We recently published a list of 10 Cheap New Stocks To Buy Right Now. In this article, we are going to take a look at where Solventum Corporation (NYSE:SOLV) stands against other cheap new stocks to buy right now.
The US IPO market experienced a rebound in 2024, with proceeds and deal volume increasing as compared to the previous two years. However, activity remained below historical levels due to economic uncertainty. A resurgence is expected in 2025, mainly driven by potential interest rate cuts, pent-up investor demand, and a large pipeline of well-prepared companies, including many unicorns. This was discussed in detail earlier in our 12 Best New Stocks to Buy According to Hedge Funds article. Here’s an excerpt from it:
“…IPO activity saw a strong increase in 2024, with 61 traditional IPOs garnering more than $26.4 billion YTD, which was in line with the combined total number of IPOs in 2022 and 2023, which witnessed 28 and 35 IPOs, respectively. Despite this improvement, IPO activity remained short of early anticipations and historical levels of activity. This is because several IPO candidates decided to stay on the sidelines as they waited for a clearer economic picture after the U.S. presidential elections.”
General Atlantic CEO Bill Ford recently joined CNBC’s ‘Squawk Box’ to discuss the state of the private equity landscape, the IPO market, and the M&A outlook for 2025. Speaking on January 21, Ford highlighted that the IPO market has faced challenges over the past three years due to regulatory hurdles and a difficult exit environment. Despite this, there’s optimism about a renaissance in IPO activity, with 28 companies in General Atlantic’s pipeline ready to go public. This resurgence is anticipated to benefit private equity investors seeking liquidity, companies looking to raise capital, and public investors eager to access high-growth opportunities.
Ford noted that the regulatory overhang from the previous administration had discouraged many companies from pursuing public listings despite favorable equity markets and a strong economy. However, as these barriers begin to ease, he expects a wave of IPOs that will reinvigorate the public markets. He described this development as a triple win, enabling private equity firms to achieve liquidity, providing growth-stage companies with much-needed capital, and offering public investors access to innovative businesses. The discussion also touched on the broader implications for private equity. Ford explained that while strategic buyers had been sidelined in recent years due to regulatory constraints, their return to the market could create a more balanced environment. Historically, about 50% of exits occurred through IPOs and 50% through M&A transactions, and Ford anticipates a return to this equilibrium.
Ford’s comments align with broader trends in the IPO landscape for 2025. A lot of companies have signaled intentions to go public this year, reflecting renewed confidence in public markets. This revival is expected to reshape the investment landscape.
Methodology
We used the Finviz stock screener to look for companies that went public in the past 2 years. We sorted our screen by IPO date and market cap and looked through the top stocks that recently went public and are trading at a valuation of over $1 billion. We then selected 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 Q3 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).
Source: Unsplash
Solventum Corporation (NYSE:SOLV)
Number of Hedge Fund Holders: 48
Forward P/E ratio as of January 25: 13.16
Market Capitalization: $12.96 billion
Solventum Corporation (NYSE:SOLV) is a healthcare company that develops and delivers innovative solutions across a diverse portfolio. It operates in Medsurg, Dental Solutions, Health Information Systems, and Purification & Filtration. It addresses patient care, clinical workflows, and healthcare operations.
The company has historically underperformed its markets, with flat or declining volumes over the past 2 years. This comes from commercial misalignment and poor R&D productivity. To address these challenges, Solventum Corp. (NYSE:SOLV) has implemented a 3-phased approach. The company will first identify and prioritize high-growth markets and submarkets through market analysis. Then, it will align its commercial and R&D efforts with these priorities. This includes specializing sales teams, adjusting incentives, and shifting R&D focus towards target markets. Finally, it will pursue portfolio optimization through inorganic growth, potentially acquiring smaller companies or technologies.
The company’s financial outlook for 2024 reflects these growth initiatives as it raised its organic sales growth guidance to 0-1% and expects adjusted earnings per share to be between $6.30 and $6.50. The company also anticipates free cash flow in the range of $700 million to $800 million. Solventum Corp.’s (NYSE:SOLV) success hinges on its ability to successfully execute Phase 2 of its transformation plan.
Overall, SOLV ranks 1st on our list of cheap new stocks to buy right now. While we acknowledge the growth potential of SOLV, 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 SOLV 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
