In this piece, we will take a look at the ten best NASDAQ stocks under $20 to buy.
The close of September has seen the much awaited interest rate cut from the Federal Reserve materialize. The Fed, in a move that surprised some market participants, decided to cut rates by 50 basis points in the third week of September. Investors’ surprise surrounding this decision was clear as major indexes fell in the immediate aftermath of the rate cut and ended the day lower. This was because an outsized rate cut stoked fears about the health of the economy, which tends to make the US dollar stronger and hurt equity returns.
However, the next day would see a complete reversal. Bullish investors made sure that the benchmark S&P stock index closed at a new record high – its first in two months which has seen investors reckon with a weak labor market to contend whether it signaled an incoming recession. The day after the rate cut, the benchmark S&P index gained 1.70% and closed the day at a new record of 5,713 points.
However, its percentage gains during the day would be eclipsed by the broader NASDAQ stock index, as it was up by 2.61%. The week’s end would see the S&P, the NASDAQ, and the Dow close with 1.36%, 1.49%, and 1.62%, respectively. Yet, even though indexes closed higher in a month that is typically bearish for stocks, Friday’s trading saw the NASDAQ trim 0.36% over the previous day while the S&P ended 0.19% lower.
This end of the week uncertainty underpins the sentiment that should mark stock returns for October. In October, investors will reckon with a hotly contested election and try to decipher whether the third quarter earnings season makes stocks more attractive. With the benchmark S&P trading at a forward price to earnings ratio of 21 which is 34% higher than its long term average of 15.7, there appears to be limited room for further gains in equities unless the corporate sector smashes earnings out of the park. This overvaluation in markets is also evident in the price to book value ratio, as equities are currently trading at 5x, which is nearly double their long term average of 2.6x.
Consequently, the bullishness that investors have had prior to the interest rate cutting cycle makes us wonder whether large cap stocks can deliver more returns. The technology sector as a whole has been led by the world’s leading artificial intelligence graphics processing unit (AI GPU) designer whose shares are up 141% year to date. Yet, the uneasiness that investors are feeling is apparent as well. This same stock had gained 181% by the second week of June, with concerns of a product delay, weaker margins, and tepid guidance making it pull back and lose 27% by the first week of August which also greeted investors with weak labor market data.
Its gains have also pushed the broader NASDAQ index in 2024 which is up by 22.74% year to date. Using a NASDAQ ETF by Fidelity as a proxy, we find out that the top five stocks in the ETF account for roughly 44% of the total holdings. These five stocks, starting from the fifth, are up by 62%, 27.8%, 141%, 17.36%, and 22.9%. This makes it clear that the biggest holdings of the index have driven its returns.
This bifurcation in the stock market has been on the minds of investment banks as well. As we noted in our coverage of Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy, the banks’ analysts had noted that there “is ample room for equities performance to broaden, but this requires a cyclical recovery,” adding that the market cap based difference in the benchmark S&P’s returns was clear as the forward P/E “runs at 21x on a cap-weighted basis but only 16x equal- weighted.” However, they cautioned that the potential to benefit from this gap via investing in small cap stocks “requires economic growth acceleration with lower interest rates, which seems unlikely in the current inflation environment.”
This return has fluctuated with bond yields in the past. Data compiled by MS shows that historically at 1% levels for bond yields, small cap stocks returned 100% relative to large caps. On the flip side, as yields soared to ~5.6%, this metric dropped to 82%.
Yet, even though MS might have been cautious for small caps before the Fed’s interest rate cut, the undervaluation in small caps is supported by other data points too. For instance, JPMorgan shares that for small and medium cap (SMID) and large cap stocks that are the top 20% in terms of free cash flow margins, the forward P/E ratio of the SMID stocks relative to the large cap stocks was 0.74x as of April 2024. This marks a sizeable difference over its peak of 1.38x in April 2009. Similarly, if we consider the forward P/E ratios of small cap over large cap stocks as a whole, we find out that as of May 2024, they were trading at 73%, which is quite low over a high of approximately 125% after 2010.
