenue growth, posting a total revenue of $675 million in Q2 2022.
On October 10, Mizuho analyst Dan Dolev upgraded Toast Inc. (NYSE:TOST) to Buy from Neutral, with a price target of $24, up from $22. The analyst's survey of over 55 restaurants operating on the company's platforms sheds light upon the promising impact on sales and profits from cross-selling payroll and adjacent software-as-a-service products. He noted that restaurants using the company's platforms for payroll tend to use a higher number of SaaS products on average and spend significantly more, at least $5000 more per annum, than restaurants who don't. He believes continued payroll and SaaS cross-sell success is expected to propel the company to profitability in 2024, one year in advance of the current consensus expectation.
Here is what Baron Funds had to say about Toast's (NYSE:TOST) long-term prospects in their Q3 2021 investor letter:
“Toast, Inc. (NYSE:TOST) is a cloud-based, end-to-end technology platform purpose-built for the restaurant industry. Its platform provides a comprehensive suite of cloud software products and financial technology solutions to its customers to connect front-of-house with back-of-house operations across all customer channels. Toast’s (NYSE:TOST) core module is its point-of-sale software solution and requires all customers to use Toast as their payment processor. Customers then have the option to bundle or add-on additional modules across operations, digital ordering and delivery, marketing and loyalty, team management, and back office. Toast (NYSE:TOST) today powers 48,000 restaurants within the 860,000 U.S. restaurant industry, largely focusing on small- and medium-sized (“SMB”) restaurant customers (generally fewer than 10 locations but up to 50), with some larger enterprise customers as well. Toast (NYSE:TOST) is the clear market leader in SMB restaurant technology with the best product offering and only full, end-to-end platform. We believe that as restaurants continue to invest in technology at an accelerated pace emerging from COVID, Toast (NYSE:TOST) will be a big beneficiary given its leading market position and best-in-class product. At less than 6% penetration of U.S. restaurants and 3% penetration of its $15 billion recurring-revenue TAM, Toast (NYSE:TOST) has a long runway for growth by signing on additional locations to the platform and increasing the attach rate of its value-add modules. Only 54% of customers today use 4 or more of Toast’s (NYSE:TOST) 10-plus modules, each of which provide significant value to the customer and would drive Toast’s (NYSE:TOST) recurring revenue stream higher.”
6. Pinterest Inc. (NYSE:PINS)
Number of Hedge Fund Holdings: 41 YTD Decline (As of October 29): 31.61%
Headquartered in San Francisco, California, Pinterest Inc. (NYSE:PINS) is an image sharing and social media service designed specifically to enable saving and discovery of information on the internet. The company posted their third-quarter results on October 27, posting an EPS of $0.11, beating estimates of $0.06 by $0.05. The company recorded an 8.2% year-over-year growth in revenue in Q3 2022, beating consensus by $18.37 million by posting a revenue of $685 million.
On October 5, Goldman Sachs analyst Eric Sheridan upgraded Pinterest Inc. (NYSE:PINS) to Buy from Neutral with a price target of $31, up from $24. Although the analyst concedes that the digital advertising landscape is cloudy and uncertain, he has more positive expectations from improved user growth and engagement trends for the company over the medium and long term. According to the analyst, there is immense upside potential to the revenue growth trajectory and operating margin estimates, as the company moves into 2023. Sheridan also shed light upon the fact that his recent analysis boosts his confidence in Pinterest's (NYSE:PINS) ability to expand upon monetization and capture a larger share of advertisement budgets, as the company executes against its shopping and commerce opportunity. Like Meta Platforms Inc. (NASDAQ:META), FedEx Corp. (NYSE:FDX), and Alibaba Group Holding Limited (NYSE:BABA), the analyst also sees the company being well leveraged to long-term secular growth themes such as ad spend shifting online, social commerce, and creator economy over the long term.
Here is what RiverPark Funds had to say about Pinterest Inc. (NYSE:PINS) in their Q3 2022 investor letter:
“PINS reported better-than-feared results in an online advertising sector that has struggled during 2022. Additionally, new CEO Bill Ready provided a positive strategic view for the company and activist investor, and now top shareholder Elliott Management supports the view that the company should improve on its 2Q 14% adjusted EBITDA margin (4Q21 margin was 41%). For 2Q22, PINS posted revenue growth of 9%, with average revenue per user increasing 17% year over year on slightly decreased global users (down 5%). The company has over 430 million monthly active users, and we view the growth of monetization to be a much more compelling data point than a marginal decline in this enormous base of users.
Along with our other social media advertising holdings SNAP and META, we believe Pinterest (NYSE:PINS) to be an extremely well-positioned internet advertising platform. Users are increasingly coming to Pinterest (NYSE:PINS) to get inspiration for their home, their style or upcoming travel, which often means they are actively looking for products and services to buy. The company currently has 433 million MAU’s, 2/3 of whom are female (who continue to control the lion’s share of household purchasing budgets), which positions the company well to continue to take share of future ad dollar allocations. In addition, PINS’ TTM ARPU was $6, significantly less than SNAP’s $16, and Meta’s $32. Closing the ARPU gap with its peers while expanding user engagement should drive a minimum of 20% annual revenue growth over the next few years. In addition, if EBITDA margins merely return to last year’s levels (and we believe they should then scale higher from there), the company should be able to generate strong growth in earnings and cash flow in the years to come.”
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Disclosure: none. 10 Best Bargain Stocks To Buy Right Now is originally published on Insider Monkey.
