In this article, we will discuss the 10 Best Affordable Stocks Under $40 According to Short Sellers.
Several traders tend to profit from stocks through appreciation. However, some do the opposite– their idea is to profit from stocks when their value declines. This happens through a strategy known as short selling. In simple words, short selling means borrowing a security whose price is expected to fall and then selling it in an open market. Later, the trader buys that same stock back, hopefully at a lower price than initially sold for. The trader then returns the borrowed stock to the broker and pockets the difference.
Short interest serves as a barometer of investor sentiment towards a stock, sector, or market. Short interest represents the number of shares that have been sold short and are still outstanding. Since short sellers tend to benefit from the decline in the stock price, rising short interest generally signals higher negative investor sentiment. On the other hand, declining short interest means investors are becoming less bearish.
Short Sellers Made Fortunes Despite S&P 500 Touching Record Highs
Bloomberg reported that short sellers saw a strong 2Q 2024, despite the broader market touching record highs.
Over the past 6 months, the S&P 500 saw an increase of over ~11%. How did the short sellers make money in this environment? Short sellers amassed about $10 billion in paper profits during 2Q 2024.
The paper earnings from sectors like industrials, health care, and financials were able to offset the $15.7 billion mark-to-market losses experienced in technology.
This means that investors continue to flock to just a few mega-cap technology stocks amid a challenging macroeconomic backdrop. Therefore, there were some areas of weakness in other sectors. During the quarter ended 28 June, the tech-heavy Nasdaq 100 Index saw an increase of over ~7%. Meanwhile, the energy sector witnessed the most short covering during 2Q 2024.
Short Sellers Saw Record Weekly Profits Due to Broad-Based Tech Decline
While the short sellers saw losses in 2Q 2024 as a result of broad-based buying in the technology stocks, the group was able to pocket some gains in early April 2024. Reuters reported that traders who bet against the “Mag 7” group of the US technology stocks were able to book their biggest-ever weekly profit of over $10 billion in mid-April. During that time, the tech-heavy Nasdaq Composite Index and S&P 500 saw 6 straight sessions of declines as there was high inflation and evidence of resilience in the US economy. As a result, the rate cut hopes were hampered, benefiting the group of short sellers.
As per LSEG (London Stock Exchange Group plc) data, overall, Big Tech shed ~$1 trillion in their market cap.
Short Bets Have Now Declined, Large Bank Says
JPMorgan believes that consecutive highs in the broader US stock market turned short selling into a difficult trade. Therefore, the bets against the US indexes have now tumbled. The declining short interest continues to provide steady support to the US equities, helping to suppress volatility. Experts opine that there are 3 critical factors, because of which it was difficult to bet against the market situation.
Firstly, the short bets are expensive to maintain if the stock starts climbing, a risk that holds significance in today’s bull run. The excitement around artificial intelligence (Al), the potential for rate cuts, and the state of the broader economy have all been factored in. Secondly, analysts believe that regulators have added restrictions to short selling, as they have mandated transparency and added costs to short sellers that target equities. Finally, the industry players continue to back out as they face a rising wall of participating retail investors.
Our methodology
To compile the list of 10 Best Affordable Stocks Under $40 according to short sellers, we used the Finviz screener and shortlisted the stocks with prices less than $40. Then, we selected the stocks that have a forward P/E multiple of less than ~22.40x (since the broader market trades at a forward P/E of ~22.40x). Finally, we picked stocks that were the most popular among hedge funds and had low short interest. The stocks are ranked in descending order of their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Affordable Stocks Under $40 According to Short Sellers
10) Pinterest, Inc. (NYSE:PINS)
Forward P/E Ratio as of 26 August: 17.85x
Share Price as of 26 August: $31.70
Number of Hedge Fund Holders: 61
Short % of Shares Outstanding (31 July 2024): 4.10%
Pinterest, Inc. (NYSE:PINS) operates and maintains social networking site. It offers an online venue for personal photos, ideas, oddities, decorations, and other items.
Pinterest, Inc. (NYSE:PINS) demonstrated strong progress in 2Q 2024, with sales reaching $853.68 million. This equates to a 20.5% rise on the YoY basis. It achieved profitability with a net income of $8.89 million as compared to a net loss of $34.94 million in 2Q 2023. This exhibits improvement in operational efficiency and strategic partnerships such as VTEX’s integration for social commerce expansion.
