We recently compiled a list of the 10 Worst Affordable Stocks Under $10. In this article, we are going to take a look at where Harmony Gold Mining Company Limited (NYSE:HMY) stands against the other worst affordable stocks to buy under $10.
Can the Interest Rates Rise in the Long Run, Despite the Fed Cut?
Wall Street and the market are celebrating the Fed rate cut from last week. However, the shadows of uncertainty are still hovering over, especially with the upcoming elections. Fundstrat Global Advisors’ Co-Founder Tom Lee and Professor Jeremy Siegel are optimistic about the market going into a period of growth at least until the elections.
We recently discussed this point of view about how the market is expected to grow with the interest rates coming down. You can take a look at 10 Worst Performing Affordable Stocks Under $40, to read more about it. Here’s an excerpt from the article:
“Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business and Wisdom Tree chief economist, recently appeared on CNBC and expressed that he was pleasantly surprised by the Federal Reserve’s decision to make a 50 basis point cut. While talking about how the market is going to perform after the announcement, Professor Siegel said the market is going to be at an all-time high and there are not going to be any fluctuations as we have seen in the past few days.
The word “recalibration” holds significance here, the market has been 100% towards the target unemployment around 80% to 90% towards the inflation target and the Fed hasn’t moved the interest rate. Professor Siegel pointed out that the gap has been growing between the Fed Funds and the market conditions and they were thinking about a single cut by year-end until June. However, the latest announcement mentioned the Fed will cut rates at each meeting making a total of 6 cuts until June of next year. This will bring the Fed Funds rate down 200 basis points to 3.3%, which is where the professor thinks it should be.”
It is true that interest rate cuts help both growth and value stocks, but which ones are doing better? The current market trend shows the interest rate cut expectation and the announcement supported growth stocks more than the value stocks and also resulted in small caps becoming new favorites.
Talking about value stocks and how the market could be entering into a slower growth period, Vahan Janjigian, Chief Investment Officer at Greenwich Wealth Management, and Margaret Patel, Senior Portfolio Manager for multi-asset solutions at Allspring Global Investments discussed this in a recent CNBC interview. Janjigian expressed his cautiousness regarding the market even after the Fed cut rates. He believes that interest rates will go up in the long term. It is because the market is eventually going to get a more normalized yield curve, which he believes is good for the economy. If the yield curve continues to follow the upward trajectory, it will favor value stocks more than growth stocks.
Stated that the market moves in the direction Janjigian expects, we can see a sell-off for the stocks that are currently moving higher, including the tech and growth stocks. Moreover, he also pointed towards some of the biggest investment risks. He mentioned that the rising deficit, debt, and cost of servicing the debt are some of the biggest threats. Debt is also one of the reasons interest rates could potentially go up in the future, as the debt grows it can potentially push the market-determined interest rate higher.
It is important to note that Janjigian’s strategy is somewhat hedged, meaning he has stakes in both large and small-cap stocks, indicating that any market outcome will eventually benefit his portfolio.
Adding to this Patel is thinking along the same lines as well. She also believes that the upcoming quarter could be slower, mainly due to the delay by the Fed in lowering the rates. Patel expects the economy will continue to grow but at a slower rate of merely 1% to 1.5%. Talking about her popular stock picks, she prefers companies with sustainability and earnings levels above the market average.
Our Methodology
We used the Finviz stock screener to get a list of stocks under $10 that are trading at a discount to the market average (forward P/E is 23 according to data from WSJ) with earnings expected to grow this year. Using this criteria, we shortlisted 20 stocks and then selected 10 stocks that were most widely held by hedge funds. We ranked the stocks in descending order of the number of hedge funds that have stakes in them, as of Q2 2024. Please note that all data was recorded on September 22, 2024.
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).
An open pit mine with heavy excavation machinery toiling away against the backdrop of a hidden valley.
Harmony Gold Mining Company Limited (NYSE:HMY)
Share Price: $9.86
Forward P/E Ratio: 8.42
Earnings Growth This Year: 19.60%
Number of Hedge Fund Holders: 17
Harmony Gold Mining Company Limited (NYSE:HMY) is an international gold mining and exploration company with a growing copper footprint around the globe. The company has over 74 years of mining experience in South Africa and currently, more than 90% of its gold comes from this location. Moreover, the company has a significant presence in Papua New Guinea and Australia where it is involved in mining copper.
The company has shifted its focus to gaining operational excellence. During the fourth quarter 2024 earnings call release, management highlighted that their gold production increased by 6% to 1.56 million ounces beating their upper limit of the revised guidance. In addition to improving production, Harmony Gold Mining Company Limited (NYSE:HMY) was also able to reduce its sustaining cost per ounce by 4% to $1,500.
Moreover, the Underground recovered-grades improved for the company resulting in a 100% increase in Free Cash Flow to $681 million at 22% margins. One of the key factors while analyzing a mining company is the safety of its operations as even the slightest incident has the potential to halt operations. Harmony Gold Mining Company Limited (NYSE:HMY) has been able to keep its injury frequency rate per million ounces below 6% for the past consecutive 3 fiscal years, indicating that it owns up to its motto of “a safe mine being a profitable mine”.
Lastly, the company has also remained focused on transforming its assets to improve their life. Its Mine Waste Solution project has extended the life of mine by 14 years. Moreover, the Mponeng extension extended the life of mine by 20 years adding 2.34 million ounces to Mineral Reserves. The stock was held by 17 hedge funds in Q2 2024, with total stakes worth $171.9 million. Kopernik Global Investors is the top shareholder of the company with a position worth more than $26.9 million.
Overall HMY ranks 3rd on our list of the worst affordable stocks under $10. While we acknowledge the potential of HMY 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.
