We recently published a list of 10 Best US Stocks to Buy Under $5. In this article, we are going to take a look at where Grab Holdings Ltd (NASDAQ:GRAB) stands against the other stocks to buy under $5.
Investors are becoming increasingly nervous amid a slowing U.S. economy. Signs of weakness in consumer spending and manufacturing points to an economy that is overheating amid the high interest rate environment
In August, nonfarm payrolls grew by 142,000, an increase from 89,000 in July but short of the 161,000 forecast. The unemployment rate decreased to 4.2%, while the “real” unemployment rate climbed to 7.9%, the highest since October 2021.
According to Dan North, an economist at Allianz Trade, the recent string of economic data has been disappointing, signaling something is wrong. A slowing economy always takes a significant toll on investors sentiments in the equity market.
The slowdown comes when the stock market is at a pivotal level heading into the year-end. The leading market indices are hovering close to all-time highs amid a slowing economy that needs the U.S. Federal Reserve to tweak its monetary policy.
The earnings season has also added another caveat seen by increased volatility. After months of blockbuster gains, significant stock sell-offs linked to artificial intelligence and semiconductors have come into play. Geopolitical worries, the forthcoming presidential race, and shifts in Federal Reserve strategy usher in uncertainty.
Valuations have gotten out of hand as most stocks are trading way above their historical highs. Given that the stock market experiences about four deep pullbacks of more than 5% every year, there is growing concern that one could be on the way heading into the year-end.
Appearing in an interview on CNBC, George Lagarias, the head economist at Forvis Mazars, stated that although it’s impossible to predict the magnitude of the Federal Reserve’s upcoming rate adjustment, he is in favor of a 25-basis point reduction. Analysts do not see the need for a 50 basis point or more reduction as it could confuse the markets and the economy, portraying a sense of urgency.
A more profound interest rate cut would take a significant toll on stocks trading at premium valuations as they would be the hardest hit with heightened volatility. On the other hand, emerging stocks that haven’t caught the Street’s attention yet could offer some good buying opportunities.
Currently, the market appears favorable for the growth of penny stocks and small-cap companies. Chris Retzler, portfolio manager at Needham Small Cap Growth Fund, suggests that while smaller companies are volatile, their long-term outlook is positive. He anticipates a market broadening in the second half of 2024, which could benefit smaller companies that have recently underperformed.
Retzler highlights the liquidity of smaller companies as a key growth factor. As funds shift from larger to smaller companies, many small-cap stocks may see significant price increases. Additionally, the expectation of lower interest rates over the next year is favorable for penny stocks, which require less capital to see price and valuation growth.
Investing in penny stocks or small-cap companies can be risky due to their volatility and limited historical data. However, these high-risk investments can also offer substantial rewards for those with a higher risk tolerance. While many of these companies face significant issues, some are hidden gems.
Our Methodology
We screened for US-listed companies that are trading under $5 and picked the stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
At Insider Monkey we are obsessed with 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).
A customer enjoying the convenience of a mobile financial services transaction.
Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Holders: 34
Current Share Price: $3.34
Grab Holdings Ltd (NASDAQ:GRAB) is a technology company and operator of a superapp. It offers a Grab ecosystem, a single platform for driver- and merchant partners and consumers that allows access to mobility, delivery, and digital financial services.
Grab Holdings Ltd (NASDAQ:GRAB) is an appealing investment opportunity as one of the best U.S. stocks to buy under $5 due to its dominant market share in Southeast Asia. The company enjoys a near-monopoly status in the area, particularly following its takeover of Uber’s operations in Southeast Asia in 2018.
The acquisitions are already having a significant impact as Grab continues to strengthen the Grab ecosystem and improve usage frequently. In the second quarter, it achieved a new milestone of serving a record high of 41 million monthly transacting users (MTUs) and delivering continued profitable growth at scale.
The company achieved top-line growth across all segments, with On-Demand GMV growing 18% year-over-year. This was driven by strong demand growth of a 22% increase in On-Demand transactions. Revenue rose 17% year-over-year, $664 million. Loss shrunk to $68 million, an improvement of $79 million due to an improvement in Group Adjusted EBITDA.
Furthermore, Grab Holdings Ltd (NASDAQ:GRAB) boasts a robust financial position, having ended Q2 2024 with cash liquidity of $$5.6 billion compared to $5.3 billion as of the first quarter. Consequently, Grab continues to return value to shareholders through buybacks, having bought 9.6 million shares as part of its $500 million program.
Grab Holdings Ltd (NASDAQ:GRAB) maintains a strong financial position, with its balance sheet showing it has more cash than it owes. Additionally, its liquid assets surpass its short-term debts. This gives the company a cushion to keep running and to invest in expansion, even though it hasn’t made a profit in the past year and hasn’t distributed any dividends to its investors.
According to Insider Monkey’s database, 34 hedge funds held stakes in Grab Holdings Ltd (NASDAQ:GRAB) and Tiger Global Management LLC group managed by Chase Coleman and Feroz Dewan has the highest stakes of 92.92 million shares having a value of $329.88 million.
Overall GRAB ranks 4th on our list of best US stocks to buy under $5. While we acknowledge the potential of GRAB 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 GRAB 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.
