Bear markets are not fun to live through, but they create incredible opportunities for investors to boost their returns by adding deeply undervalued companies to their stock portfolio. The challenge is sifting through all the choices to find the best stocks.

Thankfully, all professional investors that oversee $100 million or more in assets are required to disclose their holdings on form 13F with the Securities and Exchange Commission. These filings provide a treasure trove of investment ideas that have already passed some high-level filters.

Two famous investors that are worth following are Michael Burry and Warren Buffett. Let's take a deep dive into two discounted stocks that they bought recently.

Qurate Retail

Michael Burry runs Scion Asset Management, a hedge fund focused on investing in undervalued stocks. Burry made a name for himself after predicting the housing crisis in 2008 that sparked a market crash. Many investors follow his hedge fund given his willingness to make contrarian bets that go against the crowd, so it's no surprise to see Burry buying more stocks as the bear market picked up steam this year.

The most recent 13F filing for the third quarter shows Scion Asset Management holding six stocks. One of those is Qurate Retail (QRTEA -2.91%) (QRTE.B 2.92%), which owns QVC, HSN, Zulily, and other retail brands. Burry bought 5 million shares in the third quarter following a sharp fall in the stock price this year.

Qurate has valuable assets to engineer a turnaround. The video commerce brands, QVC and HSN, reach over 90 million households. Qurate's video retail companies benefit from having a core demographic of high-income shoppers, but weak consumer spending and other headwinds have weighed on the company's revenue.

A year ago, one of Qurate's fulfillment facilities suffered a fire that was disruptive to the business. Moreover, more people are ditching cable, which has pressured results at QVC and HSN. The company also bought too much inventory, which was a common mistake with many retailers this year, but this contributed to a collapse in Qurate's profitability. 

Through the third quarter, revenue was down 14% year to date. Lower demand on top of the inventory issues contributed to a loss of $2.5 billion. This is down from a profit of $555 million over the same period in 2021. Weak financials and uncertainty over near-term demand has sent the stock plunging 79% over the last year. 

Management has a plan to return the business to profitable growth. The plan includes significantly reducing operating costs, speeding up delivery times, and better managing product pricing to firm up margins. Management also sees opportunities to reach more consumers by doubling down on streaming.

The reason investors can have confidence betting on Qurate's turnaround is the attractive demographics of its customer base and the emotional connections they have with these brands. For example, the average customer of QVC and HSN are middle-aged homeowners that shop as frequently as millennials but tend to spend more than twice the amount on the same merchandise. 

With these qualities, Qurate can achieve a healthy profit margin over the long term. Over the last five years, the company generated average annual free cash flow of over $1 billion. Yet, Qurate Retail's market cap currently sits at just $619 million -- an incredible bargain at less than one time the company's trailing free cash flow generation. 

QRTEA Free Cash Flow Chart

QRTEA Free Cash Flow data by YCharts

Management expects the turnaround plan to show results starting in 2023 with momentum picking up in 2024. If successful, the stock could skyrocket from the current quote.

Paramount Global

Streaming video has proven to be a capital intensive, money losing endeavor for just about every competitor in the space (excluding Netflix), and that is certainly the case for Paramount Global (PARA 13.40%) (PARA.A 8.36%). The company ended the third quarter with 67 million subscribers across its Paramount+ and Pluto TV streaming services, but the investments in content are burning a growing hole on the bottom line.

Paramount reported a 49% decline year over year in adjusted earnings per share (EPS) last quarter. But the company is still profitable, thanks to high-margin revenue streams from advertising and the release of a few blockbusters this year from its film studio, including the box office hit Top Gun: Maverick.  

Still, the weak advertising market and expenditures to fuel the growth of Paramount+ have weighed heavily on the stock this year. While revenue increased 7% year over year through the first nine months of 2022, the stock has fallen 45% year to date. 

Warren Buffett's Berkshire Hathaway initially bought a stake in Paramount in the first quarter and has been steadily adding to the position throughout the year. At the end of the third quarter, Berkshire owned just over 91 million shares, or 15% of Paramount's total shares outstanding. 

Berkshire is now Paramount's largest shareholder. Eight Wall Street analysts have downgraded Paramount since June. However, we know that Buffett and his investing deputies, Ted Weschler and Todd Combs, don't invest based on how a business is performing in the short term. These investors swing big when they see a company selling below its long-term worth.

Paramount's intrinsic value derives from its media assets. It has a deep content library at its iconic film studio. While its TV networks, including CBS, Showtime, MTV, and Nickelodeon, are not immune to the macroeconomic environment and lower advertising, these are top media assets that can drive profitable growth over the long term and provide lucrative bundling opportunities in streaming.

Over the last five years, Paramount averaged $1.6 billion in annual free cash flow. Paramount is led by CEO Robert Bakish who has a long record of generating returns in the media industry. The recent decline in profits is largely due to the ramp in production and marketing to support streaming growth, but this means the company can throttle those expenses back if needed to show more profit.

All that said, Paramount's current market cap of $10.8 billion looks like a bargain, given its history of generating robust free cash flow and ownership of top media properties.