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.
8. WK Kellogg Co (NYSE:KLG)
Number of Hedge Fund Holders: 21
Forward P/E ratio as of January 25: 8.94
Market Capitalization: $1.46 billion
WK Kellogg Co (NYSE:KLG) is a food company known for its iconic cereals, which include Frosted Flakes, Special K, and Froot Loops. It operates in North America and manufactures, markets, and distributes a range of ready-to-eat cereals.
On January 8, TD Cowen downgraded the company to Sell from Hold, also lowering its price target from $18 to $16. Despite acknowledging the company’s potential to improve its profit margins, TD Cowen cited concerns about the breakfast cereal market, potential supply chain disruptions due to modernization, and the impact of increased regulatory scrutiny related to health and wellness initiatives. The firm now projects organic growth to decline by 1.5% in both years, which is lower than the previous consensus estimates of -0.6% and -1.0%, respectively.
However, earlier, the Q3 2024 earnings revealed that the Core 6 brands, which represent ~70% of the company’s sales drive the majority of its growth. This segment includes Frosted Flakes, Raisin Bran, and four other major brands. Five of the six brands maintained or gained market share during the period. Improved supply chain efficiency boosted in-store execution and increased sales across the segment. WK Kellogg Co (NYSE:KLG) will continue to enhance commercial efforts, such as targeted promotions and the “Special for a Reason” Special K campaign, to sustain this growth. Therefore, analyst concerns about supply chain disruptions seem to be dealt with by the impact of this improved supply chain efficiency.
7. Fidelis Insurance Holdings Ltd. (NYSE:FIHL)
Number of Hedge Fund Holders: 22
Forward P/E ratio as of January 25: 4.49
Market Capitalization: $1.93 billion
Fidelis Insurance Holdings Ltd. (NYSE:FIHL) is a specialty insurer that provides insurance and reinsurance solutions. It operates in 3 segments; Specialty, Reinsurance, and Bespoke. It offers a range of products that include aviation, energy, property, and customized risk solutions.
The Specialty segment, which caters to specific insurance needs that may not be addressed by standard insurance policies, drives the company’s growth. This is demonstrated by the 22% increase in gross premiums written to $72 million in Q3 2024, which was due to strong client retention rates, successful new business generation, and the company’s leadership position in major lines such as Property Direct and Facultative. It translated to a 114% Risk-Adjusted Premium (RAP) for the segment, which highlighted the quality and profitability of the written business.
The company’s disciplined underwriting and strong market positioning are good for the Specialty segment growth. However, the Specialty insurance market is constantly changing, so Fidelis Insurance Holdings Ltd. (NYSE:FIHL) needs to be prepared for things like major disasters and new government rules that could affect the business. On January 10, Keefe, Bruyette & Woods lowered their price target for its stock from $26 to $25 while maintaining an Outperform rating, due to the expectations of slowing premium growth and manageable catastrophe losses.
6. NCR Atleos Corp. (NYSE:NATL)
Number of Hedge Fund Holders: 27
Forward P/E ratio as of January 25: 7.7
Market Capitalization: $2.36 billion
NCR Atleos Corp. (NYSE:NATL) is a financial technology company that provides self-service banking solutions, ATM networks, and managed network services. It operates across North America, Europe, and Asia Pacific, and serves several clients including financial institutions, retailers, and businesses.
The company made $1.08 billion in revenue during Q3 2024, due to the strong growth in its ATMaaS business. ATMaaS revenue surged 23% year-over-year to $49 million, fueled by a 46% increase in live customers and expansion into 10 new markets. This growth translated to a 19% increase in gross profit for the ATMaaS segment to $16.1 million. While the company currently prioritizes maximizing revenue per unit, the long-term growth strategy focuses on expanding service offerings to existing customers.
Compass Point initiated coverage on NCR Atleos Corp. (NYSE:NATL) on December 23, 2024, issuing a Buy rating with a price target of $57. This stance is underpinned by a forecast of $418 million in free cash flow by fiscal year 2026, coupled with a projected market capitalization/free cash flow multiple of 10x. The company has a 36% market share in the ATM sector, which positions it well to capitalize on the growing demand for managed services and ATM as a Service (ATMaaS) offerings. Furthermore, the firm anticipates an increase in ARPU from 5.1 in 2024 to 5.9 by 2026 within the self-service banking segment.
