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.
A professional focused on the markets, monitoring investments in a busy trading floor.
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.”
12) Beyond Meat, Inc. (NASDAQ:BYND)
% Decline on a YTD Basis: ~49.2%
Number of Hedge Fund Holders: 8
Beyond Meat, Inc. (NASDAQ:BYND) is a plant-based meat company that is engaged in developing, manufacturing, marketing, and selling plant-based meat products under the Beyond brand name in the US and internationally.
Beyond Meat, Inc. (NASDAQ:BYND) reduced its sales guidance for Q4 2024, demonstrating a potential slowdown in growth. The company expects to generate $320–$330 million in net revenue for FY 2024, down from its previous range of $320 million –$340 million. Moreover, increasing competition and shifting consumer trends continue to weigh over the company’s performance.
In response to market challenges, Beyond Meat, Inc. (NASDAQ:BYND) sharpened its focus on key products including burgers and steaks. It has been emphasizing the health benefits of its plant-based offerings to offset negative perceptions and differentiate itself amidst increased competition. This strategic pivot targets capitalizing on Beyond Meat, Inc. (NASDAQ:BYND)’s strong brand recognition and address changes in consumer preferences.
Also, the company’s focus on international expansion, primarily in Europe, offers a significant opportunity for future growth. Beyond Meat, Inc. (NASDAQ:BYND) identified Germany as a key market, in which consumers’ attitudes towards plant-based proteins might be more favorable as compared to the US. Market experts believe that European consumers have demonstrated increased interest in sustainable and plant-based food options as a result of environmental concerns and health-conscious lifestyles. This trend aligns well with Beyond Meat, Inc. (NASDAQ:BYND)’s product offerings and marketing messages, resulting in capturing a larger market share.
11) OrthoPediatrics Corp. (NASDAQ:KIDS)
% Decline on a YTD Basis: ~30.3%
Number of Hedge Fund Holders: 11
OrthoPediatrics Corp. (NASDAQ:KIDS) is a medical device company, which is engaged in designing, developing, and marketing anatomically appropriate implants, instruments, and specialized braces for children with orthopedic conditions in the US and internationally.
One of the critical challenges OrthoPediatrics Corp. (NASDAQ:KIDS) has been facing is the expectation of a slight delay in US launches of the EOS product portfolio due to FDA discussions. In its Q3 2024 earnings call, the company highlighted that it has been in direct discussions with the FDA regarding the approval pathway for eLLi and VerteGlide. OrthoPediatrics Corp. (NASDAQ:KIDS) has received feedback that a 510(k) pathway might not be the likely approval pathway. However, it has already been engaged with the FDA to ensure that it meets all the data collection requirements to secure approval.
However, OrthoPediatrics Corp. (NASDAQ:KIDS)’s specialized focus on pediatric orthopedics is expected to drive significant growth as it provides the company with a significant advantage in a largely underserved market. Its growing network of clinics is expected to serve as a platform for gathering valuable data and insights into pediatric orthopedic care. OrthoPediatrics Corp. (NASDAQ:KIDS) can use this information to refine existing products, develop new solutions, and potentially create barriers to entry for competitors.
The company’s expansion plans are supported by its target to open clinics in an additional 18 new markets by the end of 2027, bringing the total market presence to 71. This clinic rollout strategy should drive further growth and market penetration.
10) Celanese Corporation (NYSE:CE)
% Decline on a YTD Basis: ~54.9%
Number of Hedge Fund Holders: 15
Celanese Corporation (NYSE:CE), a chemical and specialty materials company, is engaged in manufacturing and selling high-performance engineered polymers in the US and internationally.
Celanese Corporation (NYSE:CE) continues to encounter challenges related to weakening demand, and an uncertain macroeconomic environment. Furthermore, the company’s guidance for Q4 2024 further weighed over the investors’ sentiments, projecting adjusted EPS of ~$1.25, significantly below the analysts’ estimate of $2.94.
However, industry experts opine that Celanese Corporation (NYSE:CE)’s global presence, high-margin product portfolio, cost-cutting measures, and inventory management strategies are expected to act as key strengths. The company’s high-quality acetyls business and engineered materials segment are viewed as valuable assets possessing healthy margin potential.
