As global markets approach record highs amid ongoing geopolitical uncertainties and inflation concerns, several hedge fund managers are identifying undervalued stocks with potential for growth. These selections, offered by portfolio managers from three Canadian investment firms, highlight companies that have faced market volatility or missed expectations but may present opportunities for investors seeking stability and upside.

Rick Ummat, co-chief investment officer and portfolio manager at Jemekk Capital Management Inc. in Toronto, recommends CareRx Corp., a supplier of pharmacy services to seniors based in Toronto. CareRx’s shares have fallen sharply from their 52-week high despite the company’s solid fundamentals and clean balance sheet. Ummat points to CareRx’s acquisition-driven growth strategy and notes that the company may announce a significant acquisition within the next three to six months. The stock currently trades at about eight times its 2026 EBITDA, compared to 22 times for a U.S. peer, Guardian Pharmacy Services Inc. However, risks include potential challenges in integrating acquisitions and possible government cuts to seniors’ drug programs.

Ummat also highlights NeuPath Health Inc., a Mississauga-based operator of medical clinics specializing in chronic pain and sports injuries. Serving markets in Ontario and Alberta, NeuPath aims to expand nationally through acquisitions in a fragmented industry. The stock trades at approximately five times 2026 EBITDA and benefits from an underutilized balance sheet, supporting possible near-term acquisitions, according to Ummat. He also notes insider confidence, citing CEO Stephen Lemieux’s recent stock purchases. Risks involve the potential failure to successfully acquire companies that would boost earnings per share.

In Vancouver, Travis Dowle, president and portfolio manager of Maxam Capital Management Ltd., points to Premium Brand Holdings Corp., a Richmond, B.C.-based manufacturer and distributor of specialty and premium food products. The stock has declined around 30 percent over five years amid concerns over food inflation and leverage. Dowle sees upside as the company completes a multiyear capital expansion that increased its production capacity by about $2 billion on over $1 billion invested. With rising revenues, planned asset sales to reduce debt, and shares trading near nine times expected 2026 EBITDA, Premium Brand Holdings may be poised for improved performance. Execution risks remain, however.

Dowle also recommends VitalHub Corp., a Toronto-based provider of software for health care and human-services sectors. The company’s shares have dropped significantly over the past year, partly due to investor concerns about the impact of artificial intelligence on its business. Dowle contends these fears are overstated, emphasizing the company’s recurring revenue, high margins, profitability, and acquisition-driven growth strategy. The stock offers potential upside through further accretive acquisitions, organic growth, and margin expansion, trading at about 10 times expected 2026 EBITDA. Risks include slower acquisition activity and growth, though a large net cash position offers some cushion.

Jordan McNamee, founder and chief investment officer of the Optimist Fund in Toronto, identifies two U.S.-based companies with turnaround prospects. Wayfair Inc., an online furniture retailer headquartered in Boston, has struggled over the past four years due to rising interest rates affecting the housing market and recent geopolitical tensions. However, McNamee notes recent revenue growth near 8 percent year-over-year and expects a return to 20 percent growth, driven by expanded physical store presence and improved consumer conditions. Wayfair’s shares are viewed as attractive with a target price of $350 per share within three years, representing 35 times forward earnings. Still, a weakening housing market remains a risk.

McNamee’s other pick is Carvana Co. Cl A, an online used-car retailer based in Tempe, Arizona. Despite sharp stock declines this year, Carvana has demonstrated consistent growth by increasing retail vehicle sales by 40 percent over six consecutive quarters and aims to grow its market share from 2 percent to 7.5 percent over the next five to ten years. Plans include acquiring new car dealerships and expanding new car sales online. The stock is valued with a three-year target price of $260 per share, or about 35 times forward earnings, although execution risk on growth strategies is noted.

These selections illustrate a range of sectors and strategies that hedge fund managers view as undervalued given current market conditions, though each carries its own operational and market risks. Investors may find potential opportunities among these names as uncertainties persist.