Pinterest, Inc. (NYSE:PINS) took numerous steps to better monetize the audience. Since 2023, the company enhanced its click-through rates. Its API initiative for third-party integration seems to be working as ~40% of revenue has been coming from that step, as highlighted in its 1Q 2024 earnings call. This exhibits a rise from 28% of total revenue.
The company has also been capitalizing on the AI trend. In 2Q 2024, the company mentioned that advertisers continue to see improved performance throughout key objectives on Pinterest – from brand awareness to conversion. This was supported by its initiative to roll out AI-powered products and experiences. Thus, the company continues to gain a share of advertising budgets.
Moving forward, a stable ad market and strength from the retail vertical should act as tailwinds. Moreover, the early stages of third-party partnerships with Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG) continue to exhibit promising growth. Wall Street analysts opine that Pinterest, Inc. (NYSE:PINS)’s partnership with Amazon.com, Inc. (NASDAQ:AMZN) should improve the former’s revenue. This year the partnership should bring in ~$120 million of incremental revenue.
Analysts at Sanford C. Bernstein raised their target price on shares of Pinterest, Inc. (NYSE:PINS) from $35.00 to $38.00, giving it a “Market Perform” rating on 1st May. As per Insider Monkey’s 2Q 2024 data, 61 hedge funds were long Pinterest, Inc. (NYSE:PINS).
Meridian Funds, managed by ArrowMark Partners, released its fourth quarter 2023 investor letter. Here is what the fund said:
Pinterest, Inc. (NYSE:PINS) is a social media platform that enables visual discovery and generates revenue mainly through online advertising and e-commerce. Earnings declined after the company saw tremendous user and revenue growth in 2020- 2021 and grew operating expenses as if the pandemic-fueled growth trajectory would continue. Normalized growth trends and a macro slowdown that affected ad spend eventually hurt earnings per share. We believed that Pinterest had a significant opportunity to resume earnings growth because: 1. Pinterest has an attractive franchise and appears under-monetized vs. social media peers given how well its user experience lends itself to online shopping. 2. Its new CEO, who led commerce initiatives at Google, may portend a virtuous self-help/self-improvement opportunity to unlock monetization. 3. The high levels of operating expense growth vs. sales prior to our investment provides an opportunity for leverage and expense reductions to improve earnings.
Pinterest’s stock performed well in the quarter as the thesis played out and the company reported strong results while raising 2023 guidance. We pared back our position during the quarter due to stock appreciation and as the investment becomes less contrarian as our thesis plays out.”
9) JD.com, Inc. (NASDAQ:JD)
Forward P/E Ratio as of 26 August: 7.55x
Share Price as of 26 August: $25.80
Number of Hedge Fund Holders: 59
Short % of Shares Outstanding (31 July 2024): 1.89%
JD.com, Inc. (NASDAQ:JD) is an online direct sales company in China. It provides a wide selection of products through its website and mobile applications.
In the medium term, JD.com, Inc. (NASDAQ:JD) is expected to see stable margins. This comes after the firm cut its unprofitable businesses like community group purchase, Jingxi, and international businesses in 2022. The company is expected to focus on high-quality profitability rather than low-quality growth.
Over the long term, JD.com, Inc. (NASDAQ:JD) is expected to see expansion in its margins as a result of increasing scale from 1P and 3P businesses. A larger scale in each category should increase its bargaining power with suppliers. Since 2016, the company has no longer been fully reinvesting the gains from improved scale. It is focused on delivering annual margin expansion over the long run.
Therefore, the increase in mix from higher-margin third-party platform businesses together with efficiency of scale should help in lifting its margins.
In 2Q 2024, JD.com, Inc. (NASDAQ:JD)’s total revenues saw an increase of 1.2% YoY to US$140.1 billion. The company navigated a high base in the electronics and home appliances category from last year, with growth in its general merchandise category, mainly supermarkets, remaining robust.
The shares of JD.com, Inc. (NASDAQ:JD) were upgraded by analysts at JPMorgan Chase & Co. from a “Neutral” rating to an “Overweight” rating. They gave a price target of $36.00, up from $33.00 on 16th August 2024. Additionally, 59 hedge funds held stakes in the company as of the end of the second quarter, according to the Insider Monkey database.