Cycling back to MS’ belief that small cap stock performance is dependent on the economy, data shows that as the economy recovers from a recession, small caps delivered 9.62% in returns historically starting from 1984. This is 0.66% higher than the large cap returns of 8.97%, and the gap widens during economic expansion. In this phase of the business cycle, small caps delivered 25.5% in returns, while the large cap returns were 20.57%. Similarly, extrapolating this analysis to the Fed’s rate cut cycles by running a regression with the small to large cap returns as a function of rate changes shows that the rate changes have a beta of -4.39. This means that reducing rates leads to a higher spread and indicates that lower rates do prime up small caps for gains provided that economic performance is robust.
With these details in mind, let’s take a look at the best NASDAQ stocks under $20.
A money manager reviewing quantitative and fundamental analysis before investing in a public company.
Our Methodology
To make our list of the best NASDAQ stocks under $20 to buy, we ranked the 100 most valuable stocks on the NASDAQ that had a share price lower than $20 by their market capitalization and picked out the stocks with the highest number of hedge fund investors in Q2 2024.
Why are we interested in 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. Sotera Health Company (NASDAQ:SHC)
Number of Hedge Fund Holders In Q2 2024: 38
Share Price: $16.60
Sotera Health Company (NASDAQ:SHC) is a specialty healthcare services provider that provides sterilization, chemical testing, and other associated services to the healthcare and pharmaceutical industry. As of the first half of this year, $343 million of its $525 million, or 65% of its revenue came from the Sterigenics business division. Consequently, Sterigenics is a double edges sword for Sotera Health Company (NASDAQ:SHC). For starters, it is the dominant sterilization products provider in the US, which provides the firm with a wide moat, low costs, and strong industry partnerships with nearly all of the biggest medical device and pharmaceutical companies. However, any trouble at Sterigenics means that Sotera Health Company (NASDAQ:SHC)’s stock is hit hard. This was also the case in March when the shares tanked by 22% after the EPA reduced ethylene oxide emissions limits at sterilization facilities due to cancer risks. Ethylene oxide is a key chemical used by Sotera Health Company (NASDAQ:SHC)’s sterilization business, and while the firm resolved cancer lawsuits related to it in November, more suits are on the horizon. For instance, residents in Maywood, California sued Sterigenics in March (the same day the stock started to fall after the EPA rules) due to similar concerns. For its part, the company denies that the EtO emissions are responsible for cancer, but if the suits spread to other American states, the stock might see more trouble.
Meridian Funds mentioned Sotera Health Company (NASDAQ:SHC) in its Q1 2024 investor letter. Here is what the fund said:
“Sotera Health Company offers mission-critical sterilization and lab-testing services to the healthcare industry and counts 40 of the top 50 medical device companies and eight of the top 10 pharmaceutical companies as customers. As part of its sterilization service portfolio, the company offers ethylene oxide sterilization as a critical modality. In fact, approximately 50% of all medical devices are sterilized with ethylene oxide, and in most cases, it is required by the FDA for effective sterilization and market commercialization. The stock came under pressure during the quarter following a new lawsuit related to its Sterigenics facility located in California which conducts ethylene oxide sterilization. The company had settled a previous lawsuit in Illinois and we believe the company can defend its position and the merits of its perations in this case as well. Sterigenics has a strong track record of performance, emissions control, and compliance with regulatory standards. Given the company’s strong competitive position, attractive margins, and consistent growth profile, we added to our position in the company during the quarter.”
