In this article, we discuss the 12 ridiculously cheap stocks to buy now and hold for the long term. To skip the detailed analysis of current market conditions, go directly to the 5 Ridiculously Cheap Stocks to Buy Now and Hold for the Long Term.
The recent events in the market have made some investors cautious as the S&P 500 recorded its worst day since January on April 12. On the day, the index is down 1% from March 12 levels. According to a Hubbis report, Smead Capital’s Cole Smead warns of a potential 1970s-style inflation surge due to unchecked government spending. Even though the Fed reiterated its expectations of three rate cuts in 2024 at its latest meeting, many experts believe that there are more likely to be two cuts this year at the most. On the other hand, Smead sees a 15-20% chance of the Federal Reserve raising rates amid persistent inflation. He predicts negative real returns from the S&P 500 over the next decade. In the current situation, Cole Smead suggests a cautious, value-driven investment strategy to navigate market volatility effectively. He believes that there is an approximately 80% likelihood that sectors like banking, energy, and homebuilding, which have recently shown lower returns, could now show remarkable performance compared to their historical performances. These sectors are trading at significantly low valuation multiples which create more optimistic investment opportunities, compared to the sectors with high valuations.
On April 11, Cole Smead reiterated his above-mentioned expectations in a CNBC interview and said that non-US markets are likely to perform better than the S&P 500. Additionally, he has a bullish view of big oil and the financials sector. As of March 31, the Smead Value Investor Fund has given the highest weightage to the consumer cyclical sector at 24.13%, followed by the financial services and energy sector at 20.73% and 20.13%, respectively.
Seeing a Little Positivity
Aureus Asset Management’s co-founder and executive chairman, Karen Firestone doesn’t paint as bleak a picture as Cole Smead. In a CNBC interview on April 5, Firestone said that the recent correction in the market was quite expected after phenomenal growth over the last 6 months. However, Firestone’s firms still trimmed its positions in several stocks as they “got too big for the portfolio, or somewhat overpriced.”
When asked about her best ideas for the second quarter and beyond, she put forth the name of NextEra Energy, Inc. (NYSE:NEE) as she believes that the stock severely underperformed in the past and is trading at a very attractive valuation. At the company’s Q4, 2023 earnings call, NextEra Energy, Inc.’s (NYSE:NEE) CEO, John Ketchum also reassured investors about the company’s future performance and made the following statement:
“Over the past 10 years, we have delivered compound annual growth and adjusted EPS of roughly 10%, which is the highest among all top 10 power companies. Over that same period, the remaining top 10 power companies have achieved, on average, compound annual growth and adjusted EPS of roughly 2%. Notwithstanding the strong adjusted EPS results, we recognize and are disappointed by the underperformance in the share price. And as we start 2024, we remain steadfast in our continued focus on execution and creating long-term value for shareholders.
We believe the disruption over the last two years has made NextEra Energy an even stronger company. Our business model is more resilient, our development platform is even more advanced, and our supply chain is more diversified than it has ever been. Bottom line, we believe NextEra Energy is well positioned headed into 2024. And there is good reason for optimism at NextEra Energy.”
Aureus Asset Management’s Under-the-Radar Pick
In the above-mentioned interview, Firestone also showed bullish sentiment toward The Charles Schwab Corporation (NYSE:SCHW) when asked about her firm’s “under-the-radar- pick.” She believes that the company is one of the dominant players in its industry, has a low price-to-earnings ratio, and its forward earnings have significant growth potential. Firestone added that if one looks at The Charles Schwab Corporation’s (NYSE:SCHW) stock chart, it seems like it’s going to move up from now on. At its Q4 2023, earnings call, the CEO of the company, Walter W Bettinger revealed the company’s plan future plans and said:
“In 2024, you’re going to see an emphasis on execution, but with consistency around our strong client fundamentals and strategy. I recognize that 2024 is going to be a transition year from a financial standpoint, albeit one with steadily improving financial results throughout the year and a very strong exit into 2025. It’s unrealistic to think that the challenges of 2023 simply disappear, because the calendar flips over. But when I look ahead to 2025, 2026, and 2027, I’m quite confident that the power of our client franchise is going to shine in terms of financial results. There’s much work to do in 2024 and beyond, and no one at Schwab is kidding themselves that everything is perfect right now. But my confidence is high. I’m incredibly encouraged by what I see, whether it’s our positioning, our client relationships, the solutions that we offer our clients, or the focus of the entire organization on the future.”
