10 Best Affordable Stocks Under $10 to Buy

5. Kosmos Energy Ltd. (NYSE:KOS)

Number of Hedge Fund Holders: 25

Share Price as of October 18, 2024: $4.21

Forward P/E as of October 18, 2024: 8.55

Kosmos Energy Ltd. (NYSE:KOS) is an upstream oil company that specializes in deepwater exploration. The company is focused on meeting the growing demand for energy from across the globe. The company has oil production and exploration capabilities in Ghana, Equatorial Guinea, and the Gulf of Mexico, as well as gas development capabilities in Mauritania and Senegal.

In the second quarter of 2024, Kosmos Energy Ltd. (NYSE:KOS) boasted net production of 62,100 barrels of oil equivalent per day, up by 7% year-over-year, with sales of 65,400 barrels of oil equivalent per day. Revenue in dollar terms was valued at $451 million with capital expenditures at $215 million.

During the same quarter, the company achieved the first oil at Winterfell, completed the Kodiak-3 well workover, and completed the startup of the Odd Job subsea pump project. That said, full-year capital expenditures are expected to reach $750 million. Ahead of 2024, the company expects production to increase and capital expenditure to decrease, bringing in higher levels of free cash flow and improved liquidity.

Overall, the company expects production to rise as crucial startups have been completed and projects have been delivered. With these projects, the company expects to close the year with 90,000 barrels of oil equivalent per day. Kosmos Energy Ltd. (NYSE:KOS) expects to carry its current momentum into 2025 and lock in greater growth opportunities. KOS is cheap and we say that because it is trading at a discount of 29% to its sector median. Analysts expect KOS to grow its earnings by 4.8% this year.

Patient Capital Management stated the following regarding Kosmos Energy Ltd. (NYSE:KOS) in its Q3 2024 investor letter:

“Both Kosmos Energy Ltd. (NYSE:KOS) and Seadrill Limited (SDRL) were top detractors in the quarter as energy prices moved lower. We believe both these names are particularly attractive for idiosyncratic reasons beyond a simple bet on energy prices.

Kosmos Energy (KOS) is an exploration and production services company with assets in Africa. The company is nearing the point where their free cash flow generation will inflect meaningfully higher as new production comes online and CAPEX spend returns to a more normalized maintenance level. We see this as a classic case of time arbitrage where the market is myopically focused on the current year’s high level of investment while ignoring the strong free cash flow generation on the other side. At the current commodity curve, the company will generate its market cap in FCF from 2025-2028. With the combination of gas heavy reserves and inflecting cash flow generation, we think Kosmos is significantly undervalued and a potential acquisition target.”