One recommendation of all investors for those looking for undervalued stocks is to “follow the money,” but that doesn’t mean chasing the stocks that have gone up. It is more important to note which stocks are favored by institutional investors, especially when the market falls.
The reason is that institutions have enough liquidity to cause big swings in the market, and they can identify companies that they think will make big moves and buy or sell before those moves. Typically, retail investors find out too late. Especially in a volatile market environment, the better situation is missing the best profit opportunity, and the worse situation may even make their deal on the wrong side.
In this article, we will look at seven undervalued stocks that are attracting interest from institutional investors who, according to analysts, still have plenty of room to rise.
The Pfizer (NYSE: PFE) stock has seen strong growth over the past two years, due to significant reasons related to its Covid-19 vaccine. For now, analysts believe the company’s capital growth may have peaked. However, institutional buying of the stock remains very strong. In the past 12 months, institutional buyers have only been about 33 percent more than sellers. But these buyers have 98% more inflows into PFE shares than their outflows.
One of the main reasons is the company’s prospects, with all the possibilities of mRNA vaccines in the long term, and for some patients with major illnesses, a game-changer. Pfizer has always been good at generating free cash flow (FCF). This gives Pfizer considerable liquidity that may be used to bring other vaccines and treatments to market.
Zscaler (NASDAQ: ZS) is a leading network security company that operates as software as a service (SaaS), enabling various businesses to keep their data secure. Its business has been growing at a tremendous rate, with more than 5,600 customers and 150 data centers that operate like “smart switches”. In addition, it has partnerships with cloud computing giants, including Amazon (NASDAQ: AMZN) web services and Microsoft ( NASDAQ: MSFT) Azure.
Its revenue has been growing impressively over the past few years. Over the past five years, sales growth has averaged over 53%, well ahead of the industry median. Recent results are equally compelling, demonstrating its high retention rate and product quality. ZS stock remains a good long-term bet, with double-digit growth in cloud security in the next few years.
ZS shares fell in 2022 by 54% after a bad, big sale began in early April, but it’s important to note that in the past 12 months, institutional buyers have overtaken sellers, with more money flowing into the stock than the money sold.
Snowflake (NYSE: SNOW) is a major player in data warehousing, with a market capitalization of more than $35 billion. It is long-term driven by the booming business intelligence field, resulting in long-term sustainable growth. In addition, the company has more than $3.8 billion in cash balances and minimal debt, allowing it to maintain its operations during the economic downturn.
Since going public a few years ago, it has transitioned from a data warehouse business to a cloud computing company. The change releases a potential market worth more than $200 billion, as compared to the relatively limited data warehouse space. Data cloud enables different companies to have a one-stop data management experience on Snow’s platform. The change has changed the industry’s game landscape, with sales rising by $327 million and $627 million, respectively, over the past few years. In addition, the company now has a positive cash flow, which gives it greater flexibility to expand its future products.
According to institutional holdings data, Snowflakes have been bought far more than institutional sellers over the past 12 months, with most analysts giving SNOW stock buy ratings with a price target of $185.
Twilio (NYSE: TWLO) operates as a cloud communications service provider, processing phone calls, video, information, and authentication functions for various mobile applications. Developers save costs by outsourcing these features to Twilio instead of building from scratch. In 2016, it served only 28,000 customers, and it has now grown to more than 250,000. In addition, sales of the company rose surged over the past five years, from $277 million in 2016 to $2.8 billion last year.
The company’s solution is embeddable, using API, the application interface. It is a modern, standardized way of connecting and communicating with customers. Therefore, the products it provides are essential for the future, which is why it expects its total target market to grow rapidly in the coming years.
Twilio’s PS is only 5.14 times, an attractive valuation. It has also attracted great interest from institutional investors, which have nearly 78% of its institutional holdings, which bodes well for investors because the company has no problems generating significant free cash flow and is committed to returning shareholder value.
- Upstart Holdings
Upstart (NASDAQ: UPST) is a leading fintech company that uses AI to make loans to banks. The goal is to provide a fairer lending experience for lenders and borrowers by providing a broader based credit scoring system.
Upstart’s services have quickly gained popular and now cover multiple profitable verticals in its segments. It started by providing mainly unsecured loans to the medical industry, as well as some other niche industries. By last year, it had entered the more profitable auto loan market and more recently showed interest in the small business lending and mortgage industry. As a result, its total potential market continues to grow, and it can now swim in a market worth more than $5 trillion.
Over the past 12 months, UPST has been bought by far more institutions than institutions have sold, and now owns more than 52%. The company operates a lucrative business and earned its seventh consecutive quarter in the first quarter. At the heart of its performance was its huge volume, up 174% to $4.5 billion in the first quarter.
Social media giant Snap (NYSE: SNAP) shares took a hit after cutting its upcoming second-quarter results. It blamed the challenging macro-economic conditions, but it still has many opportunities to grow in the long term.
In addition, the company expects 343 million to 345 million daily active users in the second quarter, up 17 percent to 18 percent from a year earlier. The company’s business is expanding at an alarming rate, but its advertising business faces multiple obstacles, and revenue and adjusted EBITDA could effectively stabilize again once those disadvantages disappear.
The company revealed that partner demand for its advertising remains high, with commitments from its agency partners going up more than 60 percent from a year earlier. In addition, it plans to use augmented reality, gaming and updates to expand beyond traditional advertising. also has significant cash to implement these plans, with positive free cash flow from its operations last year.
As Snap’s share price has aroused great institutional interest, institutional investors have significantly increased their holdings of Snap shares for four consecutive quarters, and Snap’s PS is only 4.84 times, which is very attractive in valuation.
7.WiMi Hologram Cloud Inc
WiMi Hologram Cloud Inc.(NASDAQ: WIMI) is a leading holographic AR provider, and has been at the forefront of holographic AR technology research for many years, with the goal of becoming the world’s leading holographic cloud platform. The company continues to pay attention to R & D investment, after long-term technology accumulation, according to its existing advantages has been in VR / AR, 5G, artificial intelligence, computing power algorithm, digital twin, virtual people and other fields have a leading technology reserves.
According to a research report, it is expected that China’s Metaverse market size will maintain a growth trend from 2022 to 2027, the Metaverse market size will reach 42.53 billion yuan in 2022, the Metaverse market size will further reach 126.35 billion yuan in 2027, and the compound annual growth rate of the Metaverse market size from 2022 to 2027 will reach 32.98%. WiMi Hologram Cloud is seizing the huge opportunity of Metaverse, a multi-billion dollar market size, and the company’s revenue figures continue to rise. So, while the company’s revenue is growing, it still has a huge market to exploit.
Currently WIMI shares of PS multiple is only 1.36 times, the cheap valuation has attracted the interest of institutional investors, global hedge fund Marshall Wace, LLP significantly increased WIMI shares in the first quarter, analysts gave WIMI shares buy rating, a target price target of $7.