In the current environment, experts are bullish on the energy and financials sector. With this context, let’s take a look at some of the top ridiculously cheap stocks, which include Apollo Global Management, Inc. (NYSE:APO), Caesars Entertainment, Inc. (NASDAQ:CZR), and Cheniere Energy, Inc. (NYSE:LNG).
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Our Methodology
For this article, we used the Finviz stock screener to identify 20 stocks that have recorded sales growth of over 30% over the last 5 years and were trading under a price-to-earnings multiple of 15. We then narrowed down our list to the stocks that were most widely held by institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, primarily. The 5-year revenue growth rates and PE ratios have been used for tie-breaking, based on secondary and tertiary priorities.
The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12 Ridiculously Cheap Stocks to Buy Now and Hold for the Long Term
12. Civitas Resources, Inc. (NYSE:CIVI)
PE Ratio as of April 12: 8.23
Revenue Growth (5-year): 121.75%
Number of Hedge Fund Holders: 31
Civitas Resources, Inc. (NYSE:CIVI) is engaged in the development and production of crude oil, natural gas, and natural gas liquids. The company has its operations in the Field of the Denver-Julesburg Basin of Colorado. The stock has a PE ratio of 8.23, as of April 12.
Civitas Resources, Inc. (NYSE:CIVI) has recorded revenue growth of 121.75% over the last 5 years and takes the 12th spot on our list of ridiculously cheap stocks to buy. In the fourth quarter of 2023, 31 hedge funds went long on the company’s stock at a combined value of $540.770 million. In the preceding quarter, 27 hedge funds were bullish on Civitas Resources, Inc. (NYSE:CIVI) with shares worth $459.072 million.
In 2023, Civitas Resources, Inc. (NYSE:CIVI) acquired $7 billion worth of assets in the Permian Basin that added 160 million barrels of oil equivalent per day of production. In 2024, the company plans to drill and complete 130 to 150 gross wells in the Permian Basin and 90 to 110 gross wells in the DJ Basin.
Civitas Resources, Inc. (NYSE:CIVI) is one of the ridiculously cheap stocks to buy now and hold for the long term that has recently caught the attention of institutional investors, along with Apollo Global Management, Inc. (NYSE:APO), Caesars Entertainment, Inc. (NASDAQ:CZR), and Cheniere Energy, Inc. (NYSE:LNG).
Diamond Hill Small Cap Fund stated the following regarding Civitas Resources, Inc. (NYSE:CIVI) in its fourth quarter 2023 investor letter:
“Our bottom contributors in Q4 included Civitas Resources, Inc. (NYSE:CIVI) and WNS Holdings. Civitas, an oil and natural gas explorer and producer focused primarily on the DJ Basin, announced another Permian Basin acquisition early in Q4. This comes on the heels of closing two prior Permian acquisitions as the company attempts to diversify its holdings beyond the DJ Basin — a move which has seemingly prompted concern among investors. However, we understand the company’s rationale and appreciate its decision to diversify its holdings. Though Civitas is capitalizing on its low-cost drilling inventory to deliver solid results, the share price declined in sympathy with the broader industry as oil prices fell in the back half of the quarter.”
11. Stellantis N.V. (NYSE:STLA)
PE Ratio as of April 12: 4.05
Revenue Growth (5-year): 35.67%
Number of Hedge Fund Holders: 33
Stellantis N.V. (NYSE:STLA) is an automotive manufacturing company that has 14 brands in its portfolio, including Dodge, Fiat, Maserati, and others. As of April 12, the stock has a PE ratio of 4.05.
On April 12, Stellantis N.V. (NYSE:STLA) announced that the company successfully repurchased 21.103 million common shares for a total consideration of nearly €534.4 million from February 28 to April 11 under the First Tranche of the 2024 share buyback program announced in February.
According to Insider Monkey’s database that tracks 933 elite hedge funds, hedge fund sentiment was positive toward Stellantis N.V. (NYSE:STLA) in Q4 of 2023. 33 hedge funds had investments in the company at a total stake value of $1.713 billion. This is compared to 27 funds with positions worth $585.417 million. As of the fourth quarter of 2023, SRS Investment Management is the most prominent shareholder in the company with a position worth $197.469 million. Additionally, the company has experienced revenue growth of 35.67% over the past five years.