9. American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders In Q2 2024: 38
Share Price: $11.41
American Airlines Group Inc. (NASDAQ:AAL) is a sizeable US airline with more than 900 aircraft in its fleet. It is one of the younger airlines in the industry, and recent turmoil has placed the firm and its stock on the back foot. American Airlines Group Inc. (NASDAQ:AAL)’s shares are down 15.4% year to date, on the back of a 15% drop in May. This was due to disappointing second quarter guidance which saw the airline cut earnings outlook to $1 – $1.15 per share and increase the revenue drop outlook to 5% to 6%. This has stemmed from a lot of headaches at the firm after a strategic misstep saw it try to modernize fare distribution by introducing a new system, reducing sales staff, and eliminating several travel agents from its frequent flyer program. Naturally, this has created headwinds for the firm as it enters into the second half where increased holiday travel demand allows airlines to increase their fares. Consequently, American Airlines Group Inc. (NASDAQ:AAL) might continue to face trouble unless it can regain market share and set prices that are more in line with competitors.
American Airlines Group Inc. (NASDAQ:AAL)’s management reversed course on several of its strategies and commented on the decision during the Q2 2024 earnings call:
“With regard to our commercial organization, we immediately took action and changed senior leadership. Steve, our vice chair, second in command, and most seasoned and accomplished executive has taken charge of our commercial efforts, reorganized the team, completed a deep dive on issues and opportunities, and laid out a recovery plan that we are executing on quickly. We have also strengthened our revenue forecasting processes. Our near-term actions are concentrated on winning back customers in our share of revenue in agency and business channels. To that end, in June, we reinstated fares in the distribution channel traditionally used by travel agencies and corporate managed travel programs. Approximately $14 billion of our annual revenue was booked through this system in 2023.
This action ensures our product is available wherever customers want to buy it, and removes the most objected-to pain point of our previous distribution strategy. Next, we engaged our large TMC partners to put in place new incentive-based agreements to restore our share in those channels. Those efforts have been well-received, and we are having good conversations with companies including Amex GDP, with which we have a longstanding relationship. We expect agreements with TMC soon, and we will then work to reengage the broader business and leisure agency community. Additionally, we have eliminated plans to differentiate how customers earn miles based on where they book their travel, removing another significant obstacle impacting booking behavior and business relationships.”
8. Paramount Global (NASDAQ:PARA)
Number of Hedge Fund Holders In Q2 2024: 39
Share Price: $10.64
Paramount Global (NASDAQ:PARA) is one of the biggest media and entertainment companies in the US. It has a variety of lucrative platforms in its portfolio, such as CBS, MTV, and Paramount Pictures. These provide Paramount Global (NASDAQ:PARA) with a sizeable business which enables it to operate with a fortress balance sheet that has $2.3 billion in cash and $6.5 billion in receivables. The firm is currently on track to be acquired by Skydance, in a deal that will shape its narrative in the future. While Paramount Global (NASDAQ:PARA) is one of the most well recognized media names in the US, the firm has struggled with viewership drops and tough competition in the streaming market that is dominated primarily by Netflix. Consequently, word on the street is that it is considering selling some of its CBS holdings to raise debt and streamline the balance sheet. Skydance also aims to streamline Paramount Global (NASDAQ:PARA)’s operations by giving it a technology based focus. The firm’s Paramount Plus division lost 2.8 million subscribers in Q2 after the winding down of an agreement in South Korea.
Ariel Investments mentioned Paramount Global (NASDAQ:PARA) in its Q2 2024 investor letter. Here is what the fund said:
“Also in the quarter, we initiated a position in entertainment company, Paramount Global (PARA). Shares tumbled amidst merger talks, which coincided with leadership changes at both the executive and Board level. Continued pressures around the linear TV ecosystem and competition in streaming further drove the stock to new lows. We have held steadfast to our PARA holdings in other portfolios amidst the merger saga and this further price decrease presented an attractive buying opportunity, particularly as the company expects to deliver significant earnings growth in 2024 and to reach Paramount+ domestic profitability in 2025. In our view, the underlying value of the company’s proprietary content and media assets are not reflected in the recent share price.”
