In this piece, we will take a look at twelve best performing cheap stocks in 2024.
As we step into the final quarter of 2024, the financial markets continue to navigate a complex terrain shaped by a mix of optimism and uncertainty. The latest jobs report for September came in stronger than expected, signaling resilience in the U.S. labor market and leading many investors to reassess their expectations regarding the Federal Reserve’s monetary policy. This report has led traders to largely eliminate the possibility of a more significant rate cut, now forecasting an 87% chance of a quarter-point reduction in the near future. Despite these concerns, analysts are generally optimistic about the broader market’s prospects as we head towards year-end, thanks to promising earnings growth and stabilizing economic indicators.
Goldman Sachs, one of the leading voices on Wall Street, recently revised its target for a major stock market index upward, projecting that the index will reach 6,000 by the end of 2024. This forecast implies a 4.3% upside from current levels and reflects the bank’s confidence in sustained earnings growth throughout the remainder of the year. The bank also sees a longer-term target of 6,300 for the index, which would represent a 9.5% gain over the next 12 months. Chief U.S. equity strategist David Kostin noted that despite near-term volatility, factors like a recovery in the semiconductor cycle and easing cost pressures are likely to boost margins across multiple sectors. Such bullish sentiment suggests that investors looking for value opportunities might find them in underperforming but fundamentally sound sectors.
One area that stands out in terms of valuations and future potential is the biopharmaceutical industry. Experts like Karen Firestone, a seasoned investor and regular contributor to CNBC, highlight that despite the sector’s recent struggles, it presents an attractive entry point for long-term investors. Large pharmaceutical companies are trading at lower price-to-earnings ratios compared to the broader market, offering robust profit margins and potential for AI-driven breakthroughs in drug development. While some big names have rallied on the back of their blockbuster obesity drugs, the broader biopharma sector remains relatively undervalued.
This favorable setup is not confined to biopharma alone. The technology and consumer discretionary sectors, which were hit hard earlier this year, are also starting to show signs of life. According to FactSet, analysts expect the major stock index to post its fifth consecutive quarter of earnings growth in the third quarter, projecting a 4.2% expansion year-over-year. This suggests that sectors with solid growth fundamentals could outperform as economic conditions stabilize. At the same time, energy stocks, particularly those within the communication services sector, have received a higher percentage of “buy” ratings, reflecting optimism around their capacity to deliver gains in the coming months.
While there’s a lot of chatter around high-growth sectors, value investors are eyeing cheap stocks that have managed to deliver impressive returns. The biopharmaceutical sector is a case in point, where low valuations, high margins, and the potential integration of AI into drug discovery make it a compelling area for investment. Analysts suggest that companies with robust balance sheets and pricing power are best positioned to withstand potential economic headwinds and capitalize on emerging growth opportunities.
In addition, some strategists believe that broader market gains could extend beyond 2024, particularly if the Federal Reserve manages to engineer a “soft landing” by controlling inflation without triggering a recession. With the presidential election looming in 2025, historical data shows that major stock indices tend to perform well during election years, further supporting a cautiously optimistic outlook for equities.
Given these dynamics, it’s evident that while the market landscape is marked by volatility and economic uncertainties, there are still promising opportunities to be found. In the following sections, we delve into 12 of the best-performing cheap stocks of 2024, which have outpaced broader market indices and offer attractive entry points for investors looking to navigate these uncertain times with a focus on long-term gains.
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Our Methodology
For this article, we used Finviz stock screener to look for companies having forward Price to Earnings (P/E) ratio of less than 15. We then selected the top 12 stocks with the best year-to-date performance. Additionally, we reviewed data from approximately 912 elite hedge funds tracked by Insider Monkey during the second quarter of 2024 to determine hedge fund ownership for each company. The stocks are ranked in ascending order of their year-to-date performance.
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).
12. Valhi, Inc. (NYSE:VHI)
Number of Hedge Fund Holders: 1
Year to date Share Price Gain: 128.31%
Forward Price to Earnings (P/E) Ratio: 10.7
Valhi, Inc. (NYSE:VHI) is a diversified company engaged in the chemicals, component products, and real estate management and development sectors across North America, Europe, the Asia Pacific, and globally. The company’s broad operational reach and unique business segments make it a strong candidate for inclusion in our list of 12 best performing cheap stocks in 2024. With robust earnings performance and improved operational efficiencies, Valhi, Inc. (NYSE:VHI) has demonstrated its potential to deliver significant shareholder value despite macroeconomic challenges.