10. RenaissanceRe Holdings Ltd. (NYSE:RNR)
PE Ratio as of April 12: 4.21
Revenue Growth (5-year): 40.93%
Number of Hedge Fund Holders: 35
RenaissanceRe Holdings Ltd. (NYSE:RNR) offers reinsurance and insurance products through two segments, Property, and Casualty and Specialty segments. The company’s revenue has grown by 40.93% over the past five years. The stock has a PE ratio of 4.21, as of April 12.
RenaissanceRe Holdings Ltd. (NYSE:RNR) received Buy ratings from 5 Wall Street analysts over the last three months. As of April 12, the average price target of $261.00 represents an upside of 20.96% from the current levels.
In the fourth quarter of 2023, 35 hedge funds had stakes in RenaissanceRe Holdings Ltd. (NYSE:RNR) with total positions worth $1.449 billion. As of Q4 of 2023, Orbis Investment Management is the top shareholder and has increased its stake in the company by 513% to 2.273 million shares worth $445.519 million.
TimesSquare Capital Management made the following comment about RenaissanceRe Holdings Ltd. (NYSE:RNR) in its Q3 2023 investor letter:
“In Financials, we prefer well-placed insurance companies and niche businesses while tending to avoid banks which face credit deterioration and rising deposit costs. RenaissanceRe Holdings Ltd. (NYSE:RNR), a provider of reinsurance and insurance products, surged ahead by 6%. Its second quarter numbers were solid across underwriting, property catastrophe premiums, investment income, and fee income. While there was an impact from severe storms during the quarter, RenRe’s losses were modest.”
9. Diamondback Energy, Inc. (NASDAQ:FANG)
PE Ratio as of April 12: 11.89
Revenue Growth (5-year): 44.77%
Number of Hedge Fund Holders: 42
Diamondback Energy, Inc. (NASDAQ:FANG) is a Texas-based company that acquires, develops, and explores onshore oil and natural gas reserves in the Permian Basin in West Texas. The stock has a PE ratio of 11.89, as of April 12.
On April 5, Truist analyst Neal Dingmann lowered the price target on Diamondback Energy, Inc. (NASDAQ:FANG) to $248 from $250 and kept a Buy rating on the shares. Additionally, the company has witnessed revenue growth of 44.77% over the past five years.
Diamondback Energy, Inc. (NASDAQ:FANG) was part of 42 hedge funds’ portfolios in Q4 of 2023 with a total stake value of $729.769 million. As of the fourth quarter of 2023, Diamond Hill Capital is the top investor in the company. The firm has increased its stake in the company by 93% to 1.603 million shares worth $248.579 million.
Diamond Hill Mid Cap Strategy stated the following regarding Diamondback Energy, Inc. (NASDAQ:FANG) in its fourth quarter 2023 investor letter:
“Also among our bottom contributors (though its share price advanced in Q4) was new holding Diamondback Energy, Inc. (NASDAQ:FANG), which is a scaled, low-cost operator in the Permian Basin, one of the most prolific shale basins in the US. The company is focused on cost-efficiency, and management is aligned with shareholders as it focuses on prudent and sustainable management of the company’s assets.
Though shares were pressured in Q4 as oil prices globally declined amid a high-production environment, we believe the company is well-positioned for free cash-flow generation over the long term. We capitalized on Q4’s share-price weakness to initiate a position in a high-quality operator at a meaningful discount to our estimate of long-term intrinsic value.”
8. Coterra Energy Inc. (NYSE:CTRA)
PE Ratio as of April 12: 12.99
Revenue Growth (5-year): 48.71%
Number of Hedge Fund Holders: 42
Coterra Energy Inc. (NYSE:CTRA) develops, explores, and produces oil, natural gas, and natural gas liquids in the U.S. As of April 12, the stock has a PE ratio of 12.99.
In Q4 of 2023, hedge fund sentiment was positive toward Coterra Energy Inc. (NYSE:CTRA) as hedge funds with stakes in the stock were 42 in the quarter, with positions worth $696.261 million. This is compared to 32 funds with positions worth $529.579 million in the third quarter. Point72 Asset Management is the most prominent shareholder in the company, as of December 31, 2023. The firm increased its stake by 34% in the quarter to 5.548 million shares worth $141.589 million, representing 0.34% of the investment portfolio. The company takes the 8th spot on our list of ridiculously cheap stocks to buy now and hold for the long term.
In the last five years, Coterra Energy Inc. (NYSE:CTRA) has seen revenue growth of 48.71%. Based on 15 Wall Street analysts’ ratings over the past three months, the stock has a consensus rating of Strong Buy. As of April 12, the average price target of $32.41 implies an upside of 17.26% from the last price of $27.64.