7. R1 RCM Inc. (NASDAQ:RCM)
Number of Hedge Fund Holders In Q2 2024: 42
Share Price: $14.17
R1 RCM Inc. (NASDAQ:RCM) is a specialty business services provider that caters to the needs of the healthcare industry. The firm allows hospitals and other similar establishments to manage their billings and revenue collections and stay up to date with regulatory compliance. Its stock is up 31% year to date, primarily due to the fact that the firm is being taken private by its investors. After R1 RCM Inc. (NASDAQ:RCM)’s SEC filings revealed investor willingness for a deal in February, the stock soared by 31%. The shares added another 9.7% in August after the firm announced that it had entered into an acquisition agreement that would take it private for $14.30 per share. Consequently, R1 RCM Inc. (NASDAQ:RCM)’s stock hinges on the success of this deal, and if there are any hurdles, then the shares could struggle. On the business model front, since R1 RCM Inc. (NASDAQ:RCM) is a revenue cycle management company, it stands to benefit from the introduction of AI into its offering and a stable, margin heavy business with stable recurring revenue. However, the firm has sizeable long term debt of $2.2 billion which can hamper its growth by reducing cash flow.
Voss Capital mentioned R1 RCM Inc. (NASDAQ:RCM) in its Q1 2024 investor letter. Here is what the fund said:
“Just as we hit send on the Q4 letter, R1 received a non-binding buyout offer from its largest shareholder, private equity firm New Mountain Capital (32.3% ownership). At first the Board encouraged New Mountain to collaborate with the second largest holder, TowerBrook Capital (29.5% ownership), as they knew TowerBrook would likely not be a seller at such a low-ball valuation (minority shareholder “squeeze outs” by existing PE owners are a recurring theme this year). R1’s board then backtracked eight days later and put New Mountain in timeout and hired both Barclays and Qatalyst Partners (a boutique M&A firm with stellar reputation of getting tech companies sold) to run a full auction process. We did not sell any RCM on the initial pop (thinking it to be a more stable merger-arb type situation) and unfortunately rode the stock all the way back down to its pre-deal announcement price. We think the market is underestimating the probability of a higher buyout offer, even if it is from New Mountain and TowerBrook and the gains will quickly be recouped. If there is no deal, we believe the upside will be much greater over the next few years as R1 continues to execute and on-board large customers and reduce costs using AI. Our base case price target moves down to $16 if a deal is commenced and remains $28 (133% upside) over the next 2-3 years if there is no buyout. This is based on 14x 2026 adjusted EBIT (EBITDA-Capex), or 12x Q4 2026 EBIT run-rate, a large discount to comps.”
6. ZoomInfo Technologies Inc. (NASDAQ:ZI)
Number of Hedge Fund Holders In Q2 2024: 43
Share Price: $10.37
ZoomInfo Technologies Inc. (NASDAQ:ZI) is a software as a service (SaaS) company that enables businesses to manage their marketing operations. Its stock is down by 42% year to date, which underscores the premium that SaaS investors place on growth and cost control. In August, ZoomInfo Technologies Inc. (NASDAQ:ZI)’s dropped by 16% immediately after the firm’s Q2 results saw it miss revenue estimates of $308 million by posting $291.5 million in the segment. It also guided down full year revenue guidance by 5%. Key to ZoomInfo Technologies Inc. (NASDAQ:ZI)’s troubles is its exposure to small and medium businesses, which struggle when rates are high and the economy is slowing. Naturally, it also potentially primes the stock for tailwinds if economic conditions improve. ZoomInfo Technologies Inc. (NASDAQ:ZI) is also trying to diversify its revenue base and reported that in Q2, its contracts valued higher than $100,000 had grown for the first time since Q4 2022. Further write offs during the second half related to small businesses could spell more trouble for ZoomInfo Technologies Inc. (NASDAQ:ZI)’s shares.
