We recently compiled a list of 13 Best Growth Stocks Under $10 to Buy. In this article we will look at where Southwestern Energy Company (NYSE:SWN) 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)
Southwestern Energy Company (NYSE:SWN)
Number of Hedge Fund Holders: 49
The main office of Southwestern Energy Company (NYSE:SWN), a producer and exploratory natural gas firm, is located in Spring, Texas. The development of unconventional natural gas reservoirs in the Appalachian Basin and Haynesville Shale is the main focus of the company’s operations.
The company reported operational revenues of $1.08 billion for the second quarter of 2024, with an EPS of $0.10 that marginally exceeded analysts’ projections. The gas company beat earnings estimates for the third time in the previous four quarters. Analysts speculate that the stronger-than-expected earnings were probably caused by a higher realization of oil and gas prices.
Southwestern Energy Company’s (NYSE:SWN) production statistics were equally impressive in Q2 2024, with a total net production of 379 Bcfe, or 4.2 Bcfe per day. This includes the daily output of 101 MBbl of liquids and 3.6 Bcf of gas. In addition, the company invested $430 million in capital projects, which included drilling 30 wells, finishing 23 wells, and listing 22 wells for sale.
At the conclusion of the second quarter 2024, Southwestern Energy Company (NYSE:SWN) had $4.2 billion in total debt, with a net debt to adjusted EBITDA (non-GAAP) ratio of 2.1x, suggesting a manageable leverage profile.
Following the successful completion of its merger with Southwestern Energy Company on October 2, 2024, Chesapeake Energy Corporation formed Expand Energy Corporation, which is currently the largest independent natural gas producer in the country. Southwestern’s prior financial obligations, such as the cancellation of its credit agreement and the delisting of its stock from the NYSE, have been fulfilled with the merger. Under the symbol “EXE,” the recently established Expand Energy will start trading on the NASDAQ. Significant synergies, improved margins, and a wider market reach are anticipated from the transaction, which will lower energy costs and raise shareholder value. While keeping an eye on operational effectiveness and financial stability, the organization is also well-positioned to provide an affordable and sustainable energy future.
Israel Englander’s Millennium Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 24,923,413 shares worth $167.73 million as of Q2.
Overall SWN ranks 1st on our list of Best Growth Stocks Under $10 to Buy. While we acknowledge the potential of SWN 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 SWN 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.
