In this article, we will take a look at the 8 best bargain stocks to buy in October.
The Aftermath of an Easing Cycle
September has historically been sluggish for stocks. However, with an easing cycle and an upcoming election in store, the results this year may be untypical. On September 26, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared in an interview on CNBC to discuss the market outlook ahead of the easing cycle.
Lee suggests that an easing cycle indefinitely improves the performance of markets, especially from a historical standpoint, hinting that with 40 days to the election, the market may change its course of action accordingly. While stocks reposition themselves positively after an easing cycle, the markets may see delays, especially because investors are more likely to wait until after the results are out.
Lee added that rallies in November and December will be significantly high, especially when markets have been up more than 10% in the first half of the fiscal year 2024. While the economy is not officially in a recession, the number of investors and analysts who believe the economy is going down is immense. Therefore, to get investors on the move evidence has to be better than expected.
What do the Elections Mean for Markets?
The 50 basis point cut may have redeemed positive results for the market. On September 28, Matt Powers, Powers Advisory Group managing partner, appeared in an interview on Yahoo Finance to discuss the plausible sectors to target as elections approach.
Powers shared that inflation numbers validated the 50 basis point cut, showing positive economic signs. However, he does reiterate that there will be some short-term volatility, especially in October.
According to him, investors must focus more on stocks in the defensive sectors, including utilities, consumer staples, and financials. Powers advises investors to spare some short-term equity but focus on long-term and medium-term results. Overall, he believes that the market is more balanced and a reallocation to the dividend stocks and dividend ETFs is highly probable.
Now that we have studied the aftermath of the easing cycle and the market outlook before an impending election, let’s take a look at the 8 best bargain stocks to buy in October according to analysts.
A senior executive looking up at a large boardroom filled with the stocks their company manages.
Our Methodology
To come up with the best bargain stocks in October, we used the Finviz screener to find stocks trading at a forward P/E of less than 20. We sorted our screen by market cap and went through the 30 biggest stocks. We then shortlisted the stocks that were the most popular among hedge funds, as of Q2 2024, and that analysts saw the most upside to. The stocks are ranked in ascending order of analysts’ upside potential.
Why are we interested in 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).
8 Best Bargain Stocks To Buy in October
8. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E as of September 28, 2024: 11.27
Analyst Upside Potential as of September 28, 2024: 18%
Number of Hedge Fund Holders: 86
PDD Holdings Inc. (NASDAQ:PDD) is one of the best bargain stocks to buy according to analysts. The company is a multinational e-commerce group that owns Temu and Pinduoduo, two online retail sites, and holds a 20% market share in China’s e-commerce industry.
Pinduoduo is one of the most prominent online agriculture retail platforms in China. Temu, on the other hand, is an e-commerce platform in the United States and Europe that sells clothing, home decor, beauty, and handmade items. Temu, known for its notoriously low-priced products and fast deliveries, has partnerships with major distributors such as UPS, FedEx, and USPS.
PDD Holdings’ (NASDAQ:PDD) presence in China warrants its position as one of the best e-commerce stocks to buy. With a 20% market share in the country and a growing platform in Europe and North America, PDD’s Temu is set to become one of the most used platforms in the world. Over the past year, PDD’s growth has been exemplary. In the second quarter of 2024, PDD Holding’s total revenue reached RMB 97 billion, an 86% increase year-over-year.
Overall, PDD Holdings (NASDAQ:PDD) is witnessing an upward trajectory in terms of users and cross-border growth. Its 10 billion yuan commitment to its agricultural initiative saw a 90% growth in participating merchants, as of June 18. Additionally, the company made significant investments in research and development to improve the merchant onboarding and product listing processes.
Overall, 86 investors were bullish on the stock at the end of Q2 2024, which explains PDD’s position. While macroeconomic conditions in China may be off-putting, the company’s cross-border growth may yield promising results.
7. NetEase, Inc. (NASDAQ:NTES)
Forward P/E as of September 28, 2024: 13.07
Analyst Upside Potential as of September 28, 2024: 21%
Number of Hedge Fund Holders: 35
NetEase, Inc. (NASDAQ:NTES) ranks seventh on our list of the best bargain stocks in October according to analysts. The company is an online gaming, music streaming, and content services provider based in China.
In the second quarter of 2024, the company reported revenue worth $3.5 billion, up 6.1% year-over-year. Its games and related value-added services segment logged $2.8 billion in revenue, making up for most of the company’s sales.
NetEase’s (NASDAQ:NTES) gaming segment, as evident from its financials, is its strongest suite. During the second quarter, the company not only launched new games but also garnered more popularity for its existing games with record-high daily average users in July and August.
While NetEase, Inc. (NASDAQ:NTES) is already dominant in the gaming industry, its intelligent technology company, Youdao, will benefit thoroughly from the AI and tech wave. The education technology company relies on AI to help learners from across the globe benefit from technology. Some of its prominent tools include Youdao Translation and the Youdao Dictionary Pen.
NetEase, Inc. (NASDAQ:NTES) is an investor favorite poised to leverage AI. Analysts are bullish on the stock and their price target points to an upside of 21%. 35 hedge funds held the stock at the end of Q2 2024.
