In this article, we discuss the 10 best stocks to buy under $50.
Prior to the week ending on April 27, the US equity market posted a weekly loss for seven consecutive weeks. This was the longest losing streak since the dot-com bubble of 2000. Multiple factors were contributing to this pessimism. The Russia-Ukraine conflict, the resurgence of COVID-19, and the subsequent lockdowns in China were not positively welcomed by investors. Moreover, the Federal Reserve’s decision to increase the benchmark interest rates due to high inflation signaled more economic uncertainty in the US.
Having been impacted by recent losses, investors have begun to consider whether the sell-off this year is excessive. Despite this week’s advances, the S&P 500 Index is down 12.8% YTD, with a market worth of $6.8 trillion lower than it was in January. The co-head of global equities at Barclays, Paul Leech, commented that the “sentiment overall is very bearish, but people are also trying to reconcile the lack of positive catalysts ahead with how much bad news is already in the price.” Some experts believe that recent growth in Treasury bonds, along with stock market losses, have led some investors to restructure their portfolios back into stocks, improving stock prices.
While big-cap companies like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG) are considered a safe bet in uncertain economic situations, these stocks are often beyond most investors’ price range. As per McKinsey & Co.’s report, over 53 million jobs in the United States were put at risk last year due to the Covid-19 pandemic. Moreover, unemployment claims saw a sharp rise, with over 26 million Americans applying for unemployment as of April 2020. The pandemic has had a far-reaching impact on the income levels and financial stability of individuals. With this context in mind, we have curated a list of the 10 best stocks to buy under $50.
Photo by Adam Nowakowski on Unsplash
Our Methodology
We have picked the stocks after analyzing the earnings reports, business fundamentals, and growth plans of these companies. Hedge fund sentiment concerning each stock has been determined using Insider Monkey’s database of 912 leading hedge funds tracked at the end of Q1 2022.
10 Best Stocks to Buy Under $50
10. SentinelOne, Inc. (NYSE:S)
Stock Price as of May 27: $26.97
Number of Hedge Fund Holders: 38
SentinelOne, Inc. (NYSE:S) is a Mountain View, California-based AI-powered cybersecurity company that delivers protection to end-users, data centers, and cloud platforms. In 2021, the company’s key top-line metrics like annual recurring revenue (ARR), customer base, and revenue grew by more than 100%. Furthermore, SentinelOne, Inc. has given strong guidance for this year as well, despite the uncertainty related to the macroeconomic environment.
According to Information Dominance Center (IDC), the total addressable market for SentinelOne, Inc.’s (NYSE:S) services is expected to increase from $26 billion in 2020 to $40.2 billion by 2024. This translates into a four-year CAGR of 11.9%, reflecting the stock’s strong growth potential. In Q1 2022, SentinelOne, Inc. beat the analysts’ estimated EPS Normalized Actual of -$0.18 by $0.01. Moreover, the company posted revenue of $65.64 million, surpassing the consensus estimate by $4.95 million.
SentinelOne, Inc. reported cash in hand of $1.67 billion at the end of 2021. Although the company reported negative cash from operations of $95.6 million, the stock provides a growth story and the currently depressed multiples could make it a takeover target by a private equity firm or a provider of cloud platform looking to strengthen its IT security services during these challenging times.
SentinelOne, Inc. was mentioned in the Q4 2021 investor letter of ClearBridge Investments. Here’s what the investment management firm said:
“We added six new positions in the fourth quarter. We see next-generation cybersecurity provider SentinelOne, although early in its growth lifecycle, as capable of taking share from legacy players in the antivirus and broader cybersecurity industry.”
9. Tempur Sealy International, Inc. (NYSE:TPX)
Stock Price as of May 27: $26.41
Number of Hedge Fund Holders: 31
Tempur Sealy International, Inc. (NYSE:TPX) is a Lexington, Kentucky-based designer, manufacturer, distributor, and retailer of bedding and mattresses. The company has been on a strong growth trajectory since 2018, as it has consistently reported a double-digit increase in revenue. Tempur Sealy International, Inc. was able to achieve this aggressive growth by expanding its retail presence, increasing its distribution channels, and making acquisitions.