Ariel Investments, an investment management company, released its first-quarter 2024 investor letter and mentioned JD.com, Inc. (NASDAQ:JD). Here is what the fund said:
“We initiated a position in China-based technology-driven E-commerce company, JD.com, Inc. (NASDAQ:JD). The brand has long been known across the region as a superior online shopping channel due to its unique first-party model and unparalleled fulfillment service underpinned by JD Logistics. Yet, a challenging macro environment drove shares lower as shoppers began seeking bargains. In response, the company made significant investments in elevating its third-party merchant platform to enhance its variety of product offerings and price competitiveness for consumers. We believe these actions will yield an improved product mix, stronger top-line growth and margin expansion on a go-forward basis.”
8) Baker Hughes Company (NASDAQ:BKR)
Forward P/E Ratio as of 26 August: 15.72x
Share Price as of 26 August: $35.43
Number of Hedge Fund Holders: 41
Short % of Shares Outstanding (31 July 2024): 1.68%
Baker Hughes Company (NASDAQ:BKR) is a global leader in oilfield services and oilfield equipment. It has a strong presence in the artificial lift, specialty chemicals, and completions markets.
Because of growing demand for clean energy and the need to curb greenhouse gas emissions, several countries continue to make investments in LNG terminals. Therefore, this provides Baker Hughes Company (NASDAQ:BKR) an opportunity to expand its reach beyond oilfields to capitalize on contracts for manufacturing equipment which is being utilized in LNG facilities.
Baker Hughes Company (NASDAQ:BKR) has been maintaining a significant share in several end markets, which include specialty chemicals and directional drilling. Also, it has maintained its leading market position in specialty chemicals. The majority of the company’s revenue comes from international (non-US markets). These markets are less volatile. Given that the demand for oil and gas should remain elevated over the next few years, Baker Hughes Company (NASDAQ:BKR) is expected to see strong earnings growth moving forward.
In 2Q 2024, the company’s revenue came in at $7,139 million, exhibiting a rise of 11% sequentially and an increase of 13% YoY. This YoY rise in revenue was mainly due to higher volume in both IET (Industrial & Energy Technology) and OFSE (Oilfield Services & Equipment) segments.
Analysts at Jefferies Financial Group increased their price target on shares of Baker Hughes Company (NASDAQ:BKR) from $46.00 to $48.00. They gave a “Buy” rating on 29th July. On the other hand, 41 hedge funds out of 912 tracked by Insider Monkey held stakes in the company as of the second quarter.
ClearBridge Investments, an investment management company, released its third quarter 2023 investor letter and mentioned Baker Hughes Company (NASDAQ:BKR). Here is what the fund said:
“Performance was boosted in the quarter by the Strategy’s more economically-sensitive holdings among steady compounders and evolving opportunities. Oilfield equipment and services provider Baker Hughes Company (NASDAQ:BKR), meanwhile, benefited from a $20 rise in crude oil prices as well as disciplined execution.”
7) Pfizer. Inc. (NYSE:PFE)
Forward P/E Ratio as of 26 August: 11.20x
Share Price as of 26 August: $28.92
Number of Hedge Fund Holders: 84
Short % of Shares Outstanding (31 July 2024): 1.15%
Pfizer Inc. (NYSE:PFE) operates as a pharmaceutical company. It provides medicines, vaccines, medical devices, and consumer healthcare products for oncology, inflammation, and other therapeutic areas.
Recently, The Food and Drug Administration allowed Moderna, Inc. (NASDAQ:MRNA)— and Pfizer Inc. (NYSE:PFE) and its partner BioNTech SE (NASDAQ:BNTX) —to roll out their new shots over the coming days, both of which plan to offshoot Omicron known as the KP. Therefore, before respiratory illness season arrives this fall, there will be new COVID-19 shots.
In 2023 end, Pfizer Inc. (NYSE:PFE) bought cancer drug firm Seagen for the consideration of US$43 billion. This was done to deploy some of its pandemic earnings and offset any sort of future patent losses. Moving forward, the company’s earnings growth is expected to be supported by its patented drug portfolio, economies of scale, and strong and stable distribution network.
Pfizer Inc. (NYSÉ:PFE)’s patent-protected drugs have a strong pricing power. This enables the company to generate high returns on invested capital and solid cash flows required to finance new and upgraded treatments before generic competition arises. Over the long term, the revenue from new products is expected to mitigate eventual generic competition witnessed in the company’s key drugs.
Analysts at BMO Capital Markets restated an “Outperform” rating on the shares of Pfizer Inc. (NYSE:PFE). The brokerage gave a price target of $36.00 on 2nd May.
