In this article, we will discuss the 15 Best Beaten Down Stocks to Invest In.
As per Charles Schwab, 2025 might bring hurdles for stocks in the form of uncertain trade policy, tougher fiscal policy, and subdued average growth in the global economy and corporate earnings. Collectively, these factors might result in significant volatility. On the positive side, improving growth and higher stock valuations might support strong returns overall for international stocks in 2025.
Challenges Faced by US Equities in 2024
As per Henry Allen, macro strategist at Deutsche Bank, the biggest sell-off of 2024 was seen at the beginning of August 2024. Between 1st August 2024 and 5th August, the S&P 500 index saw a decline of more than 4%. This was due to weak nonfarm payrolls report amidst worries that the US Fed might decide to keep monetary policy too tight. Furthermore, investors’ sentiments were further impacted by the poor earnings reports from the renowned tech companies. However, the strategist believes that, for equity investors, the U.S. economic data soon demonstrated some improvement and the markets rebounded.
Next, mounting geopolitical tensions have somehow weighed over the broader equity indices in 2024. Henry Allen highlighted that a market sell-off in April was primarily because of escalating tensions in the Middle East, with Brent crude oil seeing an intraday peak for the year of ~$92 a barrel. Between 1st April and 19th April, the S&P 500 index saw a significant decline of more than ~5%. However, Wall Street experts believe that tides are now expected to turn, and 2025 might be a promising year for global equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Structural Trends to Support Growth, Says Firetrail Investments
Firetrail Investments believes that several key structural trends are expected to aid global equity markets in 2025. Technological advancement might act as one of the most significant drivers, with businesses continuing to integrate automation, Al, and cybersecurity into their activities. Companies having innovative solutions in digital transformation will potentially benefit from significant digital adoption across sectors, spanning from finance to healthcare to manufacturing.
As per Firetrail Investments, the outlook for defensive and growth-oriented stocks in 2025 remains positive. This is because investors continue to balance the appeal of continuous income-generating businesses with the potential of high-growth entities. Companies operating in sectors such as technology, communications, and advanced manufacturing are expected to benefit due to favorable valuations and the normalization of interest rates. With capital becoming more accessible, such sectors will be well-placed to invest in further innovation, driving earnings growth.
As per the investment firm, in 2025, lower inflation, favorable labour market, and supportive monetary policy conditions are expected to provide a strong foundation for growth.
With this in mind, let us now have a look at the 15 Best Beaten Down Stocks to Invest In.
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Our Methodology
To list the 15 Best Beaten Down Stocks to Invest In, we used a screener and sifted through several online rankings. After getting the list of initial 30-35 stocks, we filtered out the ones that have seen a significant decline on a YTD basis and are trading close to their respective 52-week lows. We also mentioned the hedge fund holdings around each stock. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
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).
15 Best Beaten Down Stocks to Invest In
15) Xos, Inc. (NASDAQ:XOS)
% Decline on a YTD Basis: ~53.6%
Number of Hedge Fund Holders: 4
Xos, Inc. (NASDAQ:XOS) designs, manufactures, and sells battery-electric commercial vehicles. The company has been grappling with infrastructure and customer-related delays which are impacting its operations and financial performance. Moreover, concerns about tariffs have been affecting battery costs.
However, Wall Street analysts remain optimistic about the long-term potential for Xos, Inc. (NASDAQ:XOS). The company has been expanding its business by offering electric vehicle (EV) drivetrains to third-party original equipment manufacturers (OEMs). This initiative utilizes the company’s proprietary technology in battery systems, high-voltage distribution, and software design.
By supplying drivetrains to OEMs throughout different vehicle types, Xos, Inc. (NASDAQ:XOS) plans to diversify revenue streams and capitalize on the broader electrification market. Also, this strategy complements its core business of producing electric medium- and heavy-duty commercial vehicles and helps establish partnerships with a broad range of industry players.
Furthermore, analysts believe that its partnership with Blue Bird Corporation should result in several strategic benefits that align with its growth objectives in the broader EV market. Blue Bird’s manufacturing scale and expertise allow Xos, Inc. (NASDAQ:XOS) to reach broader markets and deliver technology at a wider scale. This will potentially reduce production costs and improve operational efficiency. Also, the integration of Xos, Inc. (NASDAQ:XOS)’s powertrain into Blue Bird’s step van prototypes further validates the reliability and performance of its drivetrain technology.
14) Saga Communications, Inc. (NASDAQ:SGA)
% Decline on a YTD Basis: ~46.7%
Number of Hedge Fund Holders: 5
Saga Communications, Inc. (NASDAQ:SGA) is a media company, which is engaged in acquiring, developing, and operating broadcast properties in the United States.