In Q1 2022, Tempur Sealy International, Inc. observed a 19.8% YoY increase in net sales. For 2022, the company anticipates revenue growth of at least 10% and EPS to be around $3.20 to $3.40, compared to the analysts’ estimates of $3.36. The company also shared its plans of expanding its manufacturing capabilities and growing its “direct to consumer channel both online and in-store.”
According to Insider Monkey’s proprietary data, Ricky Sandler’s Eminence Capital is the leading investor in Tempur Sealy International, Inc.. The value of his stake stands at around $129.5 million. On a sequential basis, the hedge fund increased its holdings in the company by 71%. The stock is being considered a defensive stock during these uncertain times as the company is working aggressively to increase its presence in the US and around the globe.
Vulcan Value Partners shared its stance on Tempur Sealy International, Inc. in its Q1 2021 investor letter. Here’s what it said about the company:
“Tempur Sealy International is the leading designer, manufacturer, and distributor of mattresses globally. The company has recognizable brands across all price points. Approximately 80% of the company’s revenue is derived from its wholesale channel with roughly 5,400 retail partners. The remaining 20% of revenue comes from its retail stores and e-commerce site, Tempur-Pedic.com. Its iconic brand portfolio, world-class manufacturing facilities, and go-to-market omni channel strategy are all competitive advantages. We are pleased to be able to own the company in the portfolio again.”
8. Huntsman Corporation (NYSE:HUN)
Stock Price as of May 27: $36.57
Number of Hedge Fund Holders: 36
Huntsman Corporation (NYSE:HUN) is a Texas-based manufacturer and marketer of specialty chemical products for end consumers and industrial customers. Like its competitor Dow Inc. (NYSE:DOW), Huntsman Corporation saw its revenue increase by 29.9% YoY to $2.39 billion during Q1 2022, outperforming the consensus estimates of $2.28 billion. Meanwhile, the EPS was posted at $1.19 and surpassed the analysts’ estimates of $1.03.
In the last few years, Huntsman Corporation has been working on divesting its commodity businesses and increasing its focus on higher-margin downstream and specialty product lines. Furthermore, the firm is also looking to grow organically. In late March 2022, Huntsman Corporation announced that it is increasing its existing share repurchase program from $1 billion to $2 billion. Under the revised program, the company has executed a share repurchase of $210 million as of March 31 and has a share buyback balance of nearly $1.8 billion.
At the end of Q1 2022, 36 hedge funds reported owning a stake in Huntsman Corporation. Amongst other companies attracting hedge fund investment are Apple Inc., Amazon.com, Inc., and Alphabet Inc..
7. Corning Incorporated (NYSE:GLW)
Stock Price as of May 27: $35.65
Number of Hedge Fund Holders: 43
Corning Incorporated (NYSE:GLW) is a New York-based corporation that manufactures and sells ceramics and specialty glass products for industrial and scientific use.
The firm reported strong Q1 2022 results as revenue increased by 11.9% YoY to $3.68 billion, outperforming analysts’ forecast of $3.55 billion. Moreover, Corning Incorporated reported non-GAAP EPS of 54 cents, beating the consensus estimate of 49 cents.
Corning Incorporated also appears to have the power to withstand inflationary pressures as its gross profit margin only contracted by 20 bps to 34.8% during Q1 2022. For Q2 2022, Corning Incorporated has guided that it anticipates revenue to be in the range of $3.7 billion to $3.9 billion, as opposed to the analysts’ forecast of $3.69 billion. Core EPS is expected to be around 54 cents to 59 cents, compared to the analysts’ expectation of 55 cents. Moreover, Corning Incorporated is planning to cross the top line of $15 billion in 2022.
Of the 912 elite hedge funds in Insider Monkey’s database as of Q1 2022, 43 funds held a stake in Corning Incorporated.
