We recently compiled a list of the 10 Best Affordable Stocks Under $10 to Buy. In this article, we are going to take a look at where Coty Inc. (NYSE:COTY) stands against the other affordable stocks under $10 to buy.
The Rate Cut Debate Continues
The Fed commenced its easing cycle, however, the debate stands. Investors and analysts alike are fixated on what the Fed’s path will look like before the year comes to a close. On October 16, Seema Shah, Principal Asset Management’s chief global strategist, appeared in an interview on Yahoo Finance to discuss her rate cut expectations and thesis on the equity market.
Shah emphasizes that while the jobs report was strong, the data upholds an element of seasonality and volatility. She adds that it’s important that these numbers alone are not blown out of proportion or extrapolated to predict the Fed’s cycle. While she acknowledges that labor demand has been sluggish, she believes that the trends have not been as concerning so far.
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In addition to that, while the US economy has been sluggish, it is not showing signs of decline, indicative of the fact that a normalization process is underway. Shah believes a 25 basis point cut in November and December would be the most ideal situation. She adds that the Fed’s path is pretty clear for now and uncertainty will start to come in by mid-2025.
Strong Fundamentals are Key to Equities
People have kept aside cash for quite a while now, and like other investors and analysts, Seema Shah also sheds light on the situation and hints at risk assets becoming popular. Shah shares that there is approximately $6.6 trillion sitting in money market funds right now and she does not expect all of it to move to equities. In fact, part of the money sitting in cash will be used by people to create safety nets for themselves.
She adds that investors who had moved their investments into safe spaces during a period of high interest rates are more likely to move out their cash to other investment places as interest rates start to go down. With a soft landing in sight, Shah shares stocks are in a sweet spot, especially because the upside to equities is growing.
Overall, equities boast a continued upside, not as high as 2023, but solid regardless. The upside to equities is going to be primarily driven by fundamentals, especially earnings. Moreover, during growth periods, the market broadening out to other sectors is key, which has been the case for 2024. Since fundamentals are crucial at the moment, we have compiled a list of cheap stocks with strong fundamentals and solid earnings growth expectations. Let’s take a look at the 10 best affordable stocks under $10 to buy.
Our Methodology
To come up with the 10 best affordable stocks under $10, we studied stocks on the Finviz Stock Screener with a Forward P/E of under 15 and a share price of less than $10. We then examined the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q2 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a woman’s face wearing a beauty product, highlighting the company’s range of luxury items.
Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders: 23
Share Price as of October 18, 2024: $7.82
Forward P/E as of October 18, 2024: 14.08
Coty Inc. (NYSE:COTY) is a beauty company based in New York, United States. The company sells beauty products across two major segments including Coty Luxury and Coty Consumer. It licenses luxury brands such as Gucci, Burberry, Hugo, Bourjois, and CoverGirl. The company sells fragrances, color cosmetics, skincare, and body care in more than 125 countries and territories.
On the innovation front, Coty Inc. (NYSE:COTY) has been making some progress. In September, the company launched its first scientific advisory board that would meet twice a year to inspire breakthroughs among R&D specialists at COTY, with a special focus on skincare. Fast forward to October 17, the company revealed its innovations at the 34th International Federation of Societies of Cosmetic Chemists Congress (IFSCC). The company revealed its study on the application of neuroscience in product development. The study is the backbone of its recent innovation, Paixão Feminino Ancestral. This is a special body care line with body lotion and oil that is focused on how sensory stimuli influence people’s moods.
Overall, Coty has sustained revenue growth across key markets growing by mid-single digits to double-digit rates. In the fiscal first quarter of 2025, the company grew its sales by 4-5%, below its estimated growth of 6%. Coty Inc. (NYSE:COTY) expects sales to moderate in the fiscal second quarter of 2025, with minimal growth acceleration, due to cautious retailers.
Despite slower activity in the retail industry, the company expects its cost-reduction initiatives to bring fruit. For fiscal year 2025, the company expects to see its EBITDA increase by 9-11% as it reaps the benefits from cost savings and continued growth in sales. In addition to that, Coty Inc. (NYSE:COTY) is trading at a discount of 23.4% from its sector median of 18 and analysts expect its earnings to grow by 48.6% this year.
Overall COTY ranks 7th among the 10 best affordable stocks under $10 to buy. While we acknowledge the potential of COTY 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 time frame. If you are looking for an AI stock that is more promising than COTY 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.
