We recently compiled a list of the 10 Best Fast-Growing Penny Stocks to Buy Now. In this article, we are going to take a look at where Agilon Health Inc. (NYSE:AGL) stands against the fast-growing penny stocks.
Rate Cuts Are Around the Corner
September tends to be the worst month for the stock market, however 2024 might just be an outlier in history. Considering that the economy is doing worse than what was estimated earlier, the Fed needs to decide on a cut rate soon. We discussed this earlier in our article about the 10 Most Buzzing Stocks To Buy Now, here’s an excerpt from it:
“Investors are concerned that the FED will be slower to lower interest rates while inflation remains sticky and GDP growth begins to cool. Stovall expects three 25-basis point cuts this year, followed by another four in 2025. He thinks that while a 50 basis point cut is rare since it only ever happened twice, in 2001 and then 2007, it is still not unlikely given that the economy is worse than expected.
According to Stovall, investors need to be prepared for this increased volatility as the market digests the Fed’s actions and the potential impact on the economy. The market will likely remain uncertain until the Fed can find the right balance between slowing down the economy and stopping inflation, without causing a recession.”
Michael Feroli, JPMorgan’s chief US economist, recently discussed whether a 50 basis point cut is an overreaction. Feroli advocates for the Fed to implement a 50 basis point rate cut during its upcoming meeting on September 17-18, suggesting that this move would help return the economy to a neutral stance.
He thinks that although the economy is softening rather than collapsing, the Fed should not wait long enough for it to collapse before implementing a 50 basis point cut. The call for a significant rate cut comes in light of recent labor market data, and disappointing job growth, coupled with a downward revision of July’s figures, intensifying speculation regarding the Fed’s monetary policy direction.
Fed officials have been cautious in providing specific guidance regarding the size of the anticipated rate cut. Fed Chair Jerome Powell indicated that the central bank has largely succeeded in controlling inflation through high interest rates but expressed concerns about further weakening in the job market.
However, George Lagarias, chief economist at Forvis Mazars, believes that a 50 basis point rate cut by Fed this month could pose considerable risks to financial markets, and send a misleading signal about imminent recession risk. He thinks that unemployment alone does not translate into a recession, especially considering that China continues to deflate the global economy.
He advocates for a more measured approach, suggesting a quarter-point reduction instead of a 50 basis point cut, which he believes could imply a sense of urgency that may become a self-fulfilling prophecy. Lagarias says that unless there is a significant market disturbance, there is no cause for alarm, and a drastic cut could mislead both the markets and the economy.
According to CME’s FedWatch tool, 30% of market participants are expecting a 50 basis points cut while 70% are expecting a 25 basis point cut. Lagarias’ caution reflects a broader sentiment among economists who advise against hasty decisions that could destabilize financial markets.
Rate cuts are good for business and several small companies that have been under pressure due to higher rates could soar as interest rates come down.
Methodology
To compile our list, we used a stock screener to screen for companies that are trading under $5 and have grown their earnings by double digits over the past year. We made an initial list of 25 stocks and then selected the ones that have grown their revenue by at least 30% over the past 3 years and are also popular among elite hedge funds and analysts. 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).
A doctor in scrubs interacting with a Medicare Advantage member in her home.
Agilon Health Inc. (NYSE:AGL)
3-Year Revenue CAGR: 50.60%
Year-over-Year Revenue CAGR: 65.62%
Share Price as of September 5: $4.17
Number of Hedge Fund Holders: 17
Agilon Health Inc. (NYSE:AGL) provides healthcare services for seniors through primary care physicians across different US communities, transforming healthcare for older people by focusing on the entire health of patients.
The company had 4 main goals in 2024: improving relationships with insurance companies, getting more primary care doctors involved, making data-driven decisions, and just generally working more efficiently. It has made substantial progress on the first plan, and insurance companies value their relationships because of the doctors involved. There are ongoing talks about adjusting the contracts to reflect higher costs and other issues, including ending some wasteful contracts.
As a result of focused planning, the company was able to record a 39% year-over-year improvement in revenue for Q2 2024. This growth was driven by the class of primary care physicians of 2024 and solid organic growth in existing classes. Medical services expenses increased to $1.37 billion due to the expansion of the 2024 class. The program, ACO REACH, which provides coordinated care to Medicare beneficiaries, added memberships slightly ahead of expectations at 132,000.
As a result of strong membership growth, the full-year membership guidance is now a midpoint of 519,000 members, but the full-year revenue guidance is slightly lowered due to a series of factors, including retroactive contract terminations. Investors are still interested in the company. As of June 30, 17 hedge funds held long positions in the company with the highest stake at $58,206,000 by Rock Springs Capital Management.
Artisan Mid Cap Fund stated the following regarding Agilon Health, inc. (NYSE:AGL) in its fourth quarter 2023 investor letter:
“We ended our investment campaigns in Agilon Health, inc. (NYSE:AGL) and BioNTech during the quarter. We initiated a GardenSM position in Agilon in early 2023 with a view that the company’s health care delivery model had the potential to provide both higher quality and lower cost care to seniors, which is a growing market due to an aging population. The company’s ability to scale while expanding margins was our biggest point of uncertainty, and it came to fruition as membership growth has tracked well but medical margins have struggled. After concluding that our probability of success has decreased, we decided to move on in favor of higher conviction ideas.”
Overall AGL ranks 6th on our list of the best fast-growing penny stocks to buy. While we acknowledge the potential of AGL as an investment, 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 AGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
