We recently compiled a list of 13 Best Growth Stocks Under $10 to Buy. In this article we will look at where BGC Group, Inc. (NASDAQ:BGC) ranks among the best growth stocks under $10 to buy.
After a summer dip, stocks recovered in Q3 2024, setting new records after the quarter. More than 60% of the 500 largest companies’ components outperformed the overall index that covers these stocks in the quarter. The index that tracks the 500 largest companies traded in the US is up more than 20% year-to-date, at record-high levels. Bonds also fared well, helped by declining inflation and the Federal Reserve’s aggressive half-percentage-point drop, which indicated a move away from combating inflation and toward promoting growth. Fed rate reductions boost small-cap companies, industries, and regional banks.
Value and small-cap companies overtook large tech in the major rotation that occurred during the general stock market rally. Subsequently, expensive large-cap growth names lost investor attention, while previously underperforming markets saw strong gains. The consolidation of technology is a positive development, according to King Lip, chief strategist at BakerAvenue Wealth Management. He states that ” “We’re not in a bear market for tech by any means. But you’ve definitely seen some evidence of rotation.”
Nonetheless, in Q3 2024, eight of the 500 largest companies’ eleven sectors outperformed the broader index of these 500 companies. According to Tajinder Dhillon, senior research analyst at LSEG, the Magnificent Seven companies are predicted to raise earnings by almost 20% in the third quarter of 2024, compared with a profit rise of 2.5% for the rest of the 500 largest companies. That disparity is predicted to diminish in 2025, with the remainder of the index expected to raise earnings by 14% for the full year against a 19% rise for the mega-cap group.
The Magnificent Seven “should not have to carry the profit rebound alone,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in recent research, providing a soft landing scenario. ” “For the soft landing, we are in the ‘show me’ stage.”
Moreover, soft employment figures helped allay concerns about a recession and modest inflation. Even though the unemployment rate has increased, the overall economic trend points to strong, albeit sluggish, growth. The market is now even more optimistic due to the Fed’s aggressive rate decrease and the likelihood of future rate reductions.
It is anticipated by Morningstar analysts that the “great rotation” away from large-cap tech stocks would continue as Q4 approaches, presenting opportunities in undervalued industries. The financial services, real estate, energy, and healthcare industries are expected to grow as per Morningstar analysts, particularly with the current decline in interest rates.
According to Morningstar analysts, going ahead, the possibility of additional rate cuts and higher government expenditure in this election year should boost markets, but prudence is still advised because lower-income people are still being negatively impacted by continued inflationary pressures. Value stocks and industries with strong prospects for future recovery should be the main focus of investors.
Methodology:
We sifted through holdings of iShares Morningstar Small-Cap Growth ETF to form an initial list of 20 highest-weighted Growth Stocks Under $10 in the ETF. Then we selected the 13 stocks that were the most popular among hedge funds as of Q2, 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stocks’ current market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
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)
BGC Group, Inc. (NASDAQ:BGC)
Number of Hedge Fund Holders: 33
Current Market Capitalization: $4.64 billion
BGC Group, Inc. (NASDAQ:BGC) is a brokerage and financial technology provider to the commodities, energy, and worldwide financial markets. Brokerage for a variety of financial assets, such as fixed income, stocks, commodities, derivatives, and real estate, as well as software for trading platforms, clearing, transaction execution, and other back-office activities, are among its service and product offerings. Banks, financial institutions, and corporate entities make up the majority of its clientele. The brokerage services division of BGC is the only reportable section of the company. Geographically, the company’s revenue is derived from Asia, France, Other Europe/MEA, and Other Americas; the United Kingdom and the United States account for the majority of the company’s revenue.
A new exchange for trading U.S. Treasury futures and Secured Overnight Financing Rate (SOFR) futures, the FMX Futures Exchange, was successfully launched, according to a statement released by BGC Group (NASDAQ:BGC) on September 24. The FMX Futures Exchange’s innovative trading platform, which allows for quick trade execution, is intended to give customers a more effective and affordable approach to managing their interest rate risk.
After the quarterly results, Patrick Moley, an analyst at Piper Sandler, increased the firm’s price target for BGC Group from $10 to $11.50 and maintained an Overweight rating for the shares. BGC’s stock grew by over 37% year to date. The company is anticipated to benefit from the opening of the FMX Futures Exchange, as new income streams from trading fees, clearing fees, and other services would be created. Additionally, the exchange is anticipated to grow the company’s market share in the derivatives market and draw in new customers.
O’keefe Stevens Advisory stated the following regarding BGC Group, Inc. (NASDAQ:BGC) in its first quarter 2024 investor letter:
“During the quarter, BGC Group, Inc. (NASDAQ:BGC) announced several milestones and key elements of our thesis. First, the company provided its Q4 business update, stating it expects to be around the high end of its previous guidance range. Fenics (fully electronic business) revenues increased 20% y/y, led by Rates and Credit trading, which saw revenues rise 25% and 42.6% y/y, respectively. The market underestimates these segments’ normalized revenue and earnings power after a decade-long 0% interest rate environment. We believe these lines are just getting started in what is the normalization between treasury issuance and trading volumes.
In January, after many delays, BGC announced FMX Futures Exchange received CFTC approval and would soft launch in the summer. The exchange will compete directly with the CME, attacking their monopoly business. We detailed the key thesis on why we believe FMX can take a significant share from CME on X(Twitter), which can be found here.
The most impactful announcement was BGC’s inclusion in the S&P 600 Small Cap index, leading to the purchase of 46 million shares by price-agnostic buyers. A core tenet of the C-Corp conversion was the index inclusion opportunity. Management continues to execute its strategy with a healthy business environment and the imminent FMX launch. Despite the stock rising 11.5% in Q1 and nearly 50% over the past year, it remains undervalued. Normalized earnings power will show as Fenics becomes a more significant portion of revenue, with higher margins, lower capital intensity, and an improving business environment. We continue to hold the position and believe fair value is north of $10/share.”
Overall BGC ranks 4th on our list of Best Growth Stocks Under $10 to Buy. While we acknowledge the potential of BGC 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 BGC 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 on Insider Monkey.
