In this article, we’re going to talk about the 8 best inexpensive stocks to invest in now.
Are Experts Already Looking Into 2025?
The recent market surge has raised concerns about potential market overvaluation. While the market has experienced significant gains, there are growing concerns about the allocation of capital and the potential for inflationary pressures. The market has witnessed a significant upward trend following the Fed’s rate cut, with major indices reaching new all-time highs. This surge reflects a combination of factors, including increased investor confidence and optimism about the economic outlook.
Investors are advised to carefully consider their investment strategies amidst the current market dynamics. While small-cap stocks offer potential growth opportunities, it is crucial to evaluate the broader market trends and potential risks. By understanding the market dynamics, investors can navigate the current landscape and make informed decisions to achieve their financial goals.
On top of economic uncertainty, the upcoming elections also drive analysts to become overly cautious as the market becomes more volatile in the short term due to confused investor sentiments. Tom Lee, Fundstrat Global Advisors managing partner and head of research recently appeared on CNBC and recommended investing in small-cap stocks and equities over bonds, as they offer better growth potential, as long as the election uncertainty remains. We went over his opinion in greater detail in our article about the 10 Best Young Stocks To Buy Now, here’s an excerpt from it:
“….Tom Lee explained that the Fed’s actions have initiated an easing cycle, which historically tends to yield positive outcomes for the market 3-6 months down the line. However, he cautioned that stock performance in the immediate future remains uncertain due to ongoing repositioning ahead of the upcoming election in 40 days.
….He noted that many wealth managers and family offices are hesitant to commit capital until after Election Day, preferring to wait until that event is behind them. He expressed optimism about a potential surge in stock prices following the election, stating that November and December typically see strong rallies in election years, especially when markets have already gained more than 10% in the first half of the year.
….He highlighted an upcoming Core Personal Consumption Expenditures (PCE) report expected on Friday, which could confirm that inflation is no longer a pressing concern…Regarding a comment on recent target adjustments for the S&P 500, mentioning Brian Belski’s increase of his target to the highest on Wall Street, Lee acknowledged the potential upside in the next 3-6 months, expressing skepticism about setting aggressive targets like 6,000 for the S&P 500 at this time due to current valuations not being particularly low and having already experienced significant gains.”
As more and more analysts suggest space for further rate cuts, Vance Howard, CEO and Portfolio Manager at Howard Capital Management predicts a rate cut in early 2025 due to falling inflation and historical trends.
Appearing on CNBC on September 25, Vance Howard discussed the outlook for the market and the economy as we approach Q1 2025. He confidently stated that another significant rate cut is likely, driven by data indicating a need for it, particularly as inflation begins to decline. Howard pointed out that historically, after the first rate cut, markets tend to rise, with a perfect record of being higher 7 out of 7 times following such cuts. He also noted that if the S&P 500 has already gained 10% in the first half of the year, there is an 83% chance of continued upward movement in the second half. Therefore, he advised investors to remain optimistic and not be overly distracted by current market noise.
When asked about strategies for setting up portfolios in light of potential market volatility, Howard emphasized the importance of focusing on certain sectors. He highlighted utilities and real estate as promising areas, benefiting from falling interest rates. Howard expressed that reaching an all-time high in the market is a strong bullish signal and encouraged investors to buy on pullbacks.
Regarding specific sectors to watch, Howard identified financials as likely to strengthen following rate cuts. He explained that while financial stocks might initially dip after a rate cut, they typically rebound and continue to rise. Furthermore, he recommended staying invested in technology stocks.
Howard’s insights could potentially help investors navigate through potential market changes heading into 2025. By focusing on resilient sectors like utilities, real estate, and technology while considering strategic investments in convertible bonds and financials, investors may position themselves well for future gains. That being said, we’re here with a list of the 8 best inexpensive stocks to invest in now.
Methodology
We used the Finviz stock screener to compile a list of 20 stocks with a forward P/E ratio under 20. We then selected the 8 best inexpensive stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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 Inexpensive Stocks To Invest In Now
8. AbbVie Inc. (NYSE:ABBV)
Forward Price-to-Earnings Ratio: 16.08
Market Cap as of September 26: $337.55 billion
Number of Hedge Fund Holders: 67
AbbVie Inc. (NYSE:ABBV) is a pharmaceutical company that ranks 6 on the list of largest biomedical companies by revenue. It has a diverse portfolio of products across various therapeutic areas, including immunology, oncology, virology, neuroscience, and women’s health, and is known for its innovative approach to drug discovery and development.
