In this article, we will look at the 8 Best Cheap Growth Stocks To Invest In Now.
What Should Your Portfolio Look Like in the Current Bull Market
The current market data shows that the economy of the United States is normalizing, especially with an active Federal Reserve, global stimulus from China, and higher consumption rates. In one of our recent articles, 7 Best Low Cost Stocks To Buy Under $50, we talked about the areas that could potentially benefit the most in the current bull market. We also discussed points of view from different analysts. Here is a piece from the article:
“The Fed rate cut and the Chinese stimulus are expected to affect the market positively. Adam Parker, Trivariate Research founder and CEO; Lauren Goodwin, New York Life Investments chief market strategist; and Kristina Hooper, Invesco chief global market strategist joined CNBC recently to talk about the best opportunities in the current bull market.
Adam Parker expressed that the market is outpacing the Federal Reserve’s action. He highlighted a sense of optimism surrounding AI deployment over the next few years, but he also raised concerns about market valuations exceeding economic realities. Parker likes the healthcare sector as it is driven by AI and believes that this will put the industry in a leading market position. He also believes that the Chinese Stimulus is a positive sign for the energy and industrial sectors.
On the other hand, Lauren Goodwin talked about how the rate cuts are supposed to affect the market. She thinks growth is the key indicator while analyzing the market. When the Fed is cutting rates, profit, and earnings margins typically stay where they are until growth starts to slow down. Moreover, she also pointed out that it is difficult to see the real economic catalyst that gives growth an upstart, without inflation. She also thinks that the upcoming period is going to be volatile between growth kicking up and then slowing down. Goodwin mentioned that she is going to be the buyer of the rally until unemployment starts rising and growth becomes a problem.”
Gabriela Santos, JPMorgan Asset Management’s chief market strategist, joined CNBC recently to talk about how investors’ portfolios might not be adequately adjusted to align with the current economic normalization, particularly in fixed-income allocations.
Santos emphasized that a proactive Federal Reserve, ongoing U.S. economic expansion, and stimulus from China create a favorable environment for risk assets to perform well. Santos highlighted that portfolios typically hold only about 36% in core fixed income, while she believes a more appropriate range is 65% to 75%. She suggested reallocating cash into credit rather than equities, focusing on investment-grade bonds and securitized debt.
Moreover, she thinks that within equity as well portfolios are overly emphasized on growth and technology stocks, whereas there lies significant potential outside of these industries. Gabriela Santos also pointed out that consumer spending remains robust, tracking around 3% to 3.5%. This resilience supports the notion of a “soft landing” for the economy. She also noted that it is a good sign that the market is less concerned about inflation, and instead, the focus is now more on consumer spending data, which has been tracking around 3% to 3.5% during the current quarter.
Now let’s look at the 8 best cheap growth stocks to invest in now.
A close-up of an organized portfolio board, monitoring the performance of a diverse array of stocks.
Our Methodology
To compile the list of 8 best cheap growth stocks to invest in now, we used our previous articles and Finviz screener. Using these two sources we shortlisted 20 growth stocks from industries including Technology, Biotech, Healthcare, and Renewable energies among others. We made sure that we only selected stocks that were trading below the forward price-to-earnings ratio of 23.98 (the market’s forward P/E as per the Wall Street Journal) with earnings expected to grow during the year. Next, we ranked these stocks based on the number of hedge fund holders in Q2 2024. The list is ranked in ascending order of the number of hedge fund holders.
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).
8 Best Cheap Growth Stocks To Invest In Now
8. United Therapeutics Corporation (NASDAQ:UTHR)
Forward P/E Ratio: 13.73
Earnings Growth This Year: 24.60%
Number of Hedge Fund Holders: 42
United Therapeutics Corporation (NASDAQ:UTHR) is a biotechnology company that focuses on developing and selling medicines related to pulmonary arterial hypertension (PAH), a serious lung disease. The company develops various medicines and devices to treat PAH. It is also engaged in developing organ transplant technologies and aims to engineer organs that can be transplanted to patients in need.
The company differentiates based on market-leading medicines that are used to treat some serious illnesses. Moreover, its ongoing focus on transplantation and engineered organs is a growth powerhouse that can transform its business.
