We recently compiled a list of the 10 Oversold Blue Chip Stocks to Buy Now. In this article, we are going to take a look at where Ecopetrol S.A. (NYSE:EC) stands against other oversold blue chip stocks.
Market experts believe that, so far, 2024 continues to be a strong year for the broader stock market. With the predictions of rate cuts, some strategists opine that next year can be another year for the equities. On a YTD basis, the S&P 500 saw an increase of over ~22%. On a related note, Fidelity Investments (in the note dated October 16, 2024) highlighted that equities rallied in Q3 2024, courtesy of real estate, US value, and some small-cap stocks. While volatility increased in August, it decreased later. This led to a productive September.
Fidelity Investments went on to say that the US labor market demonstrated signs of cooling. However, it remained strong overall. Despite some softness in manufacturing, some of the major global economies continued to expand. Elsewhere, in China, new policies to fuel stock prices were rolled out. While the positive impact was seen in the Chinese equities post the stimulus measures, there remains some uncertainty regarding the long-term impact.
Factors to Watch Out For in 2025
With 2024 approaching an end, global investors continue to wonder about the factors that might influence the broader financial markets in 2025. The markets are intertwined, making US stocks more sensitive to several factors. Forbes reported that the results of the 2024 presidential election, domestic inflation and rates, technology innovation, economic trends, and elevated geopolitical tensions are some of the factors likely to influence the financial markets
As per TradingBlock, the tariff measures, together with a national deficit, are some of the critical issues for the next president. While the new tariffs can slow down the broader US economy, the deficit, if left unchecked, might lead to continued devaluation of the U.S. dollar. Also, a slowdown of the US economy might result in inflation worries.
Some market experts continue to worry about the Chinese economy. As per SALT Venture Group, the slowness in China can be a constraint for the stock market growth in the next year. This is because this slowdown can weaken the demand for US exports. As per CEIC, the US total exports to China sat at ~$12.618 billion in August 2024.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What to Expect from the Stock Market in 2025?
Forbes reported that experts are predicting stock market growth to vary in the range of a 5% decline to growth of 20% in 2025. However, some experts believe that a 10% increase is expected to be the most likely scenario. UBS expects that the stock market is on track for another year of double-digit gains. The strategists made a bullish call for stocks, projecting that the S&P 500 is expected to touch 6,600 by next year’s end. The firm went on to add that the increase is expected to be aided by a “no landing” for the economy.
The improved US macroeconomic outlook has increased the bank’s degree of certainty about the positive view of equities. Notably, the job market continues to be resilient amidst tighter financial conditions and elevated interest rates. Investors might witness some volatility because of the November election, but it’s unlikely that it will be a hurdle to more positive market drivers.
An index provider revealing the investment strategy and assets of a company.
Our Methodology
To list the 10 Oversold Blue Chip Stocks to Buy Now, we extracted the companies that have a market cap of over $10 billion by using a Finviz screener. After getting an initial list of 25-30 stocks, we chose the ones trading at a forward P/E multiple of less than 15.0x and which have fallen significantly on a YTD basis. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, 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).
Ecopetrol S.A. (NYSE:EC)
Market cap (As of 25 October): $16.6 billion
Forward P/E (As of 25 October): 5.40x
% Decline on a YTD Basis: ~32%
Number of Hedge Fund Holders: 11
Ecopetrol S.A. (NYSE:EC) operates as an integrated energy company.
Ecopetrol S.A. (NYSE:EC)’s focus on cost optimization and efficiency should continue to help it in navigating external challenges. The company’s investments are primarily allocated to Colombia, with a strong focus on exploration and production. Ecopetrol S.A. (NYSE:EC) continues to prioritize energy efficiency and clean energy projects in its investment plans. The company is committed to maintaining sustainable financial management and maximizing operational efficiency.
Ecopetrol S.A. (NYSE:EC)’s advancements in energy transition, which include the approval of Phase I of a sustainable aviation fuels project, and its efforts to help Colombia’s energy security and social development, should act as growth enablers. Moving forward, the company’s strategic focus on efficiency and cost optimization is expected to help it in combating the challenges related to fluctuating exchange rates and inflation.
Fitch Ratings expects that Ecopetrol S.A. (NYSE:EC) should be able to report positive FCF. Its base case assumption includes the company having an average annual capex budget of ~USD5.5 billion over the next 3 years and that it will pay 60% of the previous year’s net income in accordance with a 40% – 60% dividend policy. This, together with Fitch’s price assumptions for Brent crude oil price of USD80/bbl in 2024, USD70/bbl in 2025, and USD60/bbl in the long term, should help Ecopetrol S.A. (NYSE:EC) report positive FCF over next 3 years.
The challenges faced by the company in Q2 2024 were mitigated by its focus on maximizing operational savings, controlling costs, and improving the realization prices of crude oil.
Overall, EC ranks 9th on our list of 10 Oversold Blue Chip Stocks to Buy Now. While we acknowledge the potential of EC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than EC 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.