In the second quarter of 2024, Valhi, Inc. (NYSE:VHI) reported a net income of $19.9 million, or $0.70 per share, compared to a net loss of $3.2 million in the same period of 2023. For the first six months of 2024, the company posted a net income of $27.7 million, or $0.97 per share, against a net loss of $9.0 million in the comparable period of 2023. This turnaround was primarily driven by the Chemicals segment, which recorded a 13% year-over-year increase in net sales for the first half of 2024, reaching $979.3 million. Improved sales volumes and production efficiencies led to a notable operating income of $63.3 million for this segment, compared to an operating loss of $17.7 million in the first half of 2023.
Valhi, Inc. (NYSE:VHI) strategic focus on boosting production volumes of titanium dioxide (TiO2), a key product of its Chemicals segment, was instrumental in these improved financials. The company increased its TiO2 production to 93% of capacity utilization in the first six months of 2024, up from 70% in the same period of 2023. The cost reductions in energy and raw materials also supported margin expansion, making Valhi, Inc. (NYSE:VHI) Chemicals segment a significant contributor to its overall profitability.
While the Component Products segment experienced a slight decline in sales due to lower marine component revenues, its operating income grew 16% in the second quarter of 2024, thanks to higher sales of security products. Meanwhile, the Real Estate Management and Development segment saw a temporary slowdown due to permitting delays, but remains poised for recovery.
Overall, Valhi, Inc. (NYSE:VHI) diversified business model, improved profitability, and strong financial metrics make it an attractive choice among affordable stocks for long-term investment in 2024.
11. Flexsteel Industries, Inc. (NASDAQ:FLXS)
Number of Hedge Fund Holders: 6
Year to date Share Price Gain: 131.67%
Forward Price to Earnings (P/E) Ratio: 12.23
Flexsteel Industries, Inc. (NASDAQ:FLXS) is a leading furniture manufacturer known for its high-quality products and innovative designs. The company has delivered a solid financial performance in its fourth quarter and fiscal year 2024, making it a prime candidate for inclusion in our list of the 12 best performing cheap stocks in 2024. Despite ongoing challenges in the furniture industry, including weak consumer demand, Flexsteel has managed to achieve robust growth and profitability, demonstrating its strong fundamentals and ability to outperform competitors.
In the fourth quarter of fiscal 2024, Flexsteel Industries, Inc. (NASDAQ:FLXS) reported a net sales increase of 4.7% year-over-year to $110.8 million, driven primarily by an uptick in sales orders and a solid backlog. The company’s sales order backlog rose by 20% to $59.5 million, highlighting strong demand for its products. Additionally, Flexsteel Industries, Inc. (NASDAQ:FLXS) adjusted operating income reached $6.2 million, representing a 160 basis point increase compared to the prior year quarter. This growth was primarily due to a combination of strong operational execution, disciplined product portfolio management, and effective cost savings measures.
On an annual basis, Flexsteel Industries, Inc. (NASDAQ:FLXS) reported a 4.8% increase in net sales, showcasing its resilience in a market where many peers experienced double-digit declines. This robust performance is a testament to Flexsteel Industries, Inc. (NASDAQ:FLXS) strategic investments in innovation, new product development, and enhanced customer experience. The company’s focus on differentiation through value-added features and expanding its market presence has enabled it to gain market share even in a challenging environment.
From a profitability perspective, Flexsteel Industries, Inc. (NASDAQ:FLXS) improved its adjusted operating margin to 5.6% in the fourth quarter, up from 4% in the prior year. For the full fiscal year, adjusted operating income surged 126% year-over-year to $18.3 million. Flexsteel Industries, Inc. (NASDAQ:FLXS) strong cash generation capabilities are evident from its $32 million operating cash flow and a significant reduction in inventory by over $25 million during the year. This, combined with efficient working capital management, allowed the company to reduce its debt by 66%.
As Flexsteel Industries, Inc. (NASDAQ:FLXS) heads into fiscal 2025, it remains well-positioned for sustainable growth. With strategic initiatives to expand its product lines, target new markets, and invest in innovation, the company is poised to deliver continued profitability and shareholder value, making it a compelling pick among the best performing cheap stocks this year.
