Three undervalued stocks attracting the attention of institutions

Comcast Corp. NASDAQ: CMCSACharles Schwab Corp. NYSE:SW and Alphabet Inc. NASDAQ:GOOGL are among the institutional-quality large-cap stocks that are currently undervalued.

There are a few reasons why institutions continue to show conviction when it comes to stocks trading below the level where their intrinsic value indicates they should be trading.

• They offer the potential for profit as market sentiment changes and investors reevaluate fundamental factors.
• This creates an opportunity for investors who purchased these shares at lower prices to profit from the increase in their value.
• Institutional investors have the resources and expertise to conduct in-depth research and analysis, identifying undervalued assets that may currently be out of favor.
• By investing in undervalued stocks, institutional investors can take advantage of market inefficiencies, diversify their portfolios, and achieve long-term growth or income goals.

Large-cap stocks like Comcast, Schwab and Alphabet have the advantage of being components of indexes like the SPDR S&P 500 ETF Trust NYSEARCA: SPYwhich generally guarantees the continuity of institutional purchases.

Comcast stock: More funds are buying shares

The number of funds owning Comcast stock has grown over the past two quarters; this is reflected in Comcast’s one-year yield of 25.59%. The Comcast chart shows 10 months of higher trading over the past year, a sign that institutions are jumping on board. This has the potential to drive the stock price higher.

The stock is currently undergoing consolidation; watch out for breaking the lower resistance at $48.

According to a February research note from Argus analyst Joseph Bonner, “Comcast’s core cable business enjoys significant competitive advantages that we expect to last for two decades or more; that’s why Morningstar gives Comcast a wide economic moat.”

Bonner added that he expects “modest growth but strong cash flows from Comcast for the foreseeable future. Our key assumption is that Comcast will maintain its position as the dominant provider of Internet access, and this will provide a solid foundation upon which the ‘company can build relationships with customers and ensure pricing power.”

Wall Street expects Comcast to earn $4.28 per share this year, up 8%. In 2025, it is expected to rise another 8% to $4.63 per share.

Institutions flock to Schwab

Charles Schwab’s institutional ownership data shows that the rate of buying versus selling is extremely imbalanced. Over the past 12 months, 1,501 institutional buyers accounted for $68.51 billion in inflows, while 884 institutional sellers accounted for $12.22 billion in outflows.

The Charles Schwab chart shows how the stock has rebounded over the past year gradually advancing to a 14.99% annual return.

Schwab’s earnings growth slowed amid rising interest rates; Customers have moved billions from Schwab accounts, which pay low rates, to other types of external accounts with higher yields.

Wall Street expects Schwab’s earnings to start growing again this year, although there is still uncertainty over interest rates, prompting analysts to lower growth forecasts.

Schwab analysts’ forecasts show a consensus view of “hold” on the stock. The consensus price target is $69.92, an upside of 4.42%.

Alphabet: Magnificent 7 Undervalued stock

Communications services stocks lagged most others on a monthly basis, as heavily weighted sector component Alphabet fell 6.13% in that period.

If you take a look at the Alphabet chart, you will see the stock consolidate below its January 29 high of $153.78. Shares of Alphabet, part of the 2023 Magnificent 7 leaders, underperformed the SPDR Communication Services Select Sector Fund NYSEARCA: XLC in the last month.

However, we are talking about Google. Yes, the company has made some recent missteps, including with its Gemini AI-powered image generation feature.

But Wall Street, and just about everyone with a pulse, understands that Alphabet still has room to grow. Analysts expect the company to earn $6.89 per share this year, up 20%, while forecasting double-digit revenue growth in each of the next two quarters.

When it comes to search, Google has established a significant competitive advantage.

Institutional buyers seem to agree: Alphabet data on institutional ownership shows that 3,151 institutional buyers accounted for $59.33 billion in inflows, while 2,557 institutional sellers accounted for $53.53 billion in outflows over the past 12 months .

Before you consider Alphabet, you’ll want to hear this.

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