5. Amentum Holdings Inc. (NYSE:AMTM)
Number of Hedge Fund Holders: 28
Forward P/E ratio as of January 25: 10.28
Market Capitalization: $5.25 billion
Amentum Holdings Inc. (NYSE:AMTM) provides engineering and technology solutions and serves critical sectors like energy, space, and defense. It addresses challenges in science, security, and sustainability across diverse markets.
Its Digital Solutions segment uses AI, data analytics, and cybersecurity to fulfill the demand for digital transformation across different sectors. The company’s continued R&D investments, expansion into new markets like AI/ML/IoT, and partnerships with other firms will drive further growth. For instance, the company has been awarded a contract by the Satellite Applications Catapult to design and deliver a gravity offload system for simulating space conditions in the UK, as of January 21. This system will enable satellite manufacturers to test and develop in-space servicing and assembly technologies, which will enhance mission safety and contribute to the growth of the UK’s space sector.
The company focuses on developing customer-centric solutions to capitalize on growing demand driven by factors like remote work, e-commerce, and the increasing need for enhanced cybersecurity. Amentum Holdings Inc.’s (NYSE:AMTM) $45 billion backlog also provides a solid foundation for future growth in the Digital Solutions segment. The company received a Hold rating and a $24 price target from RBC Capital analyst Kenneth Herbert on January 10.
Aristotle Small Cap Equity Strategy maintains its position in the company believing that it is positioned to capitalize on government spending in key areas and also achieve significant through its recent merger. The firm stated the following in its Q4 2024 investor letter:
“Amentum Holdings, Inc. (NYSE:AMTM), is a global engineering and technology solutions provider serving the US government agencies as well as international government agencies from allied nations. The company was formed by spin-off and merger of Jacobs Solutions’ (J) Critical Mission Solutions (CMS) and Cyber & Intelligence (CI) businesses with Amentum Holdings (private). As a result, existing J shareholders received shares of the newly formed combined company (AMTM). We maintained our position in AMTM as we believe the company is well positioned to benefit from government spending on digital modernization, cybersecurity and next generation technologies. The combination of the two companies exposes AMTM to new end market and geographic opportunities as well as operating scale efficiencies to drive incremental shareholder value.”
4. Phinia Inc. (NYSE:PHIN)
Number of Hedge Fund Holders: 30
Forward P/E ratio as of January 25: 10.67
Market Capitalization: $2.13 billion
Phinia Inc. (NYSE:PHIN) is a tech company that develops and manufactures advanced components and systems for combustion and hybrid propulsion. It serves both automotive and industrial markets and focuses on improving fuel efficiency, reducing emissions, and enhancing performance.
The Aftermarket segment makes up 42% of the company’s sales. This segment provides replacement parts, accessories, and services for vehicles after they have been initially sold by the OEM. The segment saw 6% year-over-year revenue growth in Q3 2024 due to higher pricing and increased volume, particularly in Europe and the Americas. A major reason behind this growth was renewed agreements with major customers, including a top global independent player, and new contracts in Europe and North America. This helps the company capture market share from competitors.
The company plans to expand its Aftermarket offerings, including new products and services, and expand geographically, particularly in emerging markets. Investments in digital technologies like online ordering and inventory management will fuel this growth.
Phinia Inc.’s (NYSE:PHIN) Fuel Systems segment faced challenges due to lower commercial vehicle sales in Europe and China, leading to a 13.7% sales decline. It still maintained 11.4% segment margins through pricing adjustments and cost controls. Voss Capital initiated a long position in the company. The firm believes that its Fuel Systems business is positioned for market share gains in the ICE parts market despite the rise of EVs. It stated the following regarding Phinia Inc. (NYSE:PHIN) in its Q3 2024 investor letter:
“We are long shares of PHINIA Inc. (NYSE:PHIN). A recent spin-off from Borg Warner (BWA), the company is an auto parts supplier that operates two distinct businesses – 1) Fuel Systems (original equipment manufacturer supplier) and 2) Aftermarket automotive products supplier.
