We recently published a list of 10 Best Small-Cap Value Stocks to Buy Now. In this article, we are going to take a look at where Hawaiian Electric Industries Inc. (NYSE:HE) stands against other best small-cap value stocks to buy now.
Earlier on February 24, Robert Teeter of Silvercrest Asset Management shared his perspective on small-cap stocks and highlighted their link to economic conditions and sensitivity to financing activity. He noted that the Trump trade initially boosted small caps due to expectations of economic acceleration and lower interest rates, both of which are favorable for these companies. However, policy uncertainty and weaker-than-expected economic data have delayed their rally. Teeter believes that small caps will come into their own later in the year, but for now, they are facing a choppy market with significant rotation.
In advising clients, Teeter emphasized the importance of diversification within the S&P 500. He pointed out that the equal-weight benchmark has been performing well this year, and within the tech sector, the average tech stock is outperforming the tech sector as a whole. This suggests that investors are seeking diversification to protect themselves against policy risks. Teeter also highlighted healthcare as an interesting sector and noted that it has faced challenges with profit margins following the pandemic but now seems to have stabilized. He also discussed international markets and observed that they had outperformed US markets at the start of the year. He sees opportunities in these markets due to good valuations and the stabilization of the dollar, which reduces dollar strength and benefits non-US sectors.
Given Teetar’s sentiment, small-cap value stocks might be a good option right now due to their historically strong long-term performance and current undervaluation relative to large-cap stocks. According to Teeter, small caps are expected to recover later this year.
Methodology
We first used the Finviz stock screener to compile a list of small-cap value stocks that were trading between $300 million and $2 billion. We then picked 10 stocks with a forward P/E ratio under 15, 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, as of Q4 2024.
Note: All data was recorded on March 19.
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).
An engineer standing in front of a detailed control panel with the logo of the electric utility in the background, highlighting the innovation and technical expertise of the company.
Hawaiian Electric Industries Inc. (NYSE:HE)
Forward P/E Ratio as of March 19: 9.83
Market Capitalization as of March 19: $1.9 billion
Number of Hedge Fund Holders: 35
Hawaiian Electric Industries Inc. (NYSE:HE) is an electric utility company that generates, transmits, and distributes electricity across the Hawaiian Islands. It focuses on both traditional and renewable energy sources, which include wind, solar, and geothermal. It also invests in non-regulated renewable energy and sustainable infrastructure projects within the state.
In 2024, the company’s utility segment made significant strides in renewable energy integration and achieved a 36% Renewable Portfolio Standard (RPS), which was up from 33% in 2023. Simultaneously, the utility prioritized affordability for its customers. The average residential bill decreased by 7% in 2024. Recognizing the importance of wildfire safety, the segment invested ~$120 million in 2024 to enhance its infrastructure and implement preventative measures. This included launching a public safety power shutoff program, replacing utility poles, upgrading power lines, clearing vegetation, and installing weather stations and AI-assisted cameras.
In January, the utility filed an updated wildfire safety strategy with the Public Utilities Commission (PUC) and outlined a three-year action plan from 2025 to 2027. This plan is estimated to cost ~$450 million, with $400 million allocated to capital expenditure. Despite these investments, the utility’s core net income was $181 million in 2024. The utility is now pursuing legislative initiatives to establish a wildfire recovery fund and support independent power producer financing for clean energy projects.
Overall, HE ranks 2nd on our list of best small-cap value stocks to buy now. While we acknowledge the growth potential of HE, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HE 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.