Saga Communications, Inc. (NASDAQ:SGA)’s stock has seen a decline of ~47% on a YTD basis primarily reflecting broader market trends and industry-specific challenges such as shifts in advertising revenues and changing consumer media consumption habits. Furthermore, in Q3 2024, the company emphasized that it witnessed challenges in the automotive and broadcast sectors, which impacted its advertising budgets.
However, Wall Street experts believe that Saga Communications, Inc. (NASDAQ:SGA)’s focus on blended advertising, which combines radio and digital advertising efforts, should fuel long-term growth. This approach enables the company to leverage the strengths of radio—including broad reach and community connection—while exploiting digital trends to enhance targeting and measurement.
By combining these methods, Saga Communications, Inc. (NASDAQ:SGA) targets to offer advertisers a more comprehensive solution, increasing ad effectiveness and customer engagement. Apart from strengthening its value proposition to advertisers, this approach also aligns with shifting market trends where integrated marketing campaigns are becoming increasingly important. Blended campaigns should unlock cross-promotion opportunities, where digital ads complement radio spots, enhancing the campaign’s effectiveness and ROI. This is expected to result in repeat business and longer-term advertising commitments.
Wall Street analysts gave an average price target of $24.00 on the shares of Saga Communications, Inc. (NASDAQ:SGA). Merion Road Capital, an investment advisor, released its fourth-quarter 2023 investor letter. Here is what the fund said:
“Like the broader small-capitalization market, most (all) of our returns came in December. Unlike the index, however, this was driven by a few catalysts that positively impacted our portfolio. Entering December our second largest position was in an oil and gas company, Unit Corp (“UNTC”). UNTC declared a special and common dividend equal to 40% of its then market capitalization. Similar to UNTC, our position in the small radio broadcaster, Saga Communications, Inc. (NASDAQ:SGA), benefitted from a special dividend equal to 10% of its then market capitalization.”
13) DLH Holdings Corp. (NASDAQ:DLHC)
% Decline on a YTD Basis: ~50.9%
Number of Hedge Fund Holders: 7
DLH Holdings Corp. (NASDAQ:DLHC) is a U.S.-based company that provides technology-enabled business solutions and professional services mainly to government agencies.
DLH Holdings Corp. (NASDAQ:DLHC) saw revenues of $96.4 million in Q4 2024, missing the analysts’ expectations of $101 million, demonstrating potential challenges in market conditions or project timelines. Apart from the economic uncertainties influencing defense spending, the company might witness challenges associated with potential impacts from government procurement changes with the new administration.
However, DLH Holdings Corp. (NASDAQ:DLHC)’s emphasis on digital transformation and cybersecurity enhances its competitive edge. Also, this should help the company drive revenue growth through federal contracts. These strategic factors enable DLH Holdings Corp. (NASDAQ:DLHC) to provide comprehensive solutions for mission-critical operations in public health, national security, and research institutions.
By integrating digital transformation and cybersecurity into the offerings, DLH Holdings Corp. (NASDAQ:DLHC) not only addresses changes in client demands but also places itself to capture a larger share of the growing federal IT services market. This strategy aids long-term growth by aligning with government priorities on modernization and security.
As per Wall Street, the shares of DLH Holdings Corp. (NASDAQ:DLHC) have an average price target of $15.00. Investment management company Cove Street Capital recently released its Q4 2023 investor letter. Here is what the fund said:
“DLH Holdings Corp. (NASDAQ:DLHC) is a consultant that provides a wide range of services to various Federal health agencies such as the Veterans Administration and Centers for Disease Control. It offers public health and life sciences services and has added high margin cybersecurity capabilities via its acquisition of Grove Resources late in 2022. This is an asset-lite, high free cash flowing business with generally sticky 3 to 5 year contracts. This company trades at a discount to its peers—despite having best in class margins—largely due to an overhang from a high revenue but low margin incumbent contract that the government continues to drag its feet on re-awarding. Our research indicates the stock continues to be priced for a “worst case” scenario with respect to this renewal, and other likely outcomes present a high-upside case. Furthermore, management has been astutely using cash to acquire smaller players in adjacent capabilities—such as Grove—to diversify revenue across more contracts. CEO Zach Parker came in seven years ago when the company was doing $2m in EBITDA; we expect them to deliver ~$45m in EBITDA in FY24. DLHC was a top performer for us in the fourth quarter as the management team continues to execute on its strategy and positions the company to be sold to a larger player.”
