We recently compiled a list of the 10 Best Very Cheap Stocks To Buy Now According To Hedge Funds. In this article, we are going to take a look at where EOG Resources, Inc. (NYSE:EOG) stands against the other very cheap stocks to buy according to hedge funds.
As we approach the third half of 2024, the market’s performance continues to draw in both investors and analysts alike. After rising by an average of 24% the year before, the 500 largest-cap US equities finished the second quarter of this year with an impressive gain of over 3%, on average. Overall, the unexpectedly resilient U.S. economy and the frenzied AI boom have propelled equities to unprecedented levels.
Even though the markets are currently worried about a slowdown, most recent economic indicators complement this market performance, demonstrating the US economy’s resilience. The Commerce Department revealed a 3.1% YoY gain in Q4,2023 for the economy, primarily due to solid consumer expenditure on dining out, healthcare, and automobiles. The world’s largest economy’s growth prediction was slightly revised by the IMF to 2.6% this year, pointing out the country’s robust and adaptable nature to changes in the global economy. According to Economic Intelligence’s consumer goods and retail outlook study for 2024, global retail sales are projected to rise by 6.7% in 2024, bolstered by a 2% increase in volume, regardless of a dip in inflation.
This brings us to industries that are selling at a discount, of which, broadcasting is one, at an EV to EBITDA ratio of 7.31. According to The Business Research Company, the television and radio broadcasting markets have expanded significantly in recent years. It is expected to grow from $439.41 billion in 2023 to $466.83 billion in 2024, at a CAGR of 6.2%. According to Future Market Insights, North America has the largest market share globally for television broadcasting services, followed by Asia Pacific.
The introduction of digital transmission and the Internet caused a major transformation in the television industry. Broadcast television and cable coexist with cable substitutes like HBO Max, Netflix, and Amazon Prime Video. Many others have completely cut their cable connections, opting to get all of their television needs met online. The Motion Picture Association of America reports that the film and television industries have a major economic impact, employing 2.5 million people annually and paying out over US$ 188 billion in compensation.
Another industry trading at a reduced price is air transportation, which has an EV to EBITDA ratio of 6.17. The Business Research Company reports that the size of the air transport market has expanded dramatically in recent years. The projected CAGR is 6.8%, which would see it rise from $1,016.38 billion in 2023 to $1,085.37 billion in 2024. Furthermore, it is anticipated that during the next several years, the size of the air transport sector will rise significantly. With a 6.5% CAGR, it will reach $1,394.51 billion in 2028.
The future expansion of the air transport market is anticipated to be driven by the growth of e-commerce and online shopping. For example, in September 2022, the US Department of Commerce’s International Trade Administration reported that consumer e-commerce accounted for 30% of the UK’s total retail market (up from 20% in 2020), with over $120 billion in e-commerce sales annually. In the UK, 82% of individuals will have made at least one online transaction by 2021.
Methodology:
We selected stocks with an institutional ownership of over 70% and a PE ratio under 10, as of June 25 for our list of 10 Best Very Cheap Stocks To Buy Now According To Hedge Funds. We narrowed down our selection to 10 stocks that were the most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q1 of 2024. In cases where two or more stocks have the same number of hedge funds, we’ve used the PE ratio as a tie-breaker.
In order to identify cheap stocks, we searched for companies with a strong earnings track record by evaluating their EPS over the last two to three years. Secondly, we only considered stocks that received “buy” or “strong buy” recommendations from analysts.
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.)
An oil rig in action in a vast desert, drilling for natural gas.
EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 39
PE Ratio as of August 1: 9.77
EOG Resources, Inc. (NYSE:EOG) is one of America’s original unconventional oil and gas producers. Notable for its varied portfolio across many basins, EOG continues to be a robust investment even in the face of recent stock price reductions brought about by choices made by the Organization of the Petroleum Exporting Countries (OPEC).
EOG is viewed as a very cheap stock to purchase right now since its PE ratio of 9.77 is lower than the PE ratio of 12.81 for the Oil & Gas Exploration & Production industry.
Insider Monkey monitored that 39 hedge funds out of the 920 hedge funds held a position in EOG Resources, Inc. (NYSE:EOG) as of the end of the first quarter of 2024. Donald Yacktman’s Yacktman Asset Management is the largest stakeholder in the company, with 1,787,728 shares worth $225.02 million.
EOG Resources exceeded Wall Street expectations for second-quarter earnings as the oil and gas company benefited from increased oil output. Based on LSEG statistics, the firm reported an adjusted profit of $3.16 per share for the quarter ended June 30, which was higher than the average expectation of $2.96 made by analysts. Compared to the 970,300 barrels of oil equivalent per day (boepd) produced in the same period of the previous year, the total output for the second quarter of 2024 was 1.05 million boepd. 1.04 million boepd was the average forecast made by analysts.
According to the Energy Information Administration’s (EIA) Petroleum Supply Monthly report, U.S. oil output and demand reached a four-month high in April, increasing producers’ profits, like EOG Resources. Additionally, the company projected a third-quarter output of 1.05 million to 1.08 million boepd.
Strategically, EOG aims to protect against low energy prices and set the stage for larger profits under favorable market conditions by maintaining a 30% after-tax rate of return at $40 per barrel of oil and $2.50 per MMBtu of natural gas.
EOG emphasized the potential for growth in the demand for natural gas, which is being driven by LNG exports and rising industrial consumption, at Bernstein’s Annual Strategic Decisions Conference. The Dorado gas project in South Texas puts EOG in a position to benefit from these developments. EOG estimates 10 billion barrels of oil equivalent in reserves, which equates to about 26 years of production by 2024.
The average price goal of the 20 analysts that have 12-month price projections for EOG Resources shares is $144.15. The average objective indicates a 17.09% rise from the $123.11 stock price as it is right now. Piper Sandler and RBC Capital Markets increased their price estimates for EOG Resources in July due to encouraging results from the company’s Utica wells and an effective program of buybacks by shareholders.
EOG Resources has strong prospects for future development with its excellent production growth, effective operations, large reserves, and dedication to shareholder returns. However, the company’s performance is dependent on the fluctuating price of gas and oil, and in order to sustain output growth, it must constantly discover new, high-quality reserves.
Overall, EOG Resources, Inc. (NYSE:EOG) is an attractive investment due to its effective operations, significant reserves, and deliberate concentration on high-return projects. The firm is well-positioned for long-term development and significant shareholder returns due to its commitment to returning 70% of free cash flow to shareholders, a solid dividend history, and an appealing price.
Overall EOG ranks 10th on our list of the very cheap stocks to buy. You can visit 10 Best Very Cheap Stocks To Buy Now According To Hedge Funds to see the other very cheap stocks to buy that are on hedge funds’ radar. While we acknowledge the potential of EOG 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 EOG 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.