Parnassus Investments, an investment management company, released the first quarter 2024 investor letter. Here is what the fund said:
“During the quarter, we added new positions in Pfizer Inc. (NYSE:PFE), NICE and Charter Communications. We purchased Pfizer to capture the potential upside from any turnaround following the COVID-induced boom-bust cycle of the last few years. Pfizer’s stock price sank by more than 40% in 2023 as COVID-19 vaccine revenues rolled off, providing an attractive entry point for us. The company completed its acquisition of Seagen, which should strengthen Pfizer’s pipeline in antibody-drug conjugates (ADC). Pfizer also offers an attractive dividend yield.”
6) Energy Transfer LP (NYSE:ET)
Forward P/E Ratio as of 26 August: 10.27x
Share Price as of 26 August: $16.11
Number of Hedge Fund Holders: 32
Short % of Shares Outstanding (31 July 2024): 1.03%
Energy Transfer LP (NYSE:ET) owns a large platform of crude oil, natural gas, and natural gas liquid assets primarily in Texas and the US mid-continent region. The company has gathering and processing facilities, one of the largest fractionation facilities in the U.S., and fuel distribution.
The company is involved in all the aspects of midstream sector. It transports, stores, and processes various hydrocarbons throughout its systems. Therefore, the size and breadth of the systems provide several expansion project opportunities.
Energy Transfer LP (NYSE:ET) plans to capitalize on the early opportunities that it is seeing in power generation because of increased power needs from data centers due to the rise in artificial intelligence (AI). The company now expects its 2024 growth capital expenditures to be ~$3.1 billion. It benefits from a portfolio of assets having exceptional product and geographic diversity.
Energy Transfer LP (NYSE:ET) seems to be well-positioned to capitalize on the increasing natural gas power demand. Considering this growth opportunity, together with its strengthened balance sheet and consistent distribution growth, Energy Transfer LP (NYSE:ET) should see strong and stable growth over the upcoming years. Its well-diversified portfolio and solid execution track record should act as tailwinds. Dallas has been emerging as the key data center hub. Therefore, the company is likely to benefit from perhaps ~8 billion cubic feet per day of new data center demand, which is expected to take place by 2030.
Analysts at UBS Group increased their price target on shares of Energy Transfer LP (NYSE:ET) from $23.00 to $24.00, giving a “Buy” rating on 15th May. According to the Insider Monkey database, the number of hedge funds holding stakes in Energy Transfer LP (NYSE:ET) stood at 32 at the end of 2Q 2024.
Silver Beech Capital, a value-oriented investment management firm, released its 4Q 2023 investor letter. Here is what the fund said:
Energy Transfer LP (NYSE:ET) owns and operates the largest and most balanced collection of energy infrastructure assets in the United States. ET’s assets include 125,000 miles of oil and natural gas pipelines, export facilities on both the Gulf Coast and East Coast, and more than 1 million barrels per day of natural gas liquid fractionation capacity. ET accounts for 20% of worldwide natural gas liquid exports. Further, ET is uniquely connected to every major hydrocarbon basin in the United States.
By assembling energy infrastructure to gather, process, transport, and store hydrocarbons, ET connects exploration and production companies (“E&Ps”) with downstream end users such as gas stations, utilities, and export facilities. As an end-to-end midstream solution, ET enables its customers to focus on their portion of the value chain without the burden of significant but essential midstream logistics. ET’s services thus add tremendous value to all constituents of the energy marketplace.
Though natural gas is a relatively clean source of fuel, restrictive federal and state regulations and other permissions severely restrict the building of natural gas pipelines and other infrastructure in North America that would help facilitate abundant hydrocarbon production. Pipelines are by far the cheapest and greenest method of transporting hydrocarbons; pipelines reduce emissions from truck transport and reduce congestion on highways, rail, and shipping routes…” (Click here to read the full text)
5) Cenovus Energy Inc. (NYSE:CVE)
Forward P/E Ratio as of 26 August: 9.02x
Share Price as of 26 August: $19.28
Number of Hedge Fund Holders: 46
Short % of Shares Outstanding (31 July 2024): 0.82%
Cenovus Energy Inc. (NYSE:CVE) is an integrated oil company, which is focused on creating value through the development of its oil sands assets.
Considering Cenovus Energy Inc. (NYSE:CVE)’s research ahead of its peers, resource potential to demonstrate the low-cost SAP technology, and project break-evens among the lowest in the oil sands industry, its SAP technology should give the company a cost advantage over its peers. Canadian oil industry should benefit from the TMX pipeline, which should help in reducing oil differentials and fuelling profitability. Cenovus Energy Inc. (NYSE:CVE) is committed to debt reduction and returning excess FCF to shareholders, providing attractive opportunities.