United Therapeutics Corporation (NASDAQ:UTHR) demonstrated its market capitalization during the second quarter results in 2024. All its major medicines improved in terms of product revenue. Tyvaso DPI led the chart by improving the product revenue by 25% year-over-year. Whereas, Remodulin and Orenitram improved 16% and 13%, respectively during the same time. Overall, the product revenue amounted to $715 million indicating a 20% increase year-over-year.
United Therapeutics Corporation (NASDAQ:UTHR) is one of the best cheap growth stocks to invest in now. The stock is trading at around 14 times its forward earnings with analysts expecting 25% earnings growth during the year. Moreover, it is also popular among hedge funds with 42 institutional holders having stakes in the company, as of Q2 2024.
7. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Forward P/E Ratio: 5.68
Earnings Growth This Year: 7.00%
Number of Hedge Fund Holders: 44
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is a biopharmaceutical company that specializes in treatments for neurological disorders and oncology. Xywav, Epidiolex/Epidyolex, and Rylaze/Enrylaze among others are three of its top-performing medicines contributing significant growth for the company.
The already existing treatments developed by Jazz Pharmaceuticals plc (NASDAQ:JAZZ) posted a significant increase in sales during the second quarter results. Xywav’s net product sales grew 13% year-over-year, Epidiolex sales grew 22%, and Rylaze grew 6% during the same time. The combined performance led the total revenue to grow 15% when compared to the same quarter last year. Its oncology department also witnessed a 10% increase during the same time, indicating a robust performance overall.
While the current progress is impressive, what stands out is that the prospect of growth continues to improve for the company. Its Zanidatamab has been granted a priority review by the FDA and is said to be market-ready 2 months from now.
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is a cheap growth stock to invest in now. We say this because it is trading at only 6 times its forward earnings. Moreover, its earnings are also expected to increase by 7% during the year.
Aristotle Capital Global Equity Strategy made the following comment about Jazz Pharmaceuticals plc (NASDAQ:JAZZ) in its Q3 2023 investor letter:
“During the quarter, we sold our position in Magna International and invested in a new position, Jazz Pharmaceuticals plc (NASDAQ:JAZZ). Founded in 2003, Jazz Pharmaceuticals is a global biopharmaceutical company headquartered in Ireland. The drugmaker’s portfolio of nine approved products focuses on conditions with limited therapeutic treatments in neuroscience (~75% of 2022 revenue) and oncology (~25%).
Jazz’s drug Xyrem was added to its portfolio in 2005 and was approved for use in patients with narcolepsy. The drug’s strong efficacy propelled it to be the standard of care for this incurable sleep condition and has achieved wide adoption for the treatment of excessive daytime sleepiness and cataplexy (episodes of loss of muscle control).
Xyrem’s patent exclusivity ended in January 2023, and authorized generic versions of the product have entered the market. To prepare for the patent cliff, the company developed Xywav, a lower‐sodium version of Xyrem, which is touted for its potentially better heart safety. The drug has received FDA approval for the treatment of narcolepsy and idiopathic hypersomnia and has orphan drug exclusivity through 2027…” (Click here to read the full text)
6. Super Micro Computer, Inc. (NASDAQ:SMCI)
Forward P/E Ratio: 12.51
Earnings Growth This Year: 52.90%
Number of Hedge Fund Holders: 47
If you are looking for a growth stock that is trading at a cheap valuation and is riding the AI wave successfully, you might want to add Super Micro Computer, Inc. (NASDAQ:SMCI) to your watchlist.
Super Micro Computer, Inc. (NASDAQ:SMCI) has developed a new growth catalyst in the shape of artificial intelligence. The company has gained an indispensable position in the market with its liquid cooling clusters, next-gen X14 Intel Xeon 6, and H14 AMD Turin systems. The company has been witnessing a sharp increase in its revenue and net income for the past 3 years. During this time it has grown its bottom line by 121% and top line by 61% indicating that AI is a strong catalyst for its growth.
The most recent quarter i.e. fourth quarter of 2024 was also a success. The tech company ended the fiscal year with almost $14.9 billion in revenue indicating 2x growth from the previous year. Management expects even stronger growth during the next fiscal year and their expectations are backed by a record high number of orders and a growing backlog of design wins.