The Fuels Systems business is uniquely positioned to capitalize on attractive competitive dynamics that we believe will allow the company to take gobs of market share in its niche markets over the coming years. As an internal combustion engine (ICE) parts supplier pure play, overly hyped expectations of electric vehicle (EV) penetration created an especially good long-term buying opportunity in PHIN earlier in the year…” (Click here to read the full text)
3. PACS Group Inc. (NYSE:PACS)
Number of Hedge Fund Holders: 32
Forward P/E ratio as of January 25: 7.5
Market Capitalization: $2.21 billion
PACS Group Inc. (NYSE:PACS) provides skilled nursing and senior care services in the US. It operates a network of facilities, which include skilled nursing facilities, assisted living communities, and independent living options.
The company is aggressively expanding its footprint through strategic acquisitions in the post-acute care sector. In November 2024, it acquired 8 facilities in Pennsylvania, which added 1,199 beds and marked its entry into the state. Subsequently, in December 2024, the company acquired 11 facilities in Tennessee, which added 1,310 beds and further expanded its geographic reach to 17 states. PACS Group Inc. (NYSE:PACS) employs a flexible acquisition strategy and uses both lease and purchase models to capitalize on diverse market opportunities. It emphasizes its strong operational performance, with high-quality ratings and above-average occupancy rates across its facilities.
Strategic expansions and acquisitions are expected to drive revenue growth for the company and increase its market share in the post-acute care sector. However, recent analyst reports on the company have seen mixed revisions. Macquarie lowered its price target to $24 from $42 while maintaining an Outperform rating. Truist Financial decreased its target to $32 from $46 but also maintained a Buy rating.
2. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Fund Holders: 32
Forward P/E ratio as of January 25: 12.17
Market Capitalization: $5.97 billion
Nextracker Inc. (NASDAQ:NXT) is a solar tracker and software solutions company that focuses on utility-scale and distributed-generation solar projects. Its innovative tracking technologies, such as NX Horizon and NX Horizon-XTR, maximize energy production. Advanced software like TrueCapture and NX Navigator enhance plant performance and provide insights for solar project owners and operators.
The US accounts for 65% of the company’s revenue, with international operations spanning Brazil, India, Spain, and Australia. It enjoys a dominant position in the oligopolistic US solar tracker market, with a 35-40% market share. In EMEA, the company holds a 10% market share. This market has a growth rate of 48%. It’s expanding into the Middle East, with its first system already installed in Saudi Arabia.
The company’s acquisitions of Oijo and South Pile International now allow it to install solar trackers on challenging terrains like bedrock, which is crucial as solar projects increasingly develop on federal lands. By sourcing steel locally, Nextracker Inc. (NASDAQ:NXT) has diversified its supply chain, optimizing costs and maintaining high gross margins. TD Cowen initiated coverage on Nextracker Inc. (NASDAQ:NXT) on 19 December 2024, issuing a hold rating with a $41 target price. However, the majority of analysts recommend buying the stock. This sentiment is reflected in the consensus rating of Moderate Buy and a target of $53.10, higher than the current trading price.
1. Solventum Corp. (NYSE:SOLV)
Number of Hedge Fund Holders: 48
Forward P/E ratio as of January 25: 13.16
Market Capitalization: $12.96 billion
Solventum Corp. (NYSE:SOLV) is a healthcare company that develops and delivers innovative solutions across a diverse portfolio. It operates in Medsurg, Dental Solutions, Health Information Systems, and Purification & Filtration. It addresses patient care, clinical workflows, and healthcare operations.
The company has historically underperformed its markets, with flat or declining volumes over the past 2 years. This comes from commercial misalignment and poor R&D productivity. To address these challenges, Solventum Corp. (NYSE:SOLV) has implemented a 3-phased approach. The company will first identify and prioritize high-growth markets and submarkets through market analysis. Then, it will align its commercial and R&D efforts with these priorities. This includes specializing sales teams, adjusting incentives, and shifting R&D focus towards target markets. Finally, it will pursue portfolio optimization through inorganic growth, potentially acquiring smaller companies or technologies.
The company’s financial outlook for 2024 reflects these growth initiatives as it raised its organic sales growth guidance to 0-1% and expects adjusted earnings per share to be between $6.30 and $6.50. The company also anticipates free cash flow in the range of $700 million to $800 million. Solventum Corp.’s (NYSE:SOLV) success hinges on its ability to successfully execute Phase 2 of its transformation plan.
While we acknowledge the growth potential of Solventum Corp. (NYSE:SOLV), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SOLV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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