6. Wells Fargo & Company (NYSE:WFC)
Stock Price as of May 27: $45.89
Number of Hedge Fund Holders: 93
Wells Fargo & Company is a San Francisco, California-based bank with over 5,200 branches across the US. Since mid-February of this year, the stock price has traced back from $60 to its current level and provides an attractive entry point for investors.
Wells Fargo & Company stock has retreated due to various factors such as the start of the conflict between Russia and Ukraine, the ever-continuing development of the COVID-19 pandemic, and the rise in interest rate by the Federal Reserve to combat high inflation. The stock is undervalued as Jason Goldberg at Barclays gave Wells Fargo & Company an Overweight rating with a price target of $64 following the Q1 2022 results. The target price reflects a potential upside of nearly 40% from the last closing. In a note issued to investors on April 18, Goldberg highlighted that Wells Fargo & Company had raised its net interest income and loan growth guidance while maintaining its expense forecast in the Q1 results. The bank is expected to face headwinds across various segments. However, Goldberg expects the net impact to be positive.
Davis Funds discussed its stance on Wells Fargo & Company in its Q4 2021 investor letter. Here’s what the firm said:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Wells Fargo.”
In addition to Wells Fargo & Company, popular companies such as Apple Inc., Amazon.com, Inc., and Alphabet Inc. are popular amongst the hedge funds.
5. Freeport-McMoRan Inc. (NYSE:FCX)
Stock Price as of May 27: $39.65
Number of Hedge Fund Holders: 68
Freeport-McMoRan Inc. (NYSE:FCX) is an Arizona-based mining company with operations in North America, South America, and Indonesia. The company is involved in the exploration of copper, gold, molybdenum, and silver.
In its Q1 2022 results, Freeport-McMoRan Inc. reported strong sales growth and lower-than-expected costs. The world’s biggest copper mining company also lowered its debt significantly. The company offers a free cash flow (FCF) yield of 7%, which strengthens the case for a strong shareholder return in the form of dividends and share buyback.
Amongst the popular hedge funds holding a stake in the company, Fisher Asset Management holds a stake of $2.52 billion in Freeport-McMoRan Inc. as of March 31. The hedge fund increased its holdings in the company by 4% on a sequential basis.
Freeport-McMoRan Inc. was discussed in the Q4 2021 investor letter of Horizon Kinetics LLC. Here’s what the firm said:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
4. GoPro, Inc. (NASDAQ:GPRO)
Stock Price as of May 27: $6.99
Number of Hedge Fund Holders: 26
GoPro, Inc. (NASDAQ:GPRO) is a San Mateo, California-based corporation involved in the production and distribution of action cameras and has now further diversified into mobile applications and video-editing software.
The company realized that its products do not have a high replacement cycle like smartphones, so it has expanded its product portfolio by offering high-end cameras and budget-friendly options as well. GoPro, Inc. has also introduced a $50/year subscription service that provides a discount on GoPro products and access to the cloud to save videos. The company has transitioned more towards e-commerce sales and has reduced its reliance on channel partners and resellers to generate sales.
GoPro, Inc. is expected to benefit from higher traveling activity as borders across the world are reopening after an ease in restrictions following the COVID-19 pandemic. The company has been able to get its gross margin to the low 40s and is currently trading at a forward EV multiple of 6x only, which makes it an attractive value play. Furthermore, GoPro, Inc. has authorized a share buyback plan of $100 million.
As of Q1 2022, 26 hedge funds held a stake in GoPro, Inc..
3. Skechers U.S.A., Inc. (NYSE:SKX)
Stock Price as of May 27: $39.24
Number of Hedge Fund Holders: 28
Skechers U.S.A., Inc. (NYSE:SKX) is a California-based footwear brand. It is the third biggest athletic footwear brand in the world, with over 4,300 Skechers-branded stores globally. This is nearly four times higher than the global retail stores of athletic footwear giant NIKE, Inc. (NYSE:NKE). Although having a bigger store network results in higher expenses, it is very useful in the fragmented apparel and footwear industry.
