20 Undervalued Stocks to Consider Amid Fed Rate Ambiguity

 | Jun 21, 2023 06:23AM ET

  • The recent rally on Wall Street is taking a breather amid uncertainty over the Federal Reserve’s outlook for interest rates
  • As such, I used the InvestingPro stock screener to search for undervalued stocks that have potential ‘Fair Value’ upside of at least 25%
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    • The rally in U.S. stocks has appeared to falter, with the S&P 500 and the Nasdaq falling from recent highs amid growing uncertainty over the Federal Reserve’s outlook for interest rates.

    After raising rates by 500 basis points since March 2022, the Fed left borrowing costs unchanged earlier this month, but signaled that rate hikes could resume in July.

    Financial markets now look to Fed Chair Jerome Powell's two-day testimony before Congress, starting with the U.S. House Financial Services Committee on Wednesday, which will be scrutinized for clues regarding how the central bank views inflation and monetary policy.

    As we grapple with fresh uncertainty surrounding the Fed's rate plans, identifying undervalued stocks becomes paramount as investors find themselves seeking stability and potential opportunities.

    Amid the current backdrop, I used the InvestingPro stock screener to identify the best undervalued stocks that have the potential to weather market turbulence and provide attractive investment returns.

    InvestingPro 's stock screener is a powerful tool that can assist investors in identifying cheap stocks with strong potential upside. By utilizing this tool, investors can filter through a vast universe of stocks based on specific criteria and parameters.

    To identify undervalued stocks, I first filtered for names with an InvestingPro ‘Fair Value’ upside greater than or equal to 25%. The Fair Value estimate is determined according to several valuation models, including price-to-earnings (P/E) ratios, price-to-sales (P/S) ratios, and price-to-book (P/B) multiples.

    I then scanned for stocks with an InvestingPro ‘Fair Value’ Label of either ‘Bargain’, or ‘Undervalued’ and an InvestingPro ‘Health’ Label of ‘Excellent’, or ‘Great’.