Baron Funds mentioned ZoomInfo Technologies Inc. (NASDAQ:ZI) in its Q4 2023 investor letter. Here is what the fund said:
“We were too slow to sell when the probability of a likely thesis change dictated action over inaction. Each investment is like a puzzle. Different pieces are missing in different puzzles. Our process is deliberately slow and is built on collecting and analyzing as much information as possible and building conviction over time. In a highly stressful environment with a wide range of outcomes, a recognized lack of balance with emotions running high, postponing “bad decisions” is often the correct course of action except, when there is evidence of a potential or likely thesis change on the negative side in a bear market. We were often too slow and too timid in running for the exit. For example, when a company’s revenues prove to be less sticky during times of stress despite high average retention rates. ZoomInfo Technologies Inc. (NASDAQ:ZI), the business-to-business (B2B) sales data and software provider readily comes to mind, where we made a mistake selling the stock too slowly, as we did not fully appreciate the extent to which the company oversold unused licenses to its customers, which exacerbated the slowing demand environment, creating a whiplash effect as the license inventory was used up later on, causing revenue growth to decelerate materially.”
5. Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders In Q2 2024: 45
Share Price: $11.56
Viatris Inc. (NASDAQ:VTRS) is a sizeable pharmaceutical company that sells generic drugs, raw materials to make medicine, biologically similar drugs to well known treatments, and other associated products. Its product portfolio coupled with a global market presence provides the firm exposure to several markets to hedge against country specific downturns. It also allows the company to earn revenue during economic downturns and utilize economies of scale by selling generics. Viatris Inc. (NASDAQ:VTRS)’s significant financial resources, as evidenced by its cash and equivalents of $1.1 billion and receivables of $4 billion also allow the firm to acquire commercialization rights to lucrative assets by enabling small firms to bring their drugs to the market. Two such treatments that the firm has recently gotten hold of are cenerimod which is being developed to treat lupus and selatogrel for heart attacks. The two drugs are in phase three trials, and strong performance coupled with regulatory approval could create tailwinds for Viatris Inc. (NASDAQ:VTRS)’s shares. Such acquisitions are key for the firm as its business lacks differentiation and forces it to compete on the basis of costs.
Viatris Inc. (NASDAQ:VTRS)’s management has been busy raising cash by divesting some businesses. Here’s what it had to say during the Q2 2024 earnings call:
“Free cash flow for the quarter was primarily impacted by lower adjusted EBITDA due to the closing of divestitures. Our free cash flow and existing cash on hand allowed us to strengthen our balance sheet with debt paydown of approximately $800 million in the quarter. And as we look towards the rest of the year, we expect to have in excess of $3 billion in cash available for deployment. This takes into account divestiture proceeds received in the third quarter, expected divestiture costs and our latest outlook for free cash flow. We expect the significant financial flexibility will allow us to pay down additional debt to reach our long-term gross leverage target of approximately three times by the end of the year. We also expect to return capital in the form of dividends and will remain opportunistic with potential share repurchases and business development activity.”
4. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders In Q2 2024: 48
Share Price: $8.15
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a media and entertainment giant with a sizeable presence in the industry. It owns some of the most well known entertainment brands in America such as CNN, Warner Bros. Motion Picture Group, TNT, and HBO. Roughly 49% of the firm’s revenue comes from its network business, with movie studios and direct to consumer products accounting for 26% and 25%. In an era where direct to consumer is rapidly gaining share, Warner Bros. Discovery, Inc. (NASDAQ:WBD) has to remain agile to ensure its networks do not lose viewers. Through its scale, the firm can land lucrative deals, and it did so in September by teaming up with America’s biggest pay TV company Charter Communications to offer Discovery Max and Discovery+ to Charter customers free of charge as well as continue broadcasts of CNN, TNT, and other networks. Warner Bros. Discovery, Inc. (NASDAQ:WBD)’s shares jumped by 7% on the announcement, and it could see tailwinds in the industry as other distributors also line up for deals. This provided much needed respite, as the shares tanked by 10% in August after advertising uncertainty prompted a massive $9.1 billion impairment of TV assets.