The European Commission’s approval of TEPKINYL, a new treatment for follicular lymphoma, is a key factor in the company’s strong financial performance. The company’s acquisition of Cerevel Therapeutics has significantly expanded its neuroscience portfolio. The acquisition of ~$8.7 billion was completed in August this year.
The company is projected to achieve mid-single-digit sales growth over the next 3 years. The recent $10 billion acquisition of ImmunoGen, which added Elahere to the oncology portfolio, is expected to contribute significantly to this growth. Barclays forecasts Elahere, an antibody-drug conjugate, to reach over $2 billion in sales by the end of the decade.
It delivered solid second-quarter results, with $14.46 billion in revenue, up 4.31% year-over-year, with an earning per share value of $2.65. Despite a drop in earnings, the company demonstrated consistent quarterly growth, indicating sales recovery. Additionally, it maintains a strong gross profit margin of 69.66%.
The growth is driven by the success of newer drugs like Skyrizi and Rinvoq, which have strong efficacy and patent protection. The company’s aesthetics business, led by Botox, benefits from a strong brand and physician preference. Elahere showed strong results in ovarian cancer. Teliso-V is being submitted for approval in lung cancer. ABBV-400 is advancing in colorectal cancer.
AbbVie Inc. (NYSE:ABBV) is well-positioned to deliver a top-tier long-term outlook, driven by Humira’s success and strategic acquisitions. Despite near-term challenges, the company’s valuation is reasonable given its dividend yield and growth potential.
Polen Focus Growth Strategy stated the following regarding AbbVie Inc. (NYSE:ABBV) in its Q2 2024 investor letter:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: Home Depot, Meta Platforms, and AbbVie Inc. (NYSE:ABBV). AbbVie fell on the back of results that failed to allay concerns around continuing biosimilar threats to its very large, blockbuster arthritis drug, Humira, which went off patent last year.”
7. Philip Morris International Inc. (NYSE:PM)
Forward Price-to-Earnings Ratio: 17.54
Market Cap as of September 26: $189.22 billion
Number of Hedge Fund Holders: 70
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco and nicotine company, with products sold in 180+ countries, the most recognized and best-selling one being Marlboro. It has been transitioning towards a smoke-free future, focusing on developing and promoting reduced-risk tobacco products as an alternative to cigarettes.
Its non-tobacco products, like IQOS and ZYN, have shown significant growth in Japan, Europe, and the US. While supply chain issues have affected ZYN in the US and delayed regulatory approval in Taiwan, the company has raised its full-year projections for total revenue, operating earnings, and adjusted diluted earnings per share.
In Q2 2024, revenue was $9.47 billion, recording a year-over-year growth of 5.59%. Despite declining cigarette sales in the US, the company continues to see strong global demand driven by population growth and varying cultural attitudes toward smoking. There was a significant rise in the sales of its tobacco-free products, with sales climbing by 23.5%. The sales of nicotine pouches also experienced a remarkable increase of 50.6%, driven by the success of its ZYN brand, which saw a 50.3% year-over-year increase in the number of cans it delivered, making up roughly 38% of its total earnings in the first 6 months of 2024.
The company’s strong growth and expansion make it a compelling investment choice. To meet rising demand, it has invested $232 million in its Owensboro, Kentucky production plant, which is expected to be completed by 2025 and create 450 jobs and generate $277 million in annual economic benefits for the region. Such expansions show the company’s commitment to becoming a leader in its industry.