Carillon Scout Mid Cap Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q2 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) was the top detractor to returns in the second quarter. Super Micro designs and manufacturers server solutions based on modular and open-standard architecture. This modular approach combined with a strong engineering culture helps the company to supply the market with advanced servers and rack-scale compute solutions quickly. After an impressive return in the first quarter, the company offered disappointing near-term earnings guidance, though we do not believe its long-term opportunity has diminished. We expect continued strong growth for several years, although the range of outcomes is quite wide; it is difficult to forecast AI server market growth with precision.”
5. Charter Communications, Inc. (NASDAQ:CHTR)
Forward P/E Ratio: 9.63
Earnings Growth This Year: 12.70%
Number of Hedge Fund Holders: 48
Charter Communications, Inc. (NASDAQ:CHTR) is one of the biggest cable companies in the United States. It provides Internet, cable television, mobile, and voice services. The company also caters to businesses of all sizes to provide them with spectrum solutions.
It posted better-than-expected results in Q2 2024, despite losing significant broadband customers. Both residential and business customers fell by 149,000. The fall in customers was due to the end of FCC’s Affordable Connectivity Program subsidies. However, despite the decline in subscribers, total revenue grew 0.2% year-over-year to $13.7 billion. Revenue was ahead of consensus of $13.6 billion.
Charter Communications, Inc. (NASDAQ:CHTR) took advantage of its advertisement revenue which improved 3.3% year-over-year which was driven by higher political revenue. Moreover, the company also demonstrated significant cash-generation capabilities. Its free cash flow increased 94% when compared to the last year.
The stock is undervalued at current levels, making it one of the best cheap growth stocks to invest in now. It is trading at a forward price-to-earnings ratio of 10, its earnings are expected to grow by 12.70% this year.
Parnassus Value Equity Fund stated the following regarding Charter Communications, Inc. (NASDAQ:CHTR) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE and Charter Communications, Inc. (NASDAQ:CHTR). NICE is a leading cloud contact center software company. Charter’s stock had fallen due to near-term concerns, which we believe will not have a major impact on the long-term value of the business. Charter Communications has had several issues that created short-term uncertainty. We assessed that these issues have limited impacts on the long-term value of the business and initiated a position to take advantage of the stock’s historically low valuation.”
4. Fidelity National Information Services, Inc. (NYSE:FIS)
Forward P/E Ratio: 16.21
Earnings Growth This Year: 51.30%
Number of Hedge Fund Holders: 59
Fidelity National Information Services, Inc. (NYSE:FIS) is a global financial technology company. It provides Banking Solutions, Capital Market Solutions, Payment processing, and consulting and outsourcing services to banks of all sizes. The company operates in more than 100 countries with more than 20,000 clients.
Fidelity National Information Services, Inc. (NYSE:FIS) operates in a high-demand market enabling financial organizations to manage and move more than $9 trillion annually. It is improving its footprint and is on track for a record core signing in 2024. The Digital Banking wing of the company is also gaining more traction as it improved its new digital sales by 30% during the first half of 2024.
Financially speaking, the financial technology company does not fail to impress here either. It has grown its adjusted revenue by 4% year-over-year to reach $2.5 billion. While the revenue from Capital Markets was the strongest contender in growth, the Banking Solutions segment also grew 3% during the same time.
Fidelity National Information Services, Inc. (NYSE:FIS) also enjoys significant recurring revenue which accounts for around 81% of the total revenue. This helps the company generate significant cash flow. During the second quarter of 2024, it generated more than $504 million in free cash flow while capital expenditure was low at only 7% of the total revenue.
This financial technology company is trading at only 16 times its forward earnings, making it one of the best cheap growth stocks to invest in now.
Invesco Growth and Income Fund stated the following regarding Fidelity National Information Services, Inc. (NYSE:FIS) in its Q2 2024 investor letter:
“Given that many equity indexes reached record highs, valuation opportunities were limited and portfolio activity was somewhat muted. We purchased new holdings in financials, health care and IT. Fidelity National Information Services, Inc. (NYSE:FIS): The company is a leading global provider of financial services technology solutions for financial institutions, businesses and developers. The company has lagged its peers in recent years due to numerous acquisitions that increased its debt. However, a new CEO and CFO have made efforts to right size the firm and refocus on its core banking and capital market businesses by selling a partial stake in a recent acquisition. As a result, we believe the company should be able to increase selling opportunities, grow earnings and potentially return capital to shareholders.”
