We recently compiled a list of the 10 Best Tech Stocks to Buy Right Now Under $10. In this article, we are going to take a look at where Clarivate Plc (NYSE:CLVT) stands against the best tech stocks to buy right now under $10.

Are Dips in Tech a Buying Opportunity?

The S&P 500 experienced its worst week since March 2023 in the week ending September 8, marked by a significant decline of 4.3%. This downturn was primarily triggered by a disappointing August jobs report, which revealed that US employers added only 142,000 jobs, falling short of the expected 161,000. This unemployment rate drop caused fears of a potential recession.

Investor sentiments are complicated by the Fed’s upcoming policy decisions, as the weak labor data prompts speculations about aggressive interest rate cuts, with some analysts anticipating a potential rate cut of 25 basis points and others suggesting an even more aggressive 50 basis point reduction.

However, the US market experienced a notable rebound on Monday, driven by renewed investor focus on inflation, which remains a critical factor influencing potential interest rate cuts by the Fed. The S&P 500 climbed just over 1%, recovering about a quarter of its 4% decline.

When markets are as volatile as now, investors become more cautious. Most analysts still maintain the opinion that volatile markets are opportunities for long-term investments and help in diversifying portfolios. In fact, we just talked about this earlier in our article about the 10 Worst Broadcasting Stocks to Buy According to Short Sellers. Mona Mahajan, a senior investment strategist at Edward Jones, thinks that while dips are a buying opportunity, it might be time to diversify away from tech stocks in particular. Here’s an excerpt from that:

“She advocates for long-term investors to take advantage of market downturns, as market volatility provides ideal entry points for investing in undervalued assets.

Mahajan also addressed the broader economic landscape, including the performance of large-cap technology stocks, which she noted may not be the haven they once were, as in 2023 or the first half of 2024. This suggests a need for investors to consider diversification beyond tech stocks. Still, she thinks that AI is a driving force in the market, suggesting that it will play a crucial role in various sectors over the next several years.”

At the same time, some analysts think tech stocks will remain popular for the full year 2024. Jason Draho, UBS Global Wealth Management head of Americas Asset Allocation, just emphasized that investors should view potential dips in tech stocks as good long-term buying opportunities, as 10% corrections are historically good entry points in tech.

While he’s optimistic about the technology sector, he acknowledged that the volatility will likely persist due to concerns about export controls and AI monetization. However, several factors make this sector attractive for the rest of the year. First, companies reported strong earnings results, although they were not as spectacular as desired. Second, the AI CapEx investment story has potential upside for next year. Third, from a portfolio perspective, these companies are high-quality with solid earnings and balance sheets.

He thinks that this market volatility is acyclical. The recent sell-off in the tech sector was not primarily due to economic concerns but rather to sector-specific issues. Despite this, tech giants will continue to benefit from the AI CapEx investment story. While there may be short-term challenges, the long-term outlook for these companies remains positive. Focusing on the broader tech sector, rather than the MAG 7, is a better strategy for investors seeking to capitalize on the AI boom.

Earlier this year with the UBS Global Investment Returns Yearbook this year, Draho projected the global technology sector to deliver 18% earnings growth in 2024, and AI revenues to grow at a 72% annualized rate over the next 5 years as adoption broadens across companies. This presents significant opportunities for investors.

Draho also cautioned against over-concentrating portfolios in the sector. He suggested diversifying exposure by investing in sector leaders as well as companies likely to benefit from tech disruption as a way to manage potential downside risks in tech stocks. He also suggested exploring other areas, such as quality stocks, including regional champions in Europe and Asia, alternative growth themes like the energy transition and healthcare disruption, or small- and mid-cap stocks.

Diversification in managing risks and growing long-term wealth can also come through other means. The UBS Global Investment Returns Yearbook reports that a diversified equity portfolio across 21 countries would have 40% less risk than a single-country investment. A balanced portfolio with a 60/40 split between stocks and bonds, has historically been less volatile than a portfolio composed solely of stocks.

Methodology

We used the Finviz stock screener to screen for technology companies that were trading at less than $10 per share. We sorted our screen by market cap and looked through the top 25 stocks that matched our criteria. We picked the 10 from those that were the most widely held by hedge funds, as of Q2 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.

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).

Clarivate Plc (NYSE:CLVT)

Number of Hedge Fund Holders: 27

Share Price as of September 10: $6.65

Clarivate Plc (NYSE:CLVT) is a leading global provider of transformative intelligence that provides data and analytics to help organizations innovate. It offers subscription services (like workflow solutions and expert services) for research, intellectual property, drug discovery, and market intelligence.

For instance, it helps pharmaceutical companies use real-world data to improve clinical trials by providing access to electronic health records and registry data to test drug effectiveness, speeding up clinical trials and improving patient care.

Currently, 27 hedge funds have long positions in Clarivate Plc (NYSE:CLVT). The highest stake is held by Leonard Green & Partners, with a value of $663,832,425.

In the second quarter of 2024, this company generated a revenue of $650.30 million, which was lower than Street estimates by $1.58 million, and was down 2.77% from the same period last year.

There was, however, growth in the academia and government segments, where the company saw subscription growth of over 3% in the Q1 and Q2 combined. This was due to improved renewal rates, reaching a record high of over 96%.

The declines are offset by investments in new products and AI features to stay competitive. The goal is to achieve soft growth of over 4% by introducing new research intelligence and software products.

The company launched new AI-powered tools — AI-native Web of Science Research Intelligence helps researchers innovate faster and institutions measure research impact. There’s also Collecto for library collection management and Specto for showcasing digital collections through AI. It’s developing new patent watch and R&D solutions that will be available in early 2025.

The company has successfully restructured and invested in product innovation, setting a clear path for growth. Despite leadership changes, specifically, Jonathan Gear stepping down as the CEO on August 9th to be replaced by Matti Shem Tov, previously from ProQuest, Clarivate Plc (NYSE:CLVT) remains in a strong financial position, indicating a promising future.

Baron Small Cap Fund made the following comment about Clarivate Plc (NYSE:CLVT) in its first quarter 2023 investor letter:

“We added to our position in Clarivate Plc (NYSE:CLVT), a leading global information services provider that serves customers across academia and government, life sciences & health care, and intellectual property. Clarivate goes to market with a collection of well-known brands, including Web of Science, ProQuest One, Alma, Cortellis, Derwent, and CompuMark.

Clarivate has an attractive business model. The company’s foundation is its highly valuable proprietary data assets (#1 or #2 player in most markets) that are combined with analytical tools and insights to help users apply the underlying data to everyday business problems. As an important part of the end users’ daily workflow, Clarivate’s indispensable, mission-critical solutions create a sticky and predictable business model with high levels of recurring revenue (about 80% recurring revenue and over 90% renewal rates). Clarivate has strong operating leverage (“build it once, sell it many times”) and should be able to sustain adjusted EBITDA margins in the low to mid-40% range…” (Click here to read the full text)

Overall CLVT ranks 1oth on our list of the best tech stocks to buy right now under $10. While we acknowledge the potential of CLVT 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 the stocks on our list 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.