Cenovus Energy Inc. (NYSE:CVE) achieved a significant milestone by reaching its net debt target of $4 billion as of July. It posted strong 2Q 2024 results, with healthy performance from the oil sands assets and strong operating margins. Oil sands assets produced ~610,000 barrels per day with the $2.7 billion operating margin.
The company anticipates healthy performance in 4Q, primarily after the Christina turnaround completion. Moving forward, its earnings growth is expected to be supported by growth opportunities in the thermal heavy oil assets and favorable market dynamics in the Mid-Con refining market. Also, its focus on growth projects, refining business, and cost control should act as principal growth enablers.
In 2Q 2024, the company’s total revenues came in at ~$14.9 billion, up from $13.4 billion in the first quarter. This growth was mainly because of improved benchmark oil prices, including a narrower light-heavy crude oil differential, together with healthy operating results.
Four equities research analysts have given the stock a “Buy” rating. The average 12-month price target is $30.67. A total of 46 out of 912 hedge funds tracked by Insider Monkey held stakes in Cenovus Energy Inc. (NYSE:CVE) as of the end of the second quarter.
L1 Capital, an investment management firm, released its first quarter 2024 investor letter. Here is what the fund said:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
4) Genmab A/S (NASDAQ:GMAB)
Forward P/E Ratio as of 26 August: 20.96x
Share Price as of 26 August: $27.36
Number of Hedge Fund Holders: 13
Short % of Shares Outstanding (31 July 2024): 0.47%
Genmab A/S (NASDAQ:GMAB) is a Copenhagen-based biotechnology company, which specializes in antibody therapeutics for the treatment of cancer.
Genmab A/S (NASDAQ:GMAB) remains focused on the development of monoclonal antibody and bispecific antibody therapies in oncology indications. Its renowned drug, Darzalex (or daratumumab), came into effect after the partnership with Johnson & Johnson (NYSE:JNJ) for multiple myeloma.
Now, Darzalex is entrenched in multiple myeloma care for numerous lines of therapy, which also includes the frontline setting. Not only this, this drug is also used in combination treatments. This further unlocks greater market potential. Genmab A/S (NASDAQ:GMAB) receives royalties of up to 20% from Johnson & Johnson (NYSE:JNJ) on Darzalex sales, apart from milestones from the company’s antibody platform partnerships.
Genmab A/S (NASDAQ:GMAB) expects strong net sales for its royalty medicines, especially Darzalex, and growth from Epkinly and Tivdak. In 1H 2024, Darzalex saw an increase in demand, with net sales touching $5.57 billion. Moving forward, the acquisition of ProfoundBio and the approvals of Epkinly and Tivdak are expected to support long-term revenue and earnings growth.
Truist Financial increased its price target on shares of Genmab A/S (NASDAQ:GMAB) from $50.00 to $53.00, giving it a “Buy” rating on 4th June. Insider Monkey’s 2Q 2024 data revealed that Genmab A/S (NASDAQ:GMAB) was in the portfolios of 13 hedge funds.
3) UBS Group AG (NYSE:UBS)
Forward P/E Ratio as of 26 August: 20.79x
Share Price as of 26 August: $31.12
Number of Hedge Fund Holders: 33
Short % of Shares Outstanding (31 July 2024): 0.42%
UBS Group AG (NYSE:UBS) offers financial services to private, corporate, and institutional clients. It also provides investment, retail, corporate, and institutional banking, holistic wealth management planning, and asset management services.
The company demonstrated exceptional financial resilience in its latest results as the company outpaced earnings forecasts. In 2Q 2024, it posted an EPS of $0.34, surpassing the analysts’ expectations of $0.12.
This exhibits its successful execution of the post-Credit Suisse acquisition strategy. The company delivered a strong performance in its core businesses and remains on track with capital return plans, such as dividends and buybacks. UBS Group AG (NYSE:UBS) and Credit Suisse have wrapped up their merger after more than a year, finally bringing an end to the discussions.
The merger of the parent banks is an important milestone in facilitating the migration of clients onto UBS Group AG (NYSE:UBS)’s platforms. It should now unlock the next phase of cost, capital, funding, and tax benefits from 2H 2024.