3. First Solar, Inc. (NASDAQ:FSLR)
Forward P/E Ratio: 18.94
Earnings Growth This Year: 75.50%
Number of Hedge Fund Holders: 66
First Solar, Inc. (NASDAQ:FSLR) is a technology company that focuses on solar energy. It produces photovoltaic (PV) modules and solar panels that convert sunlight to electricity. The company has manufacturing plants in several countries including Malaysia, Vietnam, and the United States.
The company holds an important place in the energy sector of the United States as its business model aligns with the Government’s agenda of shifting towards renewable sources of energy. This automatically puts First Solar, Inc. (NASDAQ:FSLR) on the growth track for years to come.
Moreover, the stock is trading below its pre-pandemic earnings levels. It is currently trading at only 19 times its forward earnings, while analysts expect its earnings to grow by 75.5%.
The tailwinds from government measures to support solar and wind energy businesses are proving to be good for the company. During the second quarter of 2024, its revenue increased by 24.7% to $1.10 billion. Moreover, due to increased selling price, its margins came in high at more than 49%.
Apart from the government factor, artificial intelligence is also one of the key factors that will contribute heavily to its growth. Artificial intelligence and data centers require large amounts of electricity and they are looking for solar and other renewable energy companies to fulfill their energy requirements.
This robust investment case combined with its cheap valuation makes First Solar, Inc. (NASDAQ:FSLR) one of the best cheap growth stocks to invest in now.
2. Dell Technologies Inc. (NYSE:DELL)
Forward P/E Ratio: 15.29
Earnings Growth This Year: 10.20%
Number of Hedge Fund Holders: 88
Dell Technologies Inc. (NYSE:DELL) is a leading technology company that develops and sells computer technologies and software. Its technologies are being used in high-growth industries such as artificial intelligence, data analytics, and cloud computing. This transformation has put the company on the list of emerging AI companies.
The company has been doing great in terms of generating revenue. During the second quarter of 2024, Dell Technologies Inc. (NYSE:DELL) was able to improve its revenue by 9% mainly due to the increase in demand for its AI servers.
In addition, the Infrastructure Solutions Group (ISG), which deals with the AI servers was the top story for the company. The segment revenue of ISG improved 38% year-over-year to reach a record high of $11.6 billion. The revenue growth was all because of an 80% increase in server revenue indicating how big the server segment is for the company.
Dell Technologies Inc. (NYSE:DELL) is also cheap at current levels. It is trading at only 15 times its forward earnings making it one of the best cheap growth stocks to invest in now.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
1. Micron Technology, Inc. (NASDAQ:MU)
Forward P/E Ratio: 12.11
Earnings Growth This Year: 588.50%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) is the best cheap growth stock to invest in now. It operates as a leading technology company that specializes in memory and storage solutions. Its Dynamic Random-Access Memory (DRAM) is pertinent when it comes to computers and mobiles accessing data quickly. Moreover, they also develop NAND Flash Memory which is used in SSDs to store data at a quick speed.
The company has surprised its investors by posting fourth quarter results which were above analyst and management expectations. Not only this, management has also pointed out towards continued growth in the next fiscal year.
Revenue for the fourth quarter was up 93% year-over-year amounting to $7.8 billion. Whereas the overall revenue for the fiscal 2024 was up 62% on a year-over-year basis as well and amounted to $25.1 billion. This growth was on the back of artificial intelligence effectiveness and their strong performance in the data center and automotive industries. Micron Technology, Inc. (NASDAQ:MU) has very recently started investing in these high-growth industries and is experiencing high demand for its memory and storage solutions.
Management believes that the company is entering the new fiscal year with the strongest competitive capability ever. Management has also pointed towards a high demand from data centers which is exceeding its expectations. It is expecting revenue for the first quarter of 2025 to be around $8.70 billion with gross margins at 39.5%.
Lastly, its cheap valuation is another point of attraction for its customers. Micron Technology, Inc. (NASDAQ:MU) is trading at 12 times its forward earnings. Analysts expect a sharp increase of 588% in its earnings during the year.
Parnassus Value Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) posted fiscal-third-quarter results that met expectations. Micron’s DRAM (dynamic random access memory) and NAND (non-volatile storage technology) segments grew revenue strongly, continuing the company’s recovery from a cyclical downturn last year. We believe Micron is well positioned to capitalize on AI-driven demand for greater memory.”
While we acknowledge the potential of Micron Technology, Inc. (NASDAQ:MU) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
