We recently compiled a list of the 10 Best Robinhood Stocks Under $20. In this article, we are going to take a look at where KE Holdings Inc. (NYSE:BEKE) stands against the other Robinhood stocks.
The market reacted favorably after the Federal Reserve’s June 11-12 meeting. The broader market marked record closes. At the June 12 press conference, Fed Chairman Jerome Powell emphasized the Fed’s focus on its dual mandate of achieving maximum employment and stable prices. While the labor market remains strong with continued job gains and low unemployment, inflation has decreased significantly from its peak but remains above the 2% target, currently at 2.7% and the Federal Open Market Committee (FOMC) believes it’s still high.
Key Developments
The Fed Chairman reported that GDP growth slowed from 3.4% in Q4 of 2023 to 1.3% in Q1 of 2024. However, underlying demand indicated by private domestic final purchases grew at 2.8%. Consumer spending has moderated but remains solid, and investment in equipment and intangibles has improved. Moreover, the labor market is balanced, with job gains averaging 218,000 per month in April and May, and the unemployment rate was at 4%. Inflation, as measured by PCE prices, rose 2.7% over the past year, while core PCE rose 2.8% and the CPI rose 3.3% in May, with the core CPI at 3.4%. Finally, the FOMC decided to keep the federal funds rate unchanged at 5.25% to 5.5% and to continue reducing securities holdings to manage inflation.
Powell emphasized a cautious approach to policy adjustments. The Chairman said that while some progress has been made toward the inflation target, more data is needed to ensure inflation is sustainably moving toward 2%. The Fed will continue to assess economic data and adjust policies as needed to support their dual mandate. He reiterated the commitment to restoring price stability to ensure long-term economic health. The Fed chair noted that the median projection for the federal funds rate by FOMC participants is 5.1% by the end of 2024 if the “economy evolves as expected.” Nevertheless, Jerome Powell highlighted that the projections are not a guarantee and will depend upon the data in the coming months.
The CME’s FedWatch tool reveals that 35.8% of the market expects the interest rates to remain the same in September, 59.2% expect a 25 basis points (bps) reduction, and 5% believe in a 50 bps rate cut. These numbers have risen significantly in favor of rate cuts since we reported them on May 31 in our article about the best up-and-coming stocks.
After a long wait, the Fed has finally hinted at potential rate cuts in September, which brings tons of opportunities in the market. Let’s take a look at some now.
Our Methodology
For this article, we used the app to identify over 100 stocks with a $2 billion market cap that were trading under $20, as of June 12. We narrowed down our list to the stocks with positive hedge fund sentiment, analyst ratings, and optimistic prospects and chose the 10 stocks with the highest number of institutional investors.
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).
Aerial shot of a modern real estate development with residential homes.
KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 42
Share Price as of June 12: $15.97
KE Holdings Inc. (NYSE:BEKE) is a China-based company that operates an integrated online and offline platform for housing transactions and services. The company offers its services through an integrated online and offline platform known as Beike, a real estate brokerage branded store Lianjia, an operating system Agent Cooperation Network, and more. In the first quarter, 42 hedge funds had stakes in KE Holdings Inc. (NYSE:BEKE), with total positions worth $1.35 billion. As of March 31, Hillhouse Capital Management is the most significant shareholder in the company with a stake worth $400.667 million.
KE Holdings Inc.’s (NYSE:BEKE) diversified revenue streams highlight its growth potential. The home renovation and furniture business surged by 71.1% year-over-year, with contracted sales reaching RMB 3.4 billion (1 RMB = US$0.1378) in Q1. This segment’s contribution to total revenue increased, reflecting the company’s ability to capitalize on cross-selling opportunities within its ecosystem. Additionally, the home rental services segment saw an 189.3% year-over-year revenue increase, driven by a significant rise in the number of managed rental units.
In 2023, KE Holdings Inc. (NYSE:BEKE) showed resilience and was one of the few companies that grew despite the challenging circumstances in the Chinese housing market. In spite of its challenges, the company still maintains its focus on shareholder returns. The company allocated around $790 million to share buybacks in 2023 and continued its repurchase program in 2024 with $344 million spent as of May.
On May 23, KE Holdings Inc. (NYSE:BEKE) reported first-quarter earnings. The non-GAAP EPADS was $0.16, which beat the market estimates by $0.05. The revenue generated during the quarter was $2.27 billion and topped the estimates by $60 million. On May 28, a few days after its earnings beat, Barclays analyst Jiong Shao raised KE Holdings Inc.’s (NYSE:BEKE) price target to $30 from $20. Shao highlighted the company’s Q1 earnings beat and guidance raise and noted strong progress in its new home renovation and rental businesses. Although existing and new homes saw expected year-over-year declines in gross transaction value, management reported that existing home transaction volume for April and the first three weeks of May increased by double digits compared to last year.
We think KE Holdings Inc. (NYSE:BEKE) might be an attractive idea to explore while it trades at a 52% discount to its sector median, at 15.5x its forward earnings (sector median = 32.7x). Analysts expect a 48% year-over-year growth in the company’s earnings by the end of this year.
Overall BEKE ranks 6th on our list of the best Robinhood stocks to buy. You can visit 10 Best Robinhood Stocks Under $20 to see the other Robinhood stocks that are on hedge funds’ radar. While we acknowledge the potential of BEKE as an investment, 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 an AI stock that is more promising than BEKE 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.