Broyhill Asset Management stated the following regarding Philip Morris International Inc. (NYSE:PM) in its Q2 2024 investor letter:
“Philip Morris International Inc. (NYSE:PM) is a multinational tobacco company focused on smoke-free products like heated tobacco and nicotine pouches to create a smoke-free future by transitioning away from traditional cigarettes. The company’s shares gained 12% during the quarter and tacked on another 14% in July. Well-publicized supply shortages, increasing competition from unauthorized products, grandstanding politicians, and a temporary halt to online sales did little to slow PM’s smoke-free momentum, as sales of reduced-risk products grew to nearly 40% of total company revenues. In fact, management expects an acceleration across its smoke-free business in the second half as supply constraints ease, driving substantial upward revisions to guidance and estimates. Notably, Zyn volume guidance (nicotine pouches) for FY24 has increased from 520 million units at the start of the year to 560–580 million units today, with capacity for 900 million cans next year. After three years of sideways trading, investors are finally waking up to the strength and resilience of PM’s earnings power and transition from a manufacturer of traditional tobacco to a faster-growing and significantly more profitable business. The stock’s rally over the last quarter was enough to put it ahead of both the S&P and the Nasdaq for the past three years. But at a now “inflated” 14.5x FY25 consensus estimates (which are likely too low), we think today’s valuation is a long way from discounting the transformation to a smoke-free Philip Morris.”
6. Johnson & Johnson (NYSE:JNJ)
Forward Price-to-Earnings Ratio: 14.97
Market Cap as of September 26: $387.09 billion
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) is a pharmaceutical, biotechnology, and medical technologies corporation that operates in 3 main segments: consumer health, pharmaceuticals, and medical devices. It’s one of the largest healthcare companies in the world, known for its diverse range of products, including over-the-counter medications, prescription drugs, medical devices, and consumer healthcare products.
It has achieved regulatory approvals for RYBREVANT and TREMFYA. Its acquisition of Shockwave Medical in April strengthened its position in cardiovascular intervention and medical technology. All segments are expected to grow at a compound annual growth rate of 5-7% between 2025 and 2030. Additionally, over 10 assets in the Innovative Medicine segment have the potential to generate projected operational sales of over $5 billion each.
The earnings per share in Q2 2024 were $2.82, while the revenue stood at $22.45 billion, despite a year-over-year drop of 12.08%. Xarelto, Stelara, and Imbruvica accounted for 19% of revenue. The company’s oncology sector, led by Darzalex, saw sales grow 16% to $5.09 billion. International sales grew by 7.1% year-over-year, and adjusted earnings per share increased by 10.2% during the same time.
The company’s success is driven by its strong history of innovation, robust fundamentals, and a diversified product portfolio. It has numerous products generating over $1 billion in sales, and many of these products hold top market positions, making it a strong investment choice.
ClearBridge Large Cap Value Strategy made the following comment about Johnson & Johnson (NYSE:JNJ) in its Q3 2023 investor letter:
“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”
5. Alibaba Group Holding Ltd. (NYSE:BABA)
Forward Price-to-Earnings Ratio: 11.31
Market Cap as of September 26: $206.51 billion
Number of Hedge Fund Holders: 91
Alibaba Group Holding Ltd. (NYSE:BABA) is a Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology, offering products and services like e-commerce, cloud computing, mobile payment, digital media, and artificial intelligence. The company is best known for its e-commerce platforms, such as Taobao, and Tmall, which are among the largest online marketplaces in the world.
In FQ1 2025, revenue was up 4.59% from the year-ago period. E-commerce business generated was up 4% year-over-year. Global e-commerce ventures, like Lazada and Aliexpress, experienced a 32% increase in sales in the international online shopping sector. Quarterly revenues from its cloud division reached a 6% increase. Moreover, revenue from AI-related products experienced a year-over-year growth of over 155%.
The company has been using AI chatbots for years and has recently made significant advancements in its cloud business. The cloud segment benefits from AI-powered personalized suggestions and is developing a large language model called Qwen 2.0. Its AI cloud platform has seen strong growth, indicating positive user reception.
Alibaba Group Holding Ltd. (NYSE:BABA) driving growth in the competitive e-commerce market through its innovative AliExpress Choice service. The company’s recent fee increase announcement has positively impacted market sentiment. With a rapidly expanding market, it is well-positioned for long-term growth due to its competitive advantage and strong brand.
O’keefe Stevens Advisory stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2024 investor letter:
“We initiated two new positions during the quarter: Alibaba Group Holding Limited (NYSE:BABA) and Perrigo (PRGO). Both have seen their stocks decline over 70%+ from their all-time highs.
