We recently compiled a list of the 8 Best Cheap Growth Stocks To Invest In Now. In this article, we are going to take a look at where First Solar, Inc. (NASDAQ:FSLR) stands against the other cheap growth stocks.
What Should Your Portfolio Look Like in the Current Bull Market
The current market data shows that the economy of the United States is normalizing, especially with an active Federal Reserve, global stimulus from China, and higher consumption rates. In one of our recent articles, 7 Best Low Cost Stocks To Buy Under $50, we talked about the areas that could potentially benefit the most in the current bull market. We also discussed points of view from different analysts. Here is a piece from the article:
“The Fed rate cut and the Chinese stimulus are expected to affect the market positively. Adam Parker, Trivariate Research founder and CEO; Lauren Goodwin, New York Life Investments chief market strategist; and Kristina Hooper, Invesco chief global market strategist joined CNBC recently to talk about the best opportunities in the current bull market.
Adam Parker expressed that the market is outpacing the Federal Reserve’s action. He highlighted a sense of optimism surrounding AI deployment over the next few years, but he also raised concerns about market valuations exceeding economic realities. Parker likes the healthcare sector as it is driven by AI and believes that this will put the industry in a leading market position. He also believes that the Chinese Stimulus is a positive sign for the energy and industrial sectors.
On the other hand, Lauren Goodwin talked about how the rate cuts are supposed to affect the market. She thinks growth is the key indicator while analyzing the market. When the Fed is cutting rates, profit, and earnings margins typically stay where they are until growth starts to slow down. Moreover, she also pointed out that it is difficult to see the real economic catalyst that gives growth an upstart, without inflation. She also thinks that the upcoming period is going to be volatile between growth kicking up and then slowing down. Goodwin mentioned that she is going to be the buyer of the rally until unemployment starts rising and growth becomes a problem.”
Gabriela Santos, JPMorgan Asset Management’s chief market strategist, joined CNBC recently to talk about how investors’ portfolios might not be adequately adjusted to align with the current economic normalization, particularly in fixed-income allocations.
Santos emphasized that a proactive Federal Reserve, ongoing U.S. economic expansion, and stimulus from China create a favorable environment for risk assets to perform well. Santos highlighted that portfolios typically hold only about 36% in core fixed income, while she believes a more appropriate range is 65% to 75%. She suggested reallocating cash into credit rather than equities, focusing on investment-grade bonds and securitized debt.
Moreover, she thinks that within equity as well portfolios are overly emphasized on growth and technology stocks, whereas there lies significant potential outside of these industries. Gabriela Santos also pointed out that consumer spending remains robust, tracking around 3% to 3.5%. This resilience supports the notion of a “soft landing” for the economy. She also noted that it is a good sign that the market is less concerned about inflation, and instead, the focus is now more on consumer spending data, which has been tracking around 3% to 3.5% during the current quarter.
Our Methodology
To compile the list of 8 best cheap growth stocks to invest in now, we used our previous articles and Finviz screener. Using these two sources we shortlisted 20 growth stocks from industries including Technology, Biotech, Healthcare, and Renewable energies among others. We made sure that we only selected stocks that were trading below the forward price-to-earnings ratio of 23.98 (the market’s forward P/E as per the Wall Street Journal) with earnings expected to grow during the year. Next, we ranked these stocks based on the number of hedge fund holders in Q2 2024. The list is ranked in ascending order of the number of hedge fund holders.
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).
A solar panel farm with an orange sky illuminating the vast landscape.
First Solar, Inc. (NASDAQ:FSLR)
Forward P/E Ratio: 18.94
Earnings Growth This Year: 75.50%
Number of Hedge Fund Holders: 66
First Solar, Inc. (NASDAQ:FSLR) is a technology company that focuses on solar energy. It produces photovoltaic (PV) modules and solar panels that convert sunlight to electricity. The company has manufacturing plants in several countries including Malaysia, Vietnam, and the United States.
The company holds an important place in the energy sector of the United States as its business model aligns with the Government’s agenda of shifting towards renewable sources of energy. This automatically puts First Solar, Inc. (NASDAQ:FSLR) on the growth track for years to come.
Moreover, the stock is trading below its pre-pandemic earnings levels. It is currently trading at only 19 times its forward earnings, while analysts expect its earnings to grow by 75.5%.
The tailwinds from government measures to support solar and wind energy businesses are proving to be good for the company. During the second quarter of 2024, its revenue increased by 24.7% to $1.10 billion. Moreover, due to increased selling price, its margins came in high at more than 49%.
Apart from the government factor, artificial intelligence is also one of the key factors that will contribute heavily to its growth. Artificial intelligence and data centers require large amounts of electricity and they are looking for solar and other renewable energy companies to fulfill their energy requirements.
This robust investment case combined with its cheap valuation makes First Solar, Inc. (NASDAQ:FSLR) one of the best cheap growth stocks to invest in now.
Overall FSLR ranks 3rd on our list of the cheap growth stocks to invest in. While we acknowledge the potential of FSLR 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 a promising AI stock 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.