- As investors rotate out of the tech sector, there are plenty of compelling opportunities in other corners of the market.
- I used the InvestingPro Stock Screener and Fair Value feature to find cheap, undervalued companies with significant upside potential.
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As investors begin to rotate out of the high-flying tech sector, several promising opportunities in other areas of the market offer substantial upside potential.
Using the power of the InvestingPro stock screener, I identified three such stocks to consider: Gilead Sciences (NASDAQ:GILD), PNC Financial Services (NYSE:PNC), and Diamondback Energy (NASDAQ:FANG).
Source: InvestingPro
Each of these companies has strong tailwinds working in their favor, making them attractive investment options in the current market environment.
Moreover, according to InvestingPro Fair Value models, all three stocks are trading at significant discounts, providing substantial upside potential.
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1. Gilead Sciences
- ‘Fair Value’ Upside: +24.3%
- Market Cap: $86.7 Billion
Gilead Sciences is a leading biopharmaceutical company that focuses on the research, development, and commercialization of innovative medicines. Gilead’s extensive portfolio includes treatments for HIV, hepatitis B and C, influenza, cancer, and inflammatory diseases.
The Foster City, California-based company has made significant contributions to antiviral therapies, solidifying its position as a prominent player in the biopharmaceutical industry.
Source: InvestingPro
As InvestingPro points out, Gilead Sciences has an above-average ‘Financial Health Score’, highlighting its robust profitability outlook and free cash flow yield. Additionally, it should be noted that the company has raised its annual dividend payout for nine years in a row.
Tailwinds and Growth Prospects:
- HIV Treatment Market Leadership: Gilead continues to dominate the HIV treatment market with its leading therapies, providing a stable revenue base and opportunities for growth through new drug approvals and advancements.
- Oncology Expansion: The biotech company is expanding its oncology portfolio through strategic acquisitions and partnerships, aiming to capture a larger share of the cancer treatment market. This includes its acquisition of Immunomedics (NASDAQ:IMMU), which brings the promising cancer drug Trodelvy into Gilead's portfolio.
- Strong Product Pipeline: Gilead has a robust pipeline of new drugs and therapies in various stages of development. This pipeline includes new treatments for HIV, oncology, and liver diseases, which are expected to drive future revenue growth.
Valuation:
Gilead Sciences is trading at an attractive valuation with InvestingPro's AI-powered Fair Value model indicating a +24.3% upside potential from last night’s closing price of $69.61. That would bring shares closer to their Fair Value price target of $86.52.
Source: InvestingPro
This substantial upside, combined with the company's strong pipeline and market leadership, makes Gilead a compelling buy amid the current market backdrop.
2. PNC Financial Services
- ‘Fair Value’ Upside: +32%
- Market Cap: $60.5 Billion
PNC Financial Services Group is a diversified financial services company offering a wide range of banking products and services, including retail banking, corporate and institutional banking, and asset management. Operating primarily in the United States, PNC is known for its strong regional presence and exceptional customer service. The bank serves millions of clients, including individuals, small businesses, corporations, and government entities.
The Pittsburgh, Pennsylvania-based company is one of the largest Small Business Administration lenders and one of the largest credit card issuers in the nation.
Source: InvestingPro
As seen above, InvestingPro paints a mostly bullish picture of PNC’s financial health, highlighting its attractive valuation, encouraging fundamentals, and dependably profitable business model. Additionally, it should be noted that the lender has maintained its dividend payout for 54 consecutive years.
Tailwinds and Growth Prospects:
- Digital Transformation: PNC has been investing heavily in its digital banking platform, enhancing customer experience through innovative technologies such as mobile banking, online banking, and digital payment solutions. These advancements are expected to attract a tech-savvy clientele, driving growth in its digital banking segment.
- Wealth Management Expansion: PNC is focusing on expanding its wealth management and advisory services, targeting high-net-worth individuals and institutional clients. By offering personalized financial planning, investment management, and trust services, PNC aims to capture a larger share of the growing wealth management market.
- Expansion Initiatives: PNC's strategic acquisitions, such as the acquisition of BBVA (BME:BBVA) USA, have significantly strengthened its presence in key regions. This acquisition is expected to drive revenue growth and enhance PNC's competitive position.
Valuation:
PNC Financial Services is currently significantly undervalued, with InvestingPro's AI-powered Fair Value model indicating a massive +32% upside potential from its current market value of $151.90. Such a move would take shares within proximity of their Fair Value price target of $200.49.
Source: InvestingPro
This significant upside, along with its strong digital transformation efforts and strategic growth initiatives, positions PNC as an attractive investment.
3. Diamondback Energy
- ‘Fair Value’ Upside: +20%
- Market Cap: $35.3 Billion
Diamondback Energy is an independent oil and natural gas company that focuses on the acquisition, development, exploration, and exploitation of onshore oil and natural gas reserves in the Permian Basin in West Texas. The region, which spans across western Texas and southeast New Mexico, accounts for approximately 30% of total domestic oil output, making Diamondback a major player in the U.S. energy sector.
Renowned for its efficient operations and high-quality asset base, the Midland, Texas-based company has established itself as a leader in the energy industry, particularly in one of the most prolific oil-producing regions in the United States.
Source: InvestingPro
It is worth mentioning that Diamondback Energy has a near-perfect company Financial Health score, with InvestingPro highlighting its upbeat earnings prospects, rising net income, and overall strong profitability outlook.
Tailwinds and Growth Prospects:
- Elevated Oil Prices: With global energy demand rebounding and oil prices recovering, Diamondback Energy is well-positioned to benefit from higher commodity prices. This recovery supports improved revenue and profitability.
- Operational Efficiency: Diamondback is recognized for its low-cost operations and strong cash flow generation. The company's focus on operational efficiency and cost control ensures resilience even in volatile market conditions.
- Strategic Acquisitions: Diamondback's strategic acquisition of high-quality assets in the Permian Basin further enhances its production capabilities and reserve base. It agreed to buy fellow Permian Basin driller Endeavor Energy Resources in a $26 billion deal earlier this year, solidifying its position as a top-tier operator in the region.
Valuation:
Diamondback Energy is trading at a discount, with InvestingPro's AI-powered Fair Value model indicating an upside potential of +20% from Tuesday’s closing price of $197.88. That would bring PNC stock closer to its Fair Value price of $237.38.
Source: InvestingPro
This substantial upside, coupled with the company's strong operational performance and favorable industry dynamics, makes Diamondback Energy a solid investment amid the current market backdrop.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY (NYSE:SPY)), and the Invesco QQQ Trust ETF (NASDAQ:QQQ). I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.