Furthermore, the full synergies from the M&M acquisition should materialize once market volumes recover. Through the combination of M&M’s broad range of engineered materials with Celanese Corporation (NYSE:CE)’s existing offerings, the acquisition will create a comprehensive product portfolio catering to automotive, electronics, medical, and industrial applications. Furthermore, M&M’s strong presence in Asia and Europe complements Celanese Corporation (NYSE:CE)’s global footprint.
As demand recovers, mainly in the automotive and industrial sectors, Celanese Corporation (NYSE:CE) might experience significant operating leverage, potentially leading to earnings growth. Vltava Fund, an investment management company, recently released its Q1 2024 investor letter. Here is what the fund said:
“We sold three positions: Lockheed Martin, LabCorp, and Celanese Corporation (NYSE:CE). Both LabCorp and Lockheed were large positions for us at the time, and their returns had a positive material impact on the performance of the overall portfolio. Celanese, on the other hand, was always a small position, and so, despite the good returns it achieved, its impact on the portfolio’s overall return was negligible. We had bought Celanese shortly after the company had announced a large acquisition of DuPont’s broad portfolio of engineering thermoplastics and elastomers. This acquisition, while strategically sound, was overpriced in our opinion. Many investors apparently thought the same thing, as the stock reacted by dropping significantly to USD 90 in the following months. This decline nevertheless seemed excessive to us, and we therefore included Celanese stock into our portfolio. At the price of around USD 150 during March of this year, we felt, first, that our original investment hypothesis of a valuation correction had been fulfilled and, second, that the valuation was roughly in line with the company’s value. We therefore sold the stock.”
9) POSCO Holdings Inc. (NYSE:PKX)
% Decline on a YTD Basis: ~49.1%
Number of Hedge Fund Holders: 16
POSCO Holdings Inc. (NYSE:PKX) operates as an integrated steel producer in Korea and internationally.
POSCO Holdings Inc. (NYSE:PKX)’s stock has seen a decline of ~49.1% on a YTD basis as it continues to face a challenging environment due to declining prices of key raw materials in rechargeable battery materials. Furthermore, as highlighted by the company in its Q3 2024 earnings call, falling lithium hydroxide prices, which dipped below $10,000 per ton, posed challenges for POSCO Holdings Inc. (NYSE:PKX). Analysts believe that the company has been experiencing sluggish performance in its steel and rechargeable battery sectors, weighing over profitability.
However, industry experts opine that POSCO Holdings Inc. (NYSE:PKX)’s stock is well-poised for recovery heading into 2025. The company is expected to demonstrate resilience amidst fluctuating market conditions, leveraging partnerships and restructuring efforts in a bid to maintain financial stability and capitalize on future growth opportunities. Given its investments in Indian projects and lithium production, POSCO Holdings Inc. (NYSE:PKX) continues to position itself to address global demand and achieve long-term sustainability goals.
The company is jointly building an integrated steel manufacturing facility in India with JSW Group. In secondary battery materials, both companies plan to look for opportunities to make joint investments and research in their value chain. Talking about renewable energy, both companies plan to seek partnerships using resources of solar and wind power in India.
8) Beyond, Inc. (NYSE:BYON)
% Decline on a YTD Basis: ~78.7%
Number of Hedge Fund Holders: 16
Beyond, Inc. (NYSE:BYON) operates as an online retailer of furniture and home furnishings products in the US and Canada.
Beyond, Inc. (NYSE:BYON)’s stock has seen a significant decline in the recent past due to changing market dynamics and increased competition from large online retailers such as Amazon and Wayfair. The company does not operate physical stores, which limits consumer convenience and can impact its ability to capture market share.
However, Beyond, Inc. (NYSE:BYON), the rebranded Overstock.com, has been significantly transformed post the acquisition of Bed, Bath, and Beyond’s intellectual property and digital assets. This strategic move has expanded the company’s brand portfolio and should result in increased market presence and brand recognition, together with access to a broader customer base.
Beyond, Inc. (NYSE:BYON)’s management remains optimistic, expecting a turnaround to historical profit margins in 2-3 quarters. Moreover, Wall Street analysts believe that its efforts to actively monetize assets should help it bridge any potential cash gaps. For example, Beyond, Inc. (NYSE:BYON) recently sold its former headquarters, and proceeds are expected in the next quarter. Also, the company holds investments in blockchain companies via Medici Ventures.