Alibaba is the largest e-commerce player in China, with 40% gross merchandise volume (GMV) market share through its Taobao and T-mall businesses. While the cloud computing business is relatively small, its 37% market share in China positions it well to capitalize on the increasing demand for AI-related products. In the most recent quarter, AI-related cloud revenue recorded triple-digit growth y/y, with the expectation that total cloud revenue will accelerate to double-digit growth in 2H 2025.
It’s rare to find a dominant market share business with significant tailwinds trading for ~10x adj. EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x, which, we believe, is far too cheap. We understand this business would not trade at this price if it were a U.S. business. However, the valuation gap at a high single-digit P/E is pricing in a combination of the following risks – 1. China invading Taiwan. 2. Cash can never leave mainland China (disproven). 3. Increasing competition from Pinduoduo and Shien resulting in market share loss 4. China’s geopolitical tensions worsen. 5. Economic slowdown stemming from the recent housing market downturn. 6. VIE structure creates doubt over the actual ownership of the business. All risks have merit, with cash distribution restrictions at the lower end due to the recently announced dividend and special dividend. Cash returned to shareholders totaled $16.5B in FY24, up from $13.4B in FY23…” (Click here to read the full text)
4. Exxon Mobil Corp. (NYSE:XOM)
Forward Price-to-Earnings Ratio: 12.66
Market Cap as of September 26: $509.41 billion
Number of Hedge Fund Holders: 92
Exxon Mobil Corp. (NYSE:XOM) is a multinational oil and gas corporation and the largest direct descendant of John D. Rockefeller’s Standard Oil. It’s a major producer of crude oil and natural gas, and also operates in the downstream sector, refining crude oil and selling petroleum products, and in the chemical sector, producing petrochemicals.
This company is a popular energy stock due to its successful acquisitions. The company recently completed its acquisition of Pioneer Natural Resources, creating the world’s largest potential for high-return unconventional resource development. It also reached an agreement with Air Liquide to produce carbon-free hydrogen, with 98% of CO2 removed.
It also increased its share repurchase program to $20 billion through 2025, contingent on market conditions, and plans to repurchase over $19 billion by the end of 2024.
Exxon Mobil Corp. (NYSE:XOM) achieved record production in Guyana and the Permian Basin, with the latter reaching 1.2 million barrels per day. The second quarter of 2024 saw a 12.24% revenue growth as compared to the same quarter in 2023, generating $93.06 billion in total revenue. Its strong cash flow from oil and gas operations in various countries provides the financial flexibility needed to invest in these innovative projects.
Its expansion into LNG projects in Mozambique and the US aligns with the global shift towards cleaner energy sources. These initiatives demonstrate the company’s commitment to sustainability and position it for long-term growth in the evolving energy landscape. Its diversified portfolio and strategic initiatives position it well for growth in the evolving energy landscape, making it an attractive investment choice.
Madison Dividend Income Fund stated the following regarding Exxon Mobil Corporation (NYSE:XOM) in its first quarter 2024 investor letter:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
3. Bank of America Corp. (NYSE:BAC)
Forward Price-to-Earnings Ratio: 10.95
Market Cap as of September 26: $304.52 billion
Number of Hedge Fund Holders: 92
Bank of America Corp. (NYSE:BAC) is a multinational investment bank and financial services holding company that offers a range of banking products and services, including commercial banking, retail banking, wealth management, investment banking, and global markets. It is one of the largest banks in the US and operates in several countries around the world.
This is a leading US financial institution with 69 million customers, 3,800 retail locations, and 15,000 ATMs. It added 278,000 new checking accounts in Q2 2024, bringing its 2024 total to 500,000. Wealth management added 6,100 new relationships and commercial banking added thousands of small businesses. Bank of America Corp. (NYSE:BAC) manages $5.7 trillion in client balances.
The company reported strong Q2 2024 earnings, driven by higher interest rates. While rising deposit costs impacted consumer banking, its diversified revenue streams mitigated these pressures. The investment banking and capital markets division performed well despite challenging market conditions. The bank’s focus on technology and digital banking enhances customer experience and drives efficiencies.
Overall, revenue for the second quarter was $25.38 billion, up 0.71% year-over-year. Fees grew 6% year-over-year and represented 46% of total revenue. Car and Service charge revenue grew by 6%. 87% of global banking clients also are digitally active. This is especially important because in the second quarter, digital sales represented 53% of the total sales.
