We recently compiled a list of the 10 Best Stocks Under $100 To Invest In. In this article, we are going to take a look at where The Charles Schwab Corporation (NYSE:SCHW) stands against the other best stocks under $100.
Wall Street experts believe that mid-cap stocks might be well-placed for a strong run-up. As per Ryan Detrick (Chief Market Strategist at Carson Group), historically, midcaps outperform once the US Fed actually initiates cutting rates. According to him, the small and mid-caps are expected to surge up to 20% over the upcoming 12 months, far exceeding the large-cap counterparts.
Furthermore, Goldman Sachs believes that mid-caps outperform large- and small-cap stocks over the 12 months after the first rate cut. As market experts continue to expect a soft landing, the investors might look for other options apart from the biggest companies.
What Happened in Q3 2024 and What to Expect in Q4 2024?
As per the earnings sight report from FactSet dated 1st November, the S&P 500 continues to report mixed results. The Q3 remained strong for risk assets and safe havens, with the US markets delivering an all-time closing high to finish Q3 and bonds posting positive returns, as per JPMorgan Asset Management. Overall, the S&P 500 gaining for 4th straight quarter (making 18 new highs), and the US Treasuries and corporate bonds rallying with the decline in yields dominated much of the movements in Q3 2024. The asset management firm also added that gold saw its biggest gain since Q1 2016 (thanks to the expectations of faster rate cuts) and China’s stimulus supported equity market returns.
What is expected for Q4 2024 now? JPM believes that positive expected earnings growth, cooling inflation, easing policies of central banks, and firm job creation should help create a strong backdrop for risk assets. Wall Street analysts believe that mid-caps might be in a position to see strong growth moving forward.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Outlook for Mid-caps
As per BofA’s Jill Carey Hall, mid-caps can be considered as the “best hedge” for the near term.
According to Hall, the mid-caps have experienced better recent guidance and revision trends and have also surpassed the small caps on average in the downturn scenarios. Mid-caps can also act as a hedge against fewer-than-expected rate cuts, considering that small caps are rate-sensitive.
According to Goldman’s Jenny Ma, the start of the rate-cut cycle remains a potential source of incremental equity demand and a boost to broader investor risk sentiment. Moreover, over the short term, mid-cap performance as compared to other segments is expected to be dependent on the strength of economic growth data, along with the pace of the easing cycle.
As per Wells Fargo, mid-cap growth stocks are technically oversold as of now. Despite this, these stocks have a significant scope to outperform. It also added that stability in their earnings, risk, liquidity, and balance sheet appear to be more attractive as compared to small caps.
With these trends in mind, let’s take a look at the 10 Best Stocks Under $100 To Invest In.
Our Methodology
To list the 10 Best Stocks Under $100 To Invest In, we first used a screener to extract stocks trading under $100. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were arranged in the ascending order of their hedge fund sentiments, as of Q2 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).
A business executive discussing investment opportunities in a stock exchange office.
The Charles Schwab Corporation (NYSE:SCHW)
Stock Price as of November 6: $75.75
Number of Hedge Fund Holders: 72
The