Analysts are bullish on the stock as Gabriella Carbone at Deutsche Bank increased the price target on Skechers U.S.A., Inc. from $62 to $64 on April 27. While maintaining a Buy rating on the stock, the analyst highlighted that the company is experiencing strong top-line growth across all regions, which made it raise its full-year guidance.
Pzena Investment Management is the leading investor in Skechers U.S.A., Inc., with a stake worth around $281.44 million as of March 31. The hedge fund increased its holdings in the company by 43% sequentially.
Fiduciary Management shared its stance on Skechers U.S.A., Inc. in its Q1 2022 investor letter. Here’s what the firm said:
“Skechers is the third largest footwear brand in the world. The company designs, manufactures, and distributes footwear for men, women, and children in U.S. and international markets. Its products cover a wide range of footwear categories including casuals, dress casuals, sandals, boots, work boots, performance footwear, and kids footwear. The company operates in three business segments: Domestic Wholesale (23% of sales), International Wholesale (48% of sales), and Direct-to-Consumer (29% of sales). In total, international sales account for approximately 60% of revenue…” (Click here to see the full text)
2. General Motors Company (NYSE:GM)
Stock Price as of May 27: $38.57
Number of Hedge Fund Holders: 76
General Motors Company (NYSE:GM) is a Detroit, Michigan-based automobile manufacturer that is on the back foot due to the electric vehicle (EV) revolution in the US. Furthermore, the global supply chain disruption has also played a part in creating challenges for auto manufacturers to fulfill demand.
General Motors Company stock is currently trading at a forward P/E ratio of 6x only as opposed to the average P/E ratio of 9x for the companies in the S&P 500 Index. This reflects a significant discount against the broader market, making it an attractive proposition. The heavy discount should not be warranted as the company is targeting to see its top line grow by 23% YoY in 2022. Although the automotive industry is going through uncertain times due to supply chain disruptions and the EV revolution, General Motors Company has a strong growth history and brand recognition that will help the company move further. Furthermore, the company has shown flexibility to the ever-changing demands of the customers.
Here’s what Oakmark Global Fund said about General Motors Company in its Q1 2022 investor letter.
“General Motors (NYSE:GM) was a detractor during the quarter, due to increased macro uncertainty, higher fuel prices, and concerns over rising input costs, which pressured the company in particular and the auto industry as a whole. While we are closely monitoring the potential impact of these dynamics, industry demand remains robust, driven by strong consumer balance sheets and pent-up demand after multiple years of constrained production. We also remain confident in GM’s ability to navigate a complex operating environment, which the company has consistently demonstrated over the past few years. Finally, the long-term picture remains bright. We believe GM is significantly undervalued, is well-positioned for the long-term transition to electric vehicles and has numerous needle-moving ancillary business opportunities (most notably Cruise, which is an industry leader in autonomous vehicle technology) that are underappreciated.”
1. Marathon Oil Corporation (NYSE:MRO)
Stock Price as of May 27: $31.07
Number of Hedge Fund Holders: 43
Marathon Oil Corporation (NYSE:MRO) is a Houston, Texas-based crude oil and natural gas exploration and production (E&P) company.
During Q1 2022, Marathon Oil Corporation reported an increase in revenue of 49.2% YoY to $1.76 billion, which surpassed the consensus estimate of $1.69 billion. Meanwhile, the non-GAAP EPS of $1.02 was four cents higher than the analysts’ forecast. Marathon Oil Corporation stock is presently trading at a 4x forecasted free cash flow, which is a cheap multiple for an oil and gas E&P company that has a strong balance sheet, a healthy shareholder return program in place, and a low breakeven cost of $35 per barrel. Crude oil prices can be expected to remain around the current level, which makes Marathon Oil Corporation’s stock an attractive investment.
Marathon Oil Corporation was held by 43 hedge funds at the end of Q1 2022, up from 40 in the preceding quarter.
You can also take a peek at the 10 Stocks to Buy According to Canyon Capital Advisors and 10 UK Dividend Stocks To Buy.
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This article is originally published at Insider Monkey.