Polen Capital’s Polen Emerging Markets Growth Strategy stated the following regarding NetEase, Inc. (NASDAQ:NTES) in its first quarter 2024 investor letter:
“NetEase, Inc. (NASDAQ:NTES) is one of the top players in China’s video game industry and saw decent revenue growth in 2023, particularly in its games division, with profit growth close to 20%. The stock also continues to recover after gaming restrictions announced last quarter in China were not nearly as bad as first feared.”
6. Vale S.A. (NYSE:VALE)
Forward P/E as of September 28, 2024: 5.51
Analyst Upside Potential as of September 28, 2024: 27%
Number of Hedge Fund Holders: 34
Vale S.A. (NYSE:VALE) is one of the best bargain stocks in October according to analysts. The mining company is headquartered in Brazil and is present in more than 20 countries. The company engages in sustainable mining and is one of the largest producers of iron ore, pellets, and nickel. It also has operations in the logistics of mineral exporting.
The company’s responsibility towards the planet is remarkable. Currently, Vale S.A. (NYSE:VALE) produces 54% of the energy it consumes and protects 8,500 square feet of natural areas, 6 times the size of its operations. Over the years the company has launched a range of initiatives to give back to society including the Vale Foundation, Valia Portal, Vale Museum, Vale Cultural Institute, Vale Fund, and Vale Social Network, to name a few.
On the financial front, Vale S.A. (NYSE:VALE) logged $9.92 billion in revenue during the second quarter. In addition to that, the company reported record performances in production. Iron ore production stood at 81 metric tons (MT), S11D production at 20 MT, and iron sales at 90 MT, up by 3%, 2%, and 7% year-over-year, respectively.
Overall, Vale S.A. (NYSE:VALE) is set to add another 50 metric tons of capacity by 2026, making it one of the best bargain stocks to buy now. The company also signed a partnership for a new iron ore concentration plant in Sohar, which will be completed by 2027.
The growing need for sustainable energy sources makes Vale’s (NYSE:VALE) position in the industry crucial and an important name over the next few years. This explains why the company has several projects and sustainable initiatives in the pipeline.
5. Block, Inc. (NYSE:SQ)
Forward P/E as of September 28, 2024: 18.81
Analyst Upside Potential as of September 28, 2024: 34%
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ) is a financial services technology company that ranks fifth on our list of the best bargain stocks to buy now. The digital payment services provider offers its services to consumers and small to medium-sized businesses.
Founded in 2009, the company now owns several proprietary services including Square, Cash App, Spiral, TIDAL, and TBD. For the year ended 2023, more than 4 million sellers used Block’s (NYSE:SQ) Square ecosystem to make over 4 billion transactions.
The company also delivered strong financial results in the second quarter of 2024. Block, Inc. (NYSE:SQ) saw its gross profit grow by 20% year-over-year. For the full fiscal year 2024, the company expects gross profit to reach at least $8.89 billion, logging 18% growth year-over-year.
Gen Z and millennials back the demand for Block’s Cash App, allowing the company to exploit the segment further. As of now, this age group makes up 75% of the active customer base. While this is huge, the company has only penetrated 34% of the Gen Z market and 25% of the millennial market.
Overall, 59 hedge funds held the stock at the end of Q2 2024. Analysts are also bullish on the stock and their median price target represents an upside of 34% from current levels.
4. Biogen Inc. (NASDAQ:BIIB)
Forward P/E as of September 28, 2024: 12.06
Analyst Upside Potential as of September 28, 2024: 41%
Number of Hedge Fund Holders: 46
Biogen Inc. (NASDAQ:BIIB) ranks fourth on our list of the best bargain stocks to buy according to analysts. The biotechnology company is based in Massachusetts, United States. The company was founded in 1978 and has pioneered a range of breakthrough medicines for Alzheimer’s and spinal muscular atrophy.
The company is actively working to expand its operations. Previously in July, the company completed the acquisition of Human Immunology Biosciences, a private biotechnology company for patients with immune-mediated diseases. During the second quarter, Biogen Inc. (NASDAQ:BIIB) also gained approvals from Hong Kong, the United Arab Emirates, Israel, and countries in Europe for its drugs.
The company is working towards improving its business. Eighteen months ago, Biogen reported declining revenues and profits for four years. However, since Q4 2023, the company has been working relentlessly to launch new drugs, reduce costs, invest more in research and development, grow externally, and optimize its existing portfolio.
Biogen Inc. (NASDAQ:BIIB) expects to gain approval from 20 countries by the end of this year, evidence of its efforts toward the growth of its company. Such explains why 46 hedge funds were bullish on the stock at the end of Q2 2024.
Patient Capital Management’s Patient Capital Opportunity Equity Strategy stated the following regarding Biogen Inc. (NASDAQ:BIIB) in its Q2 2024 investor letter:
“Biogen Inc. (NASDAQ:BIIB) is another name that we believe is underappreciated. As a global biopharmaceutical business, the company is most well known for their products in multiple sclerosis, spinal muscular atrophy, and most recently Alzheimer’s disease. The new CEO, Christopher Viehbacher, is working to improve the company’s pipeline, most recently with their acquisition of Human Immunology Biosciences Inc. in May. Chris has a strong track record of successful M&A and we expect him to continue that tradition. More importantly, we think the market is currently giving the company no credit for success in their Alzheimer’s indication. While the uptake in Leqembi, their Alzheimer’s product, has been slow, we still see strong long-term potential for a patient population that is dramatically underserved. We find the risk/reward extremely attractive.”
