We recently published a list of 10 Best Very Cheap Stocks to Buy According to Billionaires In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against other best very cheap stocks to buy according to billionaires.
Coming off 2 years of healthy broader market performance (~26% total return in 2023, ~25% in 2024), the US Bank Wealth Management believes that the S&P 500 valuations kicked off 2025 at elevated levels. In 2025, stocks continue to face a volatile environment, and in mid-March, the S&P 500 index witnessed a correction (a fall of 10% or more). Despite this, the index’s expected P/E ratio remains marginally above the historic 5-year and 10-year average, says the firm. As per Rob Haworth, senior investment strategy director, U.S. Bank Asset Management, it’s critical that, in 2025, earnings growth remains on track.
Corporate Earnings Projections in 2025
US Bank Wealth Management believes that current market projections hint at the 11.5% S&P 500 earnings growth in 2025 versus the prior year. This number is subject to change. However, Terry Sandven, chief equity strategist for U.S. Bank Asset Management, mentioned that when considering the potential impact of tariffs and other issues, it is difficult to expect that 2025 earnings would meet the current projections. Haworth says that the impact of tariffs on company profits is expected to be mixed. Companies that are more dependent on importing goods manufactured overseas can witness more challenges.
In comparison, the smaller companies, which are not as dependent on foreign trade, are expected to be better placed to mitigate the impact of the trade environment. Because they are not selling in the foreign markets and are not relying on foreign goods, smaller companies can have more pricing power, opines Haworth. This can equate to a healthier earnings picture.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Technology Sector Remains Well-Placed
JPMorgan believes that uncertainty related to the trade and other factors of the US administration’s policy agenda continue to lead to a wait and see attitude from businesses and households. Given that household and corporate balance sheets remain relatively healthy, this attitude is expected to be consistent with a slowness in the broader US activity rather than a recession. Coming to the technology sector, in most part, the balance sheets are in healthy shape, with valuations based on forward earnings sitting at a decent place, says JP Morgan. As per the investment firm, these valuations still demonstrate anticipations for very strong 20%+ earnings growth from the US technology sector in 2025.
Our Methodology
To list the 10 Best Very Cheap Stocks to Buy According to Billionaires, we used a stock screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies that trade at a forward P/E of less than ~20.0x. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Forward P/E as of March 28: ~17.33x
Number of Billionaire Investors: 11
Number of Hedge Fund Holders: 71
American Express Company (NYSE:AXP) operates as an integrated payments company. Robert W. Baird analyst David George upped the rating on the company’s stock to a “Hold,” setting a price objective of $265.00. The rating is backed by factors highlighting a balanced risk/reward profile. The analyst believes that the recent underperformance resulted in an improved risk/reward trade-off, but the valuation still demonstrates modestly elevated expectations. However, American Express Company (NYSE:AXP)’s credit quality remains strong. Also, Clear Secure, Inc. has extended its partnership with American Express Company (NYSE:AXP) for its second one-year renewal term.
American Express Company (NYSE:AXP) exited the year with improved momentum as billings growth accelerated to 8% in Q4 2024, fueled by stronger spending from the consumer and commercial customers during the holiday season. Moving forward, the company’s growth is expected to stem from numerous attractive opportunities it sees throughout its premium customer base, mainly with Millennial and Gen Z consumers as well as in key international markets, together with its operating expense leverage which allows it to continue to invest at increased levels to fuel growth.
Bretton Capital Management, an investment management company, released Q4 2024 investor letter. Here is what the fund said:
“American Express Company (NYSE:AXP) was our best performing stock last year, returning 60%, which was on top of 2023’s 29%. Its premium credit cards are more popular than ever, and its moderately affluent customer base continues to spend. American Express did especially well signing up younger cardholders, a great sign that its growth can be sustained for years to come. The combination of healthy revenue growth and tight expense control led to an earnings-per-share growth of 25%.”
Overall, AXP ranks 10th on our list of best very cheap stocks to buy according to billionaires. While we acknowledge the potential of AXP 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than AXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