As per Wall Street analysts, the shares of Beyond, Inc. (NYSE:BYON) have an average price target of $9.08.
7) Arcos Dorados Holdings Inc. (NYSE:ARCO)
% Decline on a YTD Basis: ~34.3%
Number of Hedge Fund Holders: 19
Arcos Dorados Holdings Inc. (NYSE:ARCO) is a franchisee for an American fast-food burger restaurant. It has the right to own, operate, and grant franchises of restaurants in South and Central America and the Caribbean.
Arcos Dorados Holdings Inc. (NYSE:ARCO) has been facing challenges through market headwinds, including currency fluctuations and changing consumer spending patterns in its key markets. Furthermore, the company’s stock faced the impact of inflation-induced cost pressures on labor and raw materials.
However, Wall Street analysts opine that the current juncture of Arcos Dorados Holdings Inc. (NYSE:ARCO)’s stock provides an entry point. On 1st October 2024, the company announced that it will exercise its option to renew its Master Franchise Agreement (MFA) with McDonald’s for another 20 years starting in 2025. This agreement further strengthens its strategic footing, which stems from the geographic diversification of its solid restaurant base throughout Latin America.
As per Moody’s Ratings, the company’s competitive edge is aided by its restaurant portfolio. This is because around half of its restaurants are free-standing units, which provide a mix of takeout, drive-thru, and delivery service options. These options enhance restaurant sales. Furthermore, Arcos Dorados Holdings Inc. (NYSE:ARCO) is hedging food and paper costs at 50% of projected exposure throughout 5 markets to reduce the volatility of its input costs.
As per Wall Street, the shares of Arcos Dorados Holdings Inc. (NYSE:ARCO) have an average price target of $13.0.
6) BCE Inc. (NYSE:BCE)
% Decline on a YTD Basis: ~34.4%
Number of Hedge Fund Holders: 20
BCE Inc. (NYSE:BCE) is a communications company that provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada.
BCE Inc. (NYSE:BCE) faced some challenges, which led to a decline in its stock price. The company reported total operating revenues of C$5,971 million ($4,377 million), reflecting a decline of 1.8% YoY. Wall Street analysts gave a consensus estimate of $4,450 million. This YoY fall was primarily due to lower product revenues. Apart from this, BCE Inc. (NYSE:BCE)’s unsustainable debt load weighed over its balance sheet, raising concerns among investors. As of September 30, the company had a net debt of C$39.2 billion. Mounting levels of debt attract higher interest payments. The aggressive rate hikes by central banks impacted BCE Inc. (NYSE:BCE)’s stock. Despite being a dividend player, its yields were not as appealing as safe investment instruments.
However, Wall Street experts believe that the tides may be turning now. Moving forward, BCE Inc. (NYSE:BCE)’s stock is expected to be aided by the recent acquisition of Ziply Fiber. This provides the company with a strong foothold in the competitive U.S. telecommunications landscape and diversifies its revenue streams. The acquisition also expands its service offerings beyond its traditional Canadian market.
As compared to the Canadian market, the US market provides a larger customer base and potentially higher average revenue per user (ARPU). On the cost side, BCE Inc. (NYSE:BCE) should achieve economies of scale in areas including network equipment procurement, technology development, and back-office operations. On the revenue front, BCE Inc. (NYSE:BCE) can leverage its experience in bundling services and cross-selling to roll out new offerings.
5) Polaris Inc. (NYSE:PII)
% Decline on a YTD Basis: ~30%
Number of Hedge Fund Holders: 20
Polaris Inc. (NYSE:PII) is engaged in designing, engineering, manufacturing, and marketing power sports vehicles in the US, Canada, and internationally.
Polaris Inc. (NYSE:PII)’s stock has seen a decline of ~30% on a YTD basis amidst ongoing inventory management issues. Given the elevated inventory levels, mainly in the ORV segment, it might have to increase promotional activities to clear excess stock. This can result in margin compression and reduced profitability.
