We recently published a list of 10 Worst Affordable Stocks To Buy Right Now. In this article, we are going to take a look at where Chart Industries, Inc. (NYSE:GTLS) stands against other worst affordable stocks to buy right now.
How is the Market Performing Entering the Rate Cuts
In one of our recent articles regarding the 10 Hot Penny Stocks On the Move, we discussed how the overall macroeconomic conditions have played a crucial role in building an environment leading to the upcoming Fed rate cut. Here’s an excerpt from the piece:
“The economy of the United States has stabilized, the risks of a recession have been delayed, and inflation continues to cool down. On August 30, Reuters reported that the Federal Reserve received a fresh confirmation regarding inflation continuing to ease. The personal consumption expenditure price index rose 2.5% year-over-year in July and inflation has stayed within the 2% goal set by the Fed. Fed Chairman has indicated that the “time has come to cut rates”.
Moreover, in another report by Reuters on the same day there were reports of the US dollar gaining as another key inflation measure fell in line with the forecasts. The Fed is expected to cut rates by 25 basis points this month. Moving forward markets have forecasted 100 bps of cuts by the end of 2024.
The stock market is already riding the tide of expected interest rate cuts. On August 20, CNBC reported that the stock market was climbing yet again, putting the S&P 500 and NASDAQ on track for their eighth positive session in a row, marking their longest winning streak this year.”
While there has been a debate about a 25-point or a 50-point cut, the market has fluctuated before the announcement. On September 17, CNBC reported that the S&P 500 was lower after reaching a record high on Tuesday. The market reached a new record high of 5,670.81 and was down 0.1% at 5,627. The Nasdaq moved 0.1% higher whereas the Dow Jones fell by 40 points.
The traders have overcome the summer headwinds and moved past the concerns over the health of the US economy on the back of expectations of the Fed cutting interest rates. On the other hand, Wall Street has been on hold. Analysts are hoping the rate cuts will help boost the earnings growth for companies.
Tom Lee, Fundstrat Global Advisors co-founder, joined CNBC to talk about how the market is expected to perform moving into the fed rate cuts and after the announcement. Lee believes that one of the factors leading to confusion among investors is the election period. The market is expected to stay in a fluctuating environment for the next eight weeks until the elections are over. However, fed rate cuts are coming at a crucial time to give some positive for the market.
There are two main reasons leading up to the rate cuts, one being the inflation easing and the other being the slower labor market that needs help from the Federal Reserve. Moreover, Lee thinks that regardless of the Fed deciding on a 25-point or 50-point cut, the result is going to be positive for the market. He thinks that investors should be confident for the next 12 months as whenever the Fed cuts rates, the win ratio for the markets has been almost 100%. Moreover, the markets rally post-elections regardless of who takes the seat.
Our Methodology
For compiling the list of 10 worst affordable stocks to buy right now, we used the Finviz stock screener. We set our filters to get affordable stocks with high short interest i.e. stocks trading below the market average Forward P/E which is 23.79, expecting positive earnings growth this year, and have high short interest. From the list of affordable stocks, we selected 20 stocks that were most widely held by institutional investors. Once we had the aggregated list, we ranked them based on their Short % of Shares Outstanding, sourced from Yahoo Finance. Please note that the list is ranked in ascending order of the short interest.
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).
An extensive industrial gas facility with many storage tanks.
Chart Industries, Inc. (NYSE:GTLS)
Forward P/E Ratio: 11.09
Earnings Growth This Year: 79.10%
Number of Hedge Fund Holders: 47
Short % of Shares Outstanding: 15.84%
Chart Industries, Inc. (NYSE:GTLS) is a leading manufacturer of equipment for industrial gas, energy, and biomedical industries. Simply speaking, it develops equipment and technologies for handling gasses and liquids, with a prime focus on clean energy solutions.
Its major product segments include Cryo Tank Solutions, which manufactures storage and distribution for industrial gasses and hydrocarbons, Heat Transfer Systems, which are designed for separating, liquefying, and purifying gasses, and Specialty Products.
Chart Industries, Inc. (NYSE:GTLS) is on the path to achieving its medium-term financial targets that include sales growth in the mid-teens, mid-30 % gross margin, and adjusted diluted EPS growth CAGR of mid-40 %. Its total orders for the second quarter grew 12.1% year-over-year to reach $1,164.7 million. The quarter came in with a series of record results including sales improving 18.8% year-over-year to reach a record high of $1,040.3. Moreover, the company also improved its backlog by approximately 13% indicating its improved prospects for the upcoming quarters.
Chart Industries, Inc. (NYSE:GTLS) was held by 47 institutional investors in Q2 2024, with total stakes worth $725.9 million. D E Shaw is the top shareholder of the company with a position worth $181.3 million. Moreover, its cheap valuation makes it affordable at current levels. GTLS is trading at a 42% discount to its sector and its earnings are expected to grow by more than 79% during the year to reach $10.91.
Although the company has a high short interest rate of 15.84% as a percentage of outstanding shares and is one of the worst affordable stocks to buy right now, here’s a different perspective:
With the climate change debate on the rise and the trend of electrification across various industries, the demand for a hydrogen-fueled economy is on the rise. The United States government has awarded a $7 billion funding for several regional hydrogen hubs during the last year. Hydrogen has the potential to electrify heavy industry and that too with zero-carbon.
Why is this detail necessary? Because Chart Industries, Inc. (NYSE:GTLS) is one of the companies feeding the hydrogen economy through its equipment. In the long run as the demand for hydrogen fuel increases, it will bring the demand for the company’s products higher with it.
Heartland Value Fund stated the following regarding Chart Industries, Inc. (NYSE:GTLS) in its first quarter 2024 investor letter:
“We continue to focus on taking what the market gives us while waiting for fat pitches to come our way. This quarter, for instance, we started a new position in Chart Industries, Inc. (NYSE:GTLS). We’ve been monitoring the stock for years and finally saw the buying opportunity we’ve been waiting for. As the leading producer of equipment for the shipment of liquefied natural gas (LNG), Chart Industries sold off sharply on the Biden Administration’s decree to pause new export permits.
We view the pause as a short-term political action in anticipation of the coming election. In any case, GTLS has robust backlogs for the next several years. And if the U.S. truly slows, Chart, an international provider, should benefit as the rest of the world accelerates LNG development…”
Overall GTLS ranks 2nd on our list of the worst affordable stocks to buy right now. While we acknowledge the potential of GTLS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GTLS 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.