Longleaf Partners mentioned Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q1 2024 investor letter. Here is what the fund said:
“Warner Bros Discovery (WBD) – Media conglomerate Warner Bros Discovery was also a detractor in the quarter. The market disliked the company’s lack of guidance for 2024. While there are tentative signs that the advertising market is slightly improving, we understand why the market remains in show-me mode on this part of the business. The Warner Bros Studio has gone from a big hit with the Barbie movie last summer to some misses lately. As we have discussed before, April 2024 represents the two-year anniversary of Warner Bros and Discovery merging. After this date, the company will have more options to go more on offense. Unfortunately, this is overlooked in the near term by daily Paramount headlines. We are ready to see how the rest of this year plays out. WBD still generates substantial FCF and is de-levering its balance sheet rapidly. The company remains dramatically undervalued today, but we need to see more positives before increasing our position further”
3. Core Scientific, Inc. (NASDAQ:CORZ)
Number of Hedge Fund Holders In Q2 2024: 53
Share Price: $12.01
Core Scientific, Inc. (NASDAQ:CORZ) is a data center company that provides computing capabilities to the blockchain industry. This provides it with key resources, namely GPUs and power, in today’s era of AI computing. Since AI is expected to require vast amounts of data center power, which is scarce given the current power generation infrastructure, Core Scientific, Inc. (NASDAQ:CORZ) stands to benefit from leveraging its data center strength to cater to the needs of the AI industry. Additionally, the firm also benefits from rising Bitcoin prices as it increases its mining margins. Core Scientific, Inc. (NASDAQ:CORZ)’s stock has beaten NVDA’s this year in terms of returns. The shares are up by 246% year to date, primarily on the back of an acquisition offer by cloud company CoreWeave. While Core Scientific, Inc. (NASDAQ:CORZ) rejected the deal, CoreWeave had valued the firm at $1.2 billion which injected fresh life into the stock. The firm has inked deals with Jack Dorsey’s Block for the latest 3 nanometer Bitcoin miners that could extend its competitive advantage in the industry. Similarly, Core Scientific, Inc. (NASDAQ:CORZ) has also inked deals worth 270 megawatts of computing power for high performance computing which are slated to bring it $4.7 billion in revenue for the next 12 years.
Core Scientific, Inc. (NASDAQ:CORZ)’s management shared details of these deals during the Q2 2024 earnings call:
“We have achieved exciting milestones this year, illustrated on Slide 4. We announced a contract with CoreWeave to lease a 16-megawatt data center in Austin for HPC hosting, and we delivered that data center more than 30 days ahead of schedule and began generating revenue from it in the second quarter.
We successfully executed our plans for the April halving, maintaining strong operational performance and favorable cash cost to mine. We have now signed HPC hosting contracts with CoreWeave for a total of 382 megawatts in aggregate total potential revenue of $6.7 billion over the 12 years beginning in 2025 and 2026. We completed 72 megawatts of partially built infrastructure at our Denton, Texas site, bringing our total to about 830 megawatts of operational infrastructure highlighted on Slide 5. We began build-out a partially completed 100-megawatt facility in Pecos, Texas. Stock price appreciation triggered mandatory conversion of secured convertible notes, eliminating $260 million in debt from our balance sheet. We signed an agreement with Block to procure 15 exahash of their new 3-nanometer ASIC chip to refresh and expand our self mining fleet beyond 2024.”
