The U.S. consumer prices report released this week revealed a less-than-expected increase in December, signaling a potential cooling in inflation pressures. This data has sparked bets on further tame inflation and a drop in interest rates. The core consumer price index (CPI), which excludes volatile food and energy prices, increased by 0.2%, down from 0.3% over the previous four months. This marks the first decrease in the rate of core CPI growth in six months, driven by lower hotel prices, slower increases in medical care costs, and moderate rent growth.
The data has renewed hopes that the Federal Reserve might ease interest rates sooner than anticipated. Before the report, most market participants expected rate cuts to occur in the second half of the year, if at all. However, the latest data has bolstered expectations for two cuts this year and even the possibility of a rate cut as early as March. Following the release, Treasury yields dropped, the S&P 500 rose, and the dollar weakened.
The sharp surge in equity prices is not surprising, as lower interest rates are generally bullish for several reasons. When interest rates fall, borrowing becomes cheaper for companies, which can lead to increased investment and expansion. Stock prices are often valued based on the present value of future earnings or cash flows, discounted by interest rates. Lower interest rates reduce the discount rate, increase the present value of future earnings, and make stocks appear more valuable.
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In an interview with CNBC on January 16, Christopher Waller, Governor of the Federal Reserve, discussed the recent economic data and its implications for future monetary policy decisions. Waller welcomed the strong jobs report from the previous week and the latest inflation prints, which he found particularly encouraging. He noted that the inflation data was very positive, with core PCE inflation coming in below 0.2% for the sixth month out of the last eight. This trend, he believes, is bringing inflation closer to the Fed’s 2% target in terms of core, despite a couple of bumps in September and October.
Waller emphasized that while the inflation data is promising, it is crucial to see if this trend continues. He mentioned that base effects from last year will play a role, but he is hopeful that a repeat of the shock experienced in January and February of last year will not occur again. If the current trend persists, he suggested that rate cuts could be on the table in the first half of the year.
When asked about the exact timing of potential rate cuts, Waller indicated that much depends on the continued improvement in inflation data. He stressed that the Fed is not in a rush to act, as Chair Jerome Powell has stated, and that they need to see more progress on inflation before making any decisions. Waller mentioned that while March is not entirely ruled out, any significant economic disruptions could push the timeline back. Regarding the number of rate cuts that might be expected this year, Waller reiterated that the data will drive the Fed’s decisions. He noted that the extent of progress on inflation and the perception of the neutral rate among policymakers will influence the number of cuts.
The latest consumer price data has sparked optimism among investors, as easing inflation and the possibility of interest rate cuts create a more favorable environment for businesses and markets. With that in context, let’s take a look at the 15 best cheap stocks to buy for 2025.
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Our Methodology
To compile our list of the 15 best cheap stocks to buy for 2025, we used Finviz and Yahoo stock screeners to find the 40 largest companies trading below the forward P/E ratio of 15 as of January 15. We then used Insider Monkey’s Hedge Fund database to rank 15 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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 Cheap Stocks to Buy for 2025
15. Amgen Inc. (NASDAQ:AMGN)
Forward P/E Ratio as of January 15: 12.84
Number of Hedge Fund Investors: 68
Amgen Inc. (NASDAQ:AMGN) is a leading biotechnology company specializing in discovering, developing, and manufacturing innovative medicines. The company’s products focus on oncology, cardiology, inflammation, and bone health, with customers including hospitals, pharmacies, and healthcare providers.
Amgen Inc. (NASDAQ:AMGN) is making significant strides in advancing its pipeline, which includes several potentially groundbreaking therapies. One of the key focus areas is the development of MariTide, a novel treatment for obesity, obesity-related conditions, and type 2 diabetes. The Phase II study of MariTide is progressing well, and Amgen Inc. (NASDAQ:AMGN) is preparing to initiate a broad Phase III program. Additionally, the company has initiated a dedicated Phase II trial of MariTide in patients with type 2 diabetes, highlighting its potential to address important unmet medical needs.
Amgen Inc. (NASDAQ:AMGN) is also advancing other preclinical and Phase I programs, such as AMG 513, which targets LP(a) with a potentially best-in-class small interfering RNA medicine. Amgen Inc. (NASDAQ:AMGN) is also advancing xaluritamig, a first-in-class STEAP1 CD3 bispecific molecule, into Phase III clinical development for post-taxane metastatic castrate-resistant prostate cancer. These initiatives, along with the continued development of other oncology candidates such as bemarituzumab and AMG 193, make Amgen Inc. (NASDAQ:AMGN) well-positioned to maintain its leadership in addressing critical unmet diseases.
14. Bristol-Myers Squibb Company (NYSE:BMY)
Forward P/E Ratio as of January 15: 7.85
Number of Hedge Fund Investors: 70
Bristol-Myers Squibb Company (NYSE:BMY) is a leading global biopharmaceutical company committed to discovering, developing, and delivering innovative medicines to patients in need. The company focuses on areas such as oncology, immunology, and cardiovascular diseases.
Bristol-Myers Squibb Company (NYSE:BMY) is strategically focusing on developing and commercializing transformational medicines in disease areas where it has a competitive advantage. This includes strengthening its oncology portfolio through acquisitions, such as RayzeBio, which provides access to one of the fastest-growing platforms in solid tumor oncology with radiopharmaceuticals. In immunology, Bristol-Myers Squibb Company (NYSE:BMY) is targeting treatments that fundamentally reset the immune system, such as its CD19 NEX-T program for autoimmune diseases.
Bristol-Myers Squibb Company (NYSE:BMY) is increasingly leveraging technology and artificial intelligence (AI) to accelerate its innovation cycle and increase the probability of success in its R&D efforts. The company is using AI to enhance drug discovery, optimize clinical trials, and improve operational efficiency. By integrating advanced technologies, the company aims to bring new medicines to market faster and more efficiently, thereby driving sustainable growth and delivering value to patients and shareholders.
