We recently published a list of 10 Cheap NASDAQ Stocks To Invest In Now. In this article, we are going to take a look at where T. Rowe Price Group, Inc. (NASDAQ:TROW) stands against other cheap NASDAQ stocks to invest in now.
How Did The Stock Market Perform In Q3 2024?
The stock market has been following an uptrend since it rebounded from the bear market in Q4 2022. The bear market that ended in Q2 2022 was regarded to be a fed-induced low as the interest rates were high during that time. However, since then the S&P 500 has finished higher in seven out of the eight quarters, including four consecutive quarters of growth. Over the last four quarters, the index has returned 36.3%. This figure is significant because such high return rates were last seen when the market was recovering from 2020 COVID-19 lows.
READ MORE: 8 Best Video Conferencing Stocks To Buy According to Analysts and 10 Best Internet Retail Stocks to Buy Now.
There has been significant stimulus for the bull market to continue ranging from the Fed cutting rates to the China stimulus, and an easing economy with strong data points. Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business and WisdomTree chief economist shared his note on November 11 talking about the economic landscape and his perception of the election results. He describes last week as one of the most pivotal in recent memory, starting with the Federal Reserve’s decision to cut interest rates by 25 basis points during its November meeting. This decision reflects a cautious approach, as Fed Chair Jerome Powell’s omission of phrases like “further progress” about inflation suggests a recognition that inflationary progress has plateaued. Siegel aligned with Powell’s assessment of rental inflation, indicating that the Fed is now fully aware of disinflationary trends within the housing sector.
Siegel anticipates another rate cut at the December meeting, contingent on upcoming economic data, including the Consumer Price Index (CPI), Producer Price Index (PPI), retail sales figures, and the November jobs report. He notes that if these indicators show weaker-than-expected results, it could increase pressure on the Fed to implement further cuts.
Are We Going To Have A Third Year Of NASDAQ Bull Market?
Over the past 2 years starting from November 16, 2022, the NASDAQ composite has seen a 73% rise during this bull market. Analysts are now debating whether we can have a third year of this bull market or not. To discuss this, Nick Colas, DataTrek Research co-founder, joined CNBC on October 26. Colas thinks that this is a positive sign for the index and that there is still room for the NASDAQ to run higher.
He pointed out that if we look back at 1971 when the index started, since then we have had 10 instances where the index rallied for two straight years. Historic data shows that in six of these 10 times, the NASDAQ index continued to rally for the third year as well and in four instances it didn’t. Colas mentioned that the overall average return of these 10 years was 4.4%, which was not very impressive, however, the lower return rate was due to the 4 losing years when the index failed to rally. The four losing years as pointed out by Colas were 1984, 1987, 1990, and 2011. Three of these 4 years were characterized by crises including the 1987 market crash, the 1990 invasion of Kuwait by Iraq, and the European debt crisis in 2011. If we take these 4 years out of the equation, the overall return for the NASDAQ in year three is 13.3%. Therefore, Colas believes that as long as we don’t have any crisis events, the momentum is historically said to continue in year three.
Colas thinks the index should have at least a 10% return during the third year as historically speaking the index has delivered as much as 20% return rates during the third year. He acknowledges that many analysts think that since we have had two very strong years of growth the third might be a disappointment. However, Colas believes that today’s market environment is much healthier than the one we have had in history, and, based on that, the NASDAQ still has room to run.
Our Methodology
To curate the list of 10 cheap NASDAQ stocks to invest in now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. We used the screener to get an aggregated list of NASDAQ stocks that are trading below the average Forward P/E of 25.37 (as per Wall Street Journal). Next, we checked the Forward P/E of each stock from Seeking Alpha and earnings growth from Yahoo Finance. Lastly, we ranked the stocks in ascending order, based on the number of hedge funds holding each stock in Q2 2024, as per Insider Monkey’s database.
Why do we care about what hedge funds do? 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).
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T. Rowe Price Group, Inc. (NASDAQ:TROW)
Forward Price to Earnings Ratio: 12.53
Earnings Growth: 23.70%
Number of Hedge Fund Holders: 28
T. Rowe Price Group, Inc. (NASDAQ:TROW) is an international asset management company that helps people and organizations manage their investments. It offers various investment options including stocks, bonds, and other assets. They also create and manage mutual funds, which are pools of money from many investors used to buy a diversified portfolio of stocks or bonds. The company has clients in more than 55 countries around the world.
T. Rowe Price Group, Inc. (NASDAQ:TROW) generates a major chunk of its revenue from advisory fees it gets from Assets Under Management (AUM). However, recently the company has shifted its focus on expanding its active Exchange Traded Fund (ETF) franchise and its retirement services. It aims to reduce its outflows to half from 2023 levels by excluding a significant sub-advised variable annuity termination and focusing on growth opportunities in retirement and alternative strategies.
The assets management company ended the third quarter of fiscal 2024 with $1.63 trillion in Assets Under Management, up 21.1% year-over-year. As a result of higher assets under the company’s management and higher operating income, the adjusted earnings per share for the quarter came in at $2.57 indicating an 18% increase year-over-year.
In terms of net outflows, the total outflows for the quarter were $12.2 billion, although this was an improvement when compared to last year, however high net outflows remain a challenge for T. Rowe Price Group, Inc. (NASDAQ:TROW). Management aims to reduce net outflows and is hoping for positive funds flow in 2025. Moreover, its equity ETFs have been performing well, with strong sales pipelines and some reduction in net outflows compared to what was initially anticipated.
T. Rowe Price Group, Inc. (NASDAQ:TROW) remains an attractive investment opportunity. Firstly because it has robust fundamentals with top line and bottom line growing 6% during the past decade, and secondly due to its cheap valuation. It is one of the cheapest NASDAQ stocks to invest in now.
Overall, TROW ranks 9th on our list of cheap NASDAQ stocks to invest in now. While we acknowledge the potential of TROW to grow, 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 TROW 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.