This company presents a compelling investment opportunity. Its strong financial performance, coupled with a diversified revenue stream and strategic initiatives, positions it for continued growth. As the economy expands, the bank is poised to benefit from increased credit card spending, loans, and business borrowing.
Diamond Hill Large Cap Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its Q2 2024 investor letter:
“Other top contributors in Q2 included Bank of America Corporation (NYSE:BAC) and Extra Space Storage. Shares of financial services company Bank of America rose in the quarter as it looks increasingly likely net interest income will inflect and begin growing again in 2024’s back half and into 2025.”
2. JPMorgan Chase & Co. (NYSE:JPM)
Forward Price-to-Earnings Ratio: 12.48
Market Cap as of September 26: $598.27 billion
Number of Hedge Fund Holders: 111
JPMorgan Chase & Co. (NYSE:JPM) is a finance company, the largest bank in the US overall, and the largest bank globally by market capitalization as of 2023. It is a leading global financial services firm that offers a wide range of products and services, including commercial banking, retail banking, investment banking, asset management, and treasury and securities services, operating in over 100 countries.
The company is making significant strides in automation. It has launched a GenAI assistant to streamline tasks for over 60,000 employees. For customers, it has introduced in-store pay-by-face biometric payment solutions and a new data-managed service for institutional investors to streamline their operations.
Q2 2024 revenue was up 21.53% year-over-year, with an earnings per share value of $6.12. Its commercial and investment bank segment revenue rose 9% year-over-year and delivered an 11% gain in net income. Asset and wealth management contributed around $5.3 billion to the revenue growth.
As of March 31, it had $4.1 trillion in assets and $3.6 trillion in assets under management. Its future is looking at sustained success due to its cost advantages and strategic investments in organic growth. While credit losses have risen slightly, the company’s diversified business model offers multiple avenues for growth in consumer, commercial, investment, and asset management.
Carillon Eagle Growth & Income Fund stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its first quarter 2024 investor letter:
“JPMorgan Chase & Co. (NYSE:JPM) contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
1. UnitedHealth Group Inc. (NYSE:UNH)
Forward Price-to-Earnings Ratio: 18.45
Market Cap as of September 26: $531.17 billion
Number of Hedge Fund Holders: 114
UnitedHealth Group Inc. (NYSE:UNH) is a health insurance and services company that offers health insurance plans and health services. It is one of the largest health insurers in the US through its subsidiaries, including UnitedHealthcare, Optum, and OptumHealth, and is known for its focus on improving health outcomes and reducing costs through its integrated healthcare delivery systems.
The company uses its scale to gain a first-mover advantage in emerging drug markets, like GLP-1 weight loss treatments, with a vast network and lower costs giving it an edge. This extends to other innovative therapies, such as gene editing and advanced cancer treatments. It provides health coverage to 50 million Americans. The company is committed to community service, with professionals making 2 million+ home visits last year to identify health emergencies in patients.
It reported a 6.41% year-over-year revenue improvement for the second quarter of 2024, with an earnings per share value of $6.80. Revenue increased by $6 billion to $98.9 billion, driven by Optum and UnitedHealthcare. Customer growth in the US reached 29.6 million, up 2.3 million from the previous year. Optum, the company’s global healthcare services provider focused on data-driven care optimization, saw revenue grow by $6 billion to $62.9 billion.
Since 2011, the company’s revenue has more than tripled, increasing from just over $101 billion to nearly $372 billion by 2023. UnitedHealth Group Inc. (NYSE:UNH) has consistently performed well, even during tough economic times. The company is well-prepared to benefit from the rising demand for health insurance, driven by the expected population increase in the coming years.
Invesco Growth and Income Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q2 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH): Like many managed care providers, United Health has come under pressure from rising medical costs and higher-than-expected utilization. The stock is currently undervalued based on our analysis. We view the company as a high-quality compounder with secular growth opportunities in the managed care segment. The US Presidential election may cause additional near-term uncertainty, but we believe United Health will be able to rebound once pricing and utilization issues normalize.
While we acknowledge the growth potential of UnitedHealth Group Inc. (NYSE:UNH), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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