2. LYFT Inc. (NASDAQ:LYFT)
Number of Hedge Fund Holders In Q2 2024: 53
Share Price: $12.82
LYFT Inc. (NASDAQ:LYFT) is the second biggest ride sharing company in the US after Uber. According to Bloomberg, the firm commanded a 24% share of the US market as of March 2024. Combined with Uber’s 76% share, this means that LYFT Inc. (NASDAQ:LYFT) only has one major rival in the industry. However, the firm’s shares are down 7.6% year to date, for a sharp under performance compared to Uber’s 28.3% gain. This is because while Uber is a diversified business that targets food deliveries, autonomous driving, and other markets, LYFT Inc. (NASDAQ:LYFT) has struggled lately. It does not generate a profit, which means that margins are key to the firm’s performance. Additionally, its midpoint bookings guidance for Q3 2024 was $4.05 billion in Q2, which was short of analyst estimates by $100 million. As a result, LYFT Inc. (NASDAQ:LYFT)’s shares dropped by 17% as investors continued to doubt its ability to achieve goals. of $900 million in free cash flow and $1 billion in operating income.
LYFT Inc. (NASDAQ:LYFT)’s management is optimistic about the firm’s ability to target the autonomy wave. Here’s what it shared during the Q2 2024 earnings call:
“We have a leading team and are building the right tools to scale this business. Finally, given recent chatter about autonomous vehicles, I want to spend a few minutes outlining how we think of them. In short, AVs represent an enormous opportunity for Lyft. We believe that the best way for autonomous vehicles to commercialize at real scale and the best way to monetize this technology is through networks where the vehicles can be put to use. Lyft has that network today. To understand why we’re so bullish on AVs, you have to remember that a rideshare network is far more than the app you see. On the demand side, Lyft platform gives access to 40 million riders each year in the U.S. and Canada. And on the supply side, it includes a vast set of capabilities in onboarding individually owned vehicles to our platform, making sure every vehicle and ride are properly insured, and offering customer service when things go wrong at scale.”
1. Roivant Sciences Ltd. (NASDAQ:ROIV)
Number of Hedge Fund Holders In Q2 2024: 62
Share Price: $11.56
Roivant Sciences Ltd. (NASDAQ:ROIV) is a healthcare firm that deals with intellectual property and biotechnology drug development. It owns a wide portfolio of drug companies and has stakes in 11 companies. Consequently, the firm depends on securing royalty payments and developing new drugs to generate revenue. Just as with any other biotechnology company, Roivant Sciences Ltd. (NASDAQ:ROIV)’s hypothesis rests on its ability to develop and commercialize drugs. On this front, the firm’s Immunovant subsidiary currently has three treatments under development. These target heart problems stemming from lung disease, immune system disorders, and Graves disease. The three treatments are called mosliciguat, IMVT-1402, and brepocitinib, respectively. Mosliciguat made some progress in September, when data showed a 38% resistance which was one of the best of its kind according to Roivant Sciences Ltd. (NASDAQ:ROIV). The firm’s shares can see further tailwinds if drugs like IMVT-1402 are able to target additional diseases such as polyneuropathy and anemia. Additionally, Roivant Sciences Ltd. (NASDAQ:ROIV) could see multi billion dollar payouts from Pfizer and Moderna through litigation surrounding lipid nanoparticles for the COVID vaccines.
Roivant Sciences Ltd. (NASDAQ:ROIV)’s management shared key details for IMVT-1402 during the Q1 2025 earnings call:
“We really do believe that IMVT-1402 has a potentially best-in-class profile here. That comes, obviously, first and foremost, from our ability to suppress IgG as deeply or deeper than any of the other anti-FcRn antibodies in our view, without any impacts on things like albumin and LDL, which obviously was something that affected our first generation program.
And then I think it’s worth remembering we are also going to be able to launch in all likelihood IMVT-1402 in an auto-injector, it will be a simple subcutaneous injection that should enable self-administration at home, subject to FDA being okay with that. And we think that will be a really compelling format for patients and a differentiated option versus where — certainly where the field is right now, and our sense is potentially differentiated relative to even where the field will be in a couple of years.”
ROIV tops our list of best NASDAQ stocks under $20. While we acknowledge the potential of ROIV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ROIV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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