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 Phinia Inc. (NYSE:PHIN) 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).

Phinia Inc. (NYSE:PHIN)

Forward P/E Ratio as of March 19: 9.71

Market Capitalization as of March 19: $1.80 billion

Number of Hedge Fund Holders: 37

Phinia Inc. (NYSE:PHIN) develops and manufactures integrated components and systems. It operates through Fuel Systems and Aftermarket segments. It provides advanced fuel injection systems and aftermarket solutions for vehicles and industrial applications. It enhances fuel efficiency and reduces emissions for both traditional and hybrid technologies.

The company’s Aftermarket segment experienced a 4.9% year-over-year increase in sales in Q4 2024, which was fueled by higher volumes and favorable pricing across all regions. In 2024, the company expanded its aftermarket offerings by introducing over 3,600 new SKUs. The Aftermarket segment also secured new business wins, which included contracts with major customers in Europe, South America, and Southeast Asia. A multi-year contract to supply remanufactured products to a major Commercial Vehicle OEM in South America and the development of new distributor relationships in Southeast Asia are key initiatives to drive further growth.

Although the Aftermarket segment’s margin decreased by 1.4% in Q4, ending at 14.9%, due to increased freight and other charges, the overall performance remained robust. Phinia Inc. (NYSE:PHIN) plans to continue focusing on growing its Aftermarket business. The company will use its human and manufacturing capital efficiently while maintaining a financially disciplined approach.

Voss Capital sees the company as an auto parts supplier with substantial market share potential in its fuel systems business. Overblown EV penetration concerns present a favorable environment as well. Voss Capital stated the following regarding Phinia Inc. (NYSE:PHIN) in its Q3 2024 investor letter:

“We are long shares of PHINIA Inc. (NYSE:PHIN). A recent spin-off from Borg Warner (BWA), the company is an auto parts supplier that operates two distinct businesses – 1) Fuel Systems (original equipment manufacturer supplier) and 2) Aftermarket automotive products supplier.

The Fuels Systems business is uniquely positioned to capitalize on attractive competitive dynamics that we believe will allow the company to take gobs of market share in its niche markets over the coming years. As an internal combustion engine (ICE) parts supplier pure play, overly hyped expectations of electric vehicle (EV) penetration created an especially good long-term buying opportunity in PHIN earlier in the year…” (Click here to read the full text)

Overall, PHIN ranks 1st on our list of best small-cap value stocks to buy now. While we acknowledge the growth potential of PHIN, 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 PHIN 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.