The US IPO market experienced a rebound in 2024, with proceeds and deal volume increasing as compared to the previous two years. However, activity remained below historical levels due to economic uncertainty. A resurgence is expected in 2025, mainly driven by potential interest rate cuts, pent-up investor demand, and a large pipeline of well-prepared companies, including many unicorns. This was discussed in detail earlier in our 12 Best New Stocks to Buy According to Hedge Funds article. Here’s an excerpt from it:
“…IPO activity saw a strong increase in 2024, with 61 traditional IPOs garnering more than $26.4 billion YTD, which was in line with the combined total number of IPOs in 2022 and 2023, which witnessed 28 and 35 IPOs, respectively. Despite this improvement, IPO activity remained short of early anticipations and historical levels of activity. This is because several IPO candidates decided to stay on the sidelines as they waited for a clearer economic picture after the U.S. presidential elections.”
General Atlantic CEO Bill Ford recently joined CNBC’s ‘Squawk Box’ to discuss the state of the private equity landscape, the IPO market, and the M&A outlook for 2025. Speaking on January 21, Ford highlighted that the IPO market has faced challenges over the past three years due to regulatory hurdles and a difficult exit environment. Despite this, there’s optimism about a renaissance in IPO activity, with 28 companies in General Atlantic’s pipeline ready to go public. This resurgence is anticipated to benefit private equity investors seeking liquidity, companies looking to raise capital, and public investors eager to access high-growth opportunities.
Ford noted that the regulatory overhang from the previous administration had discouraged many companies from pursuing public listings despite favorable equity markets and a strong economy. However, as these barriers begin to ease, he expects a wave of IPOs that will reinvigorate the public markets. He described this development as a triple win, enabling private equity firms to achieve liquidity, providing growth-stage companies with much-needed capital, and offering public investors access to innovative businesses. The discussion also touched on the broader implications for private equity. Ford explained that while strategic buyers had been sidelined in recent years due to regulatory constraints, their return to the market could create a more balanced environment. Historically, about 50% of exits occurred through IPOs and 50% through M&A transactions, and Ford anticipates a return to this equilibrium.
Ford’s comments align with broader trends in the IPO landscape for 2025. A lot of companies have signaled intentions to go public this year, reflecting renewed confidence in public markets. This revival is expected to reshape the investment landscape. Under this context, we’re here with a list of the 10 cheap new stocks to buy right now.
Methodology
We used the Finviz stock screener to look for companies that went public in the past 2 years. We sorted our screen by IPO date and market cap and looked through the top stocks that recently went public and are trading at a valuation of over $1 billion. We then selected 10 stocks with a forward P/E ratio under 15, that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 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 Cheap New Stocks To Buy Right Now
10. Worthington Steel, Inc. (NYSE:WS)
Number of Hedge Fund Holders: 16
Forward P/E ratio as of January 25: 12.63
Market Capitalization: $1.51 billion
Worthington Steel, Inc. (NYSE:WS) is a North American steel processor that specializes in carbon flat-rolled steel, tailor-welded blanks, and various steel and aluminum stampings. It serves diverse industries which include automotive, construction, and energy.
The company highlighted its electrical steel lamination business as a key driver of growth in FQ2 2025. The recent acquisition of a 52% stake in Sitem Group strengthens its position in the European electrical steel lamination market. Sitem Group is a European producer of electrical steel laminations. Europe is a growing market for EVs, with a projected 80% of vehicles expected to be electric or hybrid by 2030.
The acquisition is expected to drive growth for the company by bringing expertise in press automation and tool and die making to enhance Worthington Steel, Inc.’s (NYSE:WS) manufacturing capabilities. So the company is positioned to capitalize on the demand for EVs and solidify its leadership in this market. Worthington Steel, Inc. (NYSE:WS) has a Moderate Buy consensus rating from 2 Wall Street analysts surveyed in the past year. Analyst opinions are divided, with 1 recommending a hold and 1 recommending a buy.
9. Marex Group plc (NASDAQ:MRX)
Number of Hedge Fund Holders: 18
Forward P/E ratio as of January 25: 11.92
Market Capitalization: $2.52 billion
Marex Group plc (NASDAQ:MRX) is a global financial services platform that provides liquidity, market access, and infrastructure services across energy, commodities, and financial markets. Its services include execution and clearing, market making, hedging solutions, and structured products.
Eight analysts have set an average price target of $33.25. However, recent ratings, including Barclays’ assessment on January 13, indicate a higher average target of $38.33, which implies a potential upside of 15.15%. One reason behind this sentiment could be the company’s Agency and Execution segment which saw a 36% revenue increase in Q3 2024. This was driven by strong client activity, particularly in energy markets. The acquisition of Cowen’s prime services business has also enhanced Marex Group’s (NASDAQ:MRX) capabilities in this area. While integration has taken longer than anticipated, management expects improved run rates by Q4.
The company has a track record of double-digit growth over the past 10 years, with a 34% CAGR in adjusted operating profit over the last 9 years. It has expanded its client pipeline by converting new clients and deepening relationships with existing ones. It upgraded its full-year 2024 guidance for adjusted operating profit to be between $303 and $305 million, up from the previous range of $280 to $290 million. However, Q4 is expected to be the softest quarter due to more subdued activity in December. One reason is that Marex Group plc (NASDAQ:MRX) incurred $8.6 million in costs associated with the IPO, which are non-recurring but affect the current year’s financials.