Moving forward, the company plans to focus on cost reductions, which are expected to be driven by its focus on client account and platform migrations. UBS Group AG (NYSE:UBS) captured nearly half of its targeted gross cost savings and made strong progress in addressing the legacy legal issues. It plans to roll out new rates in its advisory services in 4Q 2024. The company anticipates lending balances outside the US to improve as and when rates come down. The wealth management segment in the US and expansion in retail banking in emerging markets should continue to act as tailwinds:
Notably, 4 equities research analysts gave a “Hold” rating on the shares of UBS Group AG (NYSE:UBS) and 3 analysts gave a “Buy” rating. As of the end of 2Q 2024, 33 out of 912 hedge funds tracked by Insider Monkey held stakes in the company.
Patient Capital Management, a value investing firm, released its fourth quarter 2023 investor letter and mentioned UBS Group AG (NYSE:UBS). Here is what the fund said:
“UBS Group AG (NYSE:UBS) is a name we opportunistically purchased following the banking crisis earlier in the year. UBS benefited from buying its largest local competitor, Credit Suisse, for an 80% discount from where it was trading before the crisis. We bought after the deal, believing the market’s myopic focus on short-term integration risks failed to properly value the attractive set of assets. While the stock has done well since then, we still believe it is underappreciating the long-term return potential of the business.”
2) Barclays PLC (NYSE:BCS)
Forward P/E Ratio as of 26 August: 7.37x
Share Price as of 26 August: $12.21
Number of Hedge Fund Holders: 20
Short % of Shares Outstanding (31 July 2024): 0.17%
Barclays PLC (NYSE:BCS) is a global financial services provider, which is engaged in retail banking, credit cards, wholesale banking, wealth management, investment banking and investment management services.
Barclays PLC (NYSE:BCS) continues to focus on improving returns and enhancing shareholder value and is on track to exceed its return on tangible equity goal of 10% for 2024. This is evident as it has achieved 11.1% in 1H 2024. The bank has increased its net interest income guidance for 2024 to ~GBP11 billion, up from GBP10.7 billion. This is mainly because of favorable interest rate dynamics and efficient cost management.
Barclays PLC (NYSE:BCS) focuses on cost savings and credit management as its total costs were up only 1% in 2Q 2024. Shares of the company have seen a strong run-up of over ~54% on the YTD basis. Much of this rally was because of its announcement in early 2024 about maintaining cost efficiency. It also plans to simplify its operations and maintain focus on core operations.
For example, it recently announced that it was selling its German consumer finance business to an Austrian bank. This should help Barclays PLC (NYSE:BCS) free up some cash. It also has a strategic focus on capital distribution. This is evident via its substantial shareholder returns.
Barclays PLC (NYSE:BCS) announced ~GBP1.2 billion payout for 1H 2024, consisting of dividends and a buyback program. This announcement forms part of the broader plan to provide at least GBP10 billion to shareholders by the year 2026.
According to the Insider Monkey database, 20 hedge funds out of 912 held stakes in Barclays PLC (NYSE:BCS) as of the end of the second quarter.
1) Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG)
Forward P/E Ratio as of 26 August: 11.78x
Share Price as of 26 August: $13.34
Number of Hedge Fund Holders: 13
Short % of Shares Outstanding (31 July 2024): 0.07%
Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG) is engaged in managing financial operations for its subsidiaries. It offers commercial banking and a variety of financial services.
Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG) is now focusing on strengthening its wealth management arm, which is in sync with Japan’s rapidly aging population. The company also possesses improved profitability metrics, such as an ROE target of 9% by FY 2029. Therefore, the company is not only a strong dividend payer, but also has strong growth prospects. It pays a healthy dividend yield of over ~2.5%.
Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG) maintains a strong focus on retail customers and small and medium-sized enterprises rather than large and well-established corporate clients. This should continue to help it in generating higher average asset yield in Japan. It has strengths in the consumer finance business, where the company owns 100% of Promise business, and in credit cards.
Sumitomo Mitsui Financial Group, Inc. (NYSE:SMFG)’s strong alliances and partnerships with several other financial institutions are expected to act as primary tailwinds. It has established valuable partnerships with multiple global financial entities. These should help in enhancing its market reach and capabilities. For example, Jefferies Financial Group Inc. (NYSE:JEF) and SMBC Group announced that they have expanded their global strategic alliance to exploit future corporate and investment banking business opportunities in the Canadian market.
While we acknowledge the potential of SMFG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