Diamond Hill Capital stated the following regarding Coterra Energy Inc. (NYSE:CTRA) in its fourth quarter 2023 investor letter:
“Other bottom contributors in Q4 includedCoterra Energy Inc. (NYSE:CTRA), VF Corporation and Ciena Corporation. Coterra Energy is an oil exploration and production company focused in West Texas’s Permian Basin and Oklahoma. Though production is beating expectations, shares traded in sympathy with the broader industry, which declined alongside falling oil and natural gas prices.”
7. VICI Properties Inc. (NYSE:VICI)
PE Ratio as of April 12: 11.31
Revenue Growth (5-year): 34.19%
Number of Hedge Fund Holders: 44
VICI Properties Inc. (NYSE:VICI) owns casino and entertainment properties, including Caesars Palace Las Vegas, MGM Grand, Venetian Resort Las Vegas, and others. The company owns 93 experiential assets in the U.S. and Canada. As of April 12, the stock has a PE ratio of 11.31.
In Q4 of 2023, hedge fund sentiment was positive toward VICI Properties Inc. (NYSE:VICI). The stock was held by 44 hedge funds and their stakes amounted to $960.097 million. This is compared to 33 funds in the prior quarter, with positions worth $889.943 million. As of the fourth quarter of 2023, Ken Griffin’s Citadel Investment Group is the most dominant shareholder in the company and has a position worth $269.023 million.
On March 7, VICI Properties Inc. (NYSE:VICI) declared a quarterly cash dividend of $0.415, which was paid out on April 4 to the shareholders of record on March 21. Moreover, over the past 5 years, the company’s revenue has grown by 34.19%.
Baron Funds commented on VICI Properties Inc. (NYSE:VICI) in its third quarter 2023 investor letter. Here is what it said:
“We have slightly decreased our already modest exposure to the triple net gaming REIT VICI Properties Inc. (NYSE:VICI), an owner of quality gaming, hospitality, and entertainment properties. The company pays a 6% dividend that is well covered, has a strong track record of making accretive acquisitions, and has additional opportunities for growth in the years ahead.”
6. Crocs, Inc. (NASDAQ:CROX)
PE Ratio as of April 12: 9.80
Revenue Growth (5-year): 31.55%
Number of Hedge Fund Holders: 45
Crocs, Inc. (NASDAQ:CROX) is a well-known designer and manufacturer of footwear. The company sells its products under the brands Crocs and HEYDUD and its products are sold in 85 countries. The company has recorded revenue growth of 31.55% in the last five years.
Crocs, Inc. (NASDAQ:CROX) has a PE ratio of 9.80, as of April 12. According to our database, 45 hedge funds held stakes in the stock in the fourth quarter of 2023, with positions worth $952.877 million. Samlyn Capital is the largest shareholder of the company and has a position worth $123.091 million, as of December 31, 2023.
Crocs, Inc. (NASDAQ:CROX) is one of the ridiculously cheap stocks to buy now and hold for the long term. Other such stocks include Apollo Global Management, Inc. (NYSE:APO), Caesars Entertainment, Inc. (NASDAQ:CZR), and Cheniere Energy, Inc. (NYSE:LNG).
Patient Capital Management stated the following regarding Crocs, Inc. (NASDAQ:CROX) in its fourth quarter 2023 investor letter:
“This quarter we entered four new positions, while exiting four positions. Our largest new position was Crocs, Inc. (NASDAQ:CROX). Crocs is a well-known consumer brand in the footwear industry. Despite continual calls over the years as a fad, Crocs has shown impressive growth and staying power. Since 2017 the company has increased sales at a 20%compound annual growth rate (CAGR) while maintaining industry leading operating margins of 27%. The stock sold off recently as the HEYDUDE brand it purchased in 2022 faced challenges. A combination of market oversaturation, and still limited brand awareness has made HEYDUDE a drag on the overall business. This is more than priced in at current levels with the stock trading at a P/E of 8.5x below peers at 14.3x and their historical average of 15x since 2019. The company is making progress on fixing HEYDUDE with growth expected to return in the 2H24. Overall, we view the child piece of the core Crocs product as a consumer staple and believe people are underappreciating its staying power as well as the ongoing improvements in the HEYDUDE brand. We believe you can buy a high-quality company, at a low multiple, with top FCF yield (13%) that is committed to both debt paydown and buybacks.”
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Disclosure. None. 12 Ridiculously Cheap Stocks to Buy Now and Hold for the Long Term is originally published on Insider Monkey.