3. Cenovus Energy Inc. (NYSE:CVE)
Forward P/E as of September 28, 2024: 9.19
Analyst Upside Potential as of September 28, 2024: 46%
Number of Hedge Fund Holders: 46
Cenovus Energy (NYSE:CVE) is one of the best bargain stocks to buy now. The company is based in Canada and is engaged in the production and exploration of natural gas and cruise oil. The company owns several oil and gas fields and operations in oil sands and refining.
During the second quarter of 2024, the company produced an average of 800,800 barrels of oil per day. As for its crude oil, the company’s refineries produced an average of 568,900 barrels per day, up by 17,800 barrels from the previous quarter.
The Canadian entity managed to achieve significant milestones during the quarter. Its new pipeline to Christina Lake is expected to be operational by the end of 2024 and will be able to deliver oil by the middle of 2025. In addition to that. Cenovus Energy (NYSE:CVE) initiated two well pads at Sunrise, expected to be completed by the end of this year. As for its ongoing West White Rose project, the structure reached its final height, and part of the construction was completed.
Overall, the company is not only a rising star, but it is also performing well financially. By June 30, Cenovus Energy (NYSE:CVE) had a net debt worth of $4.26 billion, and in July the company swiftly achieved its target of $4 billion. As a result of this achievement, the company will be able to level up its returns to its shareholders.
The company is an important player in the energy segment and an investor favorite. The company strongly believes in giving back to its shareholders, as evidenced by its returns in the previous quarter. Such explains why 46 hedge funds were bullish on the stock at the end of Q2 2024.
L1 Capital L1 Long Short Fund stated the following regarding Cenovus Energy Inc. (NYSE:CVE) in its first quarter 2024 investor letter:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
2. Super Micro Computer, Inc. (NASDAQ:SMCI)
Forward P/E as of September 28, 2024: 12.51
Analyst Upside Potential as of September 28, 2024: 51%
Number of Hedge Fund Holders: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) is an information technology company based in California, United States. The company provides computing, storage, networking, and green computing technology solutions. It specializes in developing enterprise, cloud, AI, Metaverse, and 5G Telco/Edge infrastructure.
With operations in more than 100 countries, Super Micro Computer, Inc. (NASDAQ:SMCI) ranks second on our list of the best bargain stocks according to analysts. The fiscal year 2023 was a turning point for the company in financial terms. SMCI logged its first $2 billion in quarterly revenue and its first $7 billion in yearly revenue in 2023, driven by its expansions in Asia and value-added AI solutions.
The company is thriving in the server segment. Last week, it introduced high-performance Intel-based servers for AI, Cloud, and Edge. Earlier in June, Super Micro Computer, Inc. (NASDAQ:SMCI) added 3 new manufacturing facilities in Silicon Valley and globally to support the accelerating demand for AI and Enterprise solutions. According to the company’s CEO, the new servers will help SMCI develop customized solutions for their clients.
In the fiscal year 2024, Super Micro Computer, Inc. (NASDAQ:SMCI) logged $14.94 billion in revenue, up by 110% year-over-year, driven by its new AI infrastructure. Note that the company’s FQ4 2024 revenue alone exceeded the revenue for the complete fiscal year 2022. Such testifies to SMIC’s growth potential amid the AI boom, and why it is one of the best bargain stocks to buy.
1. Schlumberger Limited (NYSE:SLB)
Forward P/E as of September 28, 2024: 12.09
Analyst Upside Potential as of September 28, 2024: 53%
Number of Hedge Fund Holders: 67
Schlumberger Limited (NYSE:SLB) is a technology company in the energy sector. It provides a range of solutions to aid the exploration and development of oil and gas. It has operations across 120 countries.
The company is committed to fueling innovation across the industry, reaching net-zero targets, and creating a balanced planet. For the past 80 years, the company has been supporting the delivery of sustainable energy in Africa. In addition to that, Schlumberger Limited (NYSE:SLB) makes up 80% of the world’s geothermal projects. As of today, the company has over 13,000 active patents and more than 65 research and development centers.
Schlumberger Limited (NYSE:SLB) is one of the best bargain stocks to buy and we say that because of its solid partnerships with large entities. On September 19, the company collaborated with NVIDIA to make AI solutions for companies in the energy sector across the lines of exploration, operations, and data management. In addition to that, on September 18, the company partnered with Aramco to prevent greenhouse gas emissions in the industrial sector.
Schlumberger Limited (NYSE:SLB) is not only trading at a bargain but it is also set to benefit from the technology and AI wave. At the moment, the company is advancing in the production of robotic inspections and innovative energy systems.
Overall, SLB ranks first among the 8 best bargain stocks to buy in October. While we acknowledge the potential of technology companies in the energy industry, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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