However, Polaris Inc. (NYSE:PII) continues to focus on electric vehicle (EV) options, primarily in its off-road and recreational vehicle segments. This aligns with the increased consumer demand for sustainable and environmentally friendly products. Since the roll-out of its all-electric RANGER XP Kinetic utility side-by-side in 2023, the company has been leveraging electric technology to deliver leading performance capabilities and an unparalleled experience for off-road riders.
With the expectation of strong growth in the global EV market, Polaris Inc. (NYSE:PII) can tap a substantial opportunity to expand into the EV space. EVs provide a new product segment that differentiates Polaris Inc. (NYSE:PII) from traditional combustion engine vehicles, strengthening its brand appeal. Industry experts believe current management exhibited operating discipline through divestments of bad businesses acquired under old management. As a result, Polaris Inc. (NYSE:PII) can now focus on its roots in power sports.
Artisan Partners, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We are always on the lookout for companies that are under pressure in some form or fashion as this can create the conditions for an attractive entry price. Though equity markets have made substantial gains over the past year, we have still found select opportunities to put capital to work. Q3 purchases included Warner Music Group, MGM Resorts International and Polaris.
Polaris designs, engineers and manufactures powersports vehicles, operating in three segments: off-road, on-road and marine. The company has had a couple bad quarters, consistent with other industry peers, as demand for recreation is down. Additionally, consumer financing costs and dealer floorplan costs are up due to higher interest rates. The combination is pressuring margins. It’s a discretionary business to be sure, so we have eyes wide open. However, we believe that inventory issues are creating an opportunity to buy a market leader at an absolute cheap price. The stock is the lowest since the first half of 2020 when the pandemic began. The company is well run historically, and current management has demonstrated operating discipline by divesting bad businesses acquired under old management, focusing on the company’s roots in power sports and continuing its history of returning capital to shareholders via dividends and buybacks. Returns for the business are strong with returns on tangible capital most years in the mid-to-high teens. It is well financed with a balance sheet that is well termed out.”
4) Topgolf Callaway Brands Corp. (NYSE:MODG)
% Decline on a YTD Basis: ~42.5%
Number of Hedge Fund Holders: 22
Topgolf Callaway Brands Corp. (NYSE:MODG) is engaged in designing, manufacturing, and selling golf equipment, golf and lifestyle apparel, and other accessories in the United States, Europe, Asia, and Internationally.
Topgolf Callaway Brands Corp. (NYSE:MODG) saw potential headwinds in the recent past including a decline in same-venue sales of 11% in Q3 2024, with a more significant drop in 3+ Bay events. Apart from this, broader macroeconomic headwinds, such as cautious consumer spending, impacted the revenue growth in both Topgolf venues and its golf equipment segments.
However, Wall Street believes that Topgolf Callaway Brands Corp. (NYSE:MODG)’s stock is well-placed for a revival, with new initiatives and venue expansions anticipated to drive future growth. Furthermore, the company’s intention to pursue the separation of its business into two independent companies i.e., Callaway and Topgolf, should benefit it over the long term. Topgolf Callaway Brands Corp. (NYSE:MODG) believes that creating 2 companies will result in material benefits to the stand-alone businesses.
As per Topgolf Callaway Brands Corp. (NYSE:MODG), the transaction should result in enhanced strategic focus, optimized capital allocation, and simplified operating structure. The company expects to execute the spin-off in H2 2025. TimesSquare Capital Management, an equity investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, premium brands, or support services for other consumer companies. Also detracting from results was Topgolf Callaway Brands Corp. (NYSE:MODG), which manufactures golf equipment and accessories, as well as operates entertainment venues. Although recent channel checks indicated that TopGolf activity trends were improving, that softened later in the quarter. Overall revenues and earnings were less than anticipated, which led management to lower its guidance for the rest of the year. The company’s Callaway equipment and apparel business was more stable, though management also discussed a strategic review of the entertainment business. Subsequently, the company announced plans to spin off TopGolf in 2025. While we agreed with the rationale, the timing was at a point of weakness, and we exited the position that was down -31% during the quarter.”
3) XP Inc. (NASDAQ:XP)
% Decline on a YTD Basis: ~49.4%
Number of Hedge Fund Holders: 25
XP Inc. (NASDAQ:XP) offers financial products and services in Brazil. XP Inc. (NASDAQ:XP)’s stock has had a tough environment as a result of underperformance in its Q3 2024 revenues primarily because of slower growth in key business segments including retail investments and wealth management. The company has been witnessing a tougher economic environment in Brazil because of increased interest rates and inflationary pressures. These factors have weighed over consumer and investor sentiment.
Moving forward, XP Inc. (NASDAQ:XP)’s stock is expected to be aided by favorable demographic and economic trends. Brazil’s growing middle class and increased awareness about investment opportunities among retail investors should create long-term opportunities. Despite the modest growth outlook, Brazil is expected to add more than 6 million new households to its middle class by 2029, as per the Brazilian Chamber of Commerce. The company remains focused on becoming a leader in retail investments with the help of net new money consistency and by enhancing product offerings.
XP Inc. (NASDAQ:XP) indicated that it plans to maintain a BIS (Bank for International Settlements) ratio between 16% and 19% by 2026 and distribute more than 50% of profits in the form of dividends during the same period. Furthermore, the acquisition of Banco Modal S.A. should help XP Inc. (NASDAQ:XP) expand its client base, and enhance the ability to offer comprehensive financial solutions. Therefore, XP Inc. (NASDAQ:XP)’s strong brand recognition, customer trust, and commitment to cost management are expected to act as principal growth enablers.
2) PagSeguro Digital Ltd. (NYSE:PAGS)
% Decline on a YTD Basis: ~41.5%
Number of Hedge Fund Holders: 25
PagSeguro Digital Ltd. (NYSE:PAGS) is engaged in the provision of financial and payment solutions for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized companies in Brazil and internationally.
Morgan Stanley highlighted challenges encountered by the payments industry in Brazil, particularly expressing market saturation as a critical one. Apart from the concerns regarding the core payments business, there is also uncertainty about PagSeguro Digital Ltd. (NYSE:PAGS)’s ability to diversify away from the payments space quickly enough to mitigate the challenges.
That being said, Wall Street believes that PagSeguro Digital Ltd. (NYSE:PAGS)’s growth is expected to be aided by its entry into unsecured business lending. This provides a significant opportunity for diversification and revenue growth and enables the company to leverage its existing merchant relationships and data to provide value-added financial services. Unsecured business lending is expected to offer a new revenue stream with potentially higher margins as compared to traditional payment processing.
By leveraging its vast transaction data, PagSeguro Digital Ltd. (NYSE:PAGS) can assess credit risk more accurately than traditional lenders, potentially resulting in better loan performance and profitability. As merchants are dependent on PagSeguro Digital Ltd. (NYSE:PAGS) for both payment processing and working capital, it can further deepen its relationships and create additional barriers to switching. As per Wall Street, the shares of the company have an average price target of $14.75.
1) TORM plc (NASDAQ:TRMD)
% Decline on a YTD Basis: ~33.6%
Number of Hedge Fund Holders: 25
TORM plc (NASDAQ:TRMD) is a shipping company, which owns and operates a fleet of product tankers in the United Kingdom. TORM plc (NASDAQ:TRMD)’s stock has faced challenges in the recent past as a result of market weakness. The seasonal fluctuations in freight rates, mainly in the product tanker sector, weighed over the earnings.
The company’s TCE (time charter equivalent) earnings are expected to be in the range of US$1,110 – US$1,160 million as compared to the previous guidance of $1150 million – $1350 million. Moreover, global economic uncertainties resulted in reduced optimism for near-term shipping demand.
Despite market volatility, TORM pic (NASDAQ:TRMD) is optimistic about the future, expecting continued positive rate environments and a tightening supply-demand balance. Wall Street analysts believe that global demand for refined petroleum products should increase, supported by longer trade routes due to geopolitical factors. This growth in ton-mile demand is expected to benefit TORM plc (NASDAQ:TRMD) because of its large fleet of product tankers.
The company continues to invest in fleet growth and modernization. Its emphasis on large, fuel-efficient vessel classes places it well to capture higher freight rates and serve growing global markets. Wall Street analysts gave an average price target of $34.45 on the shares of TORM plc (NASDAQ:TRMD).
While we acknowledge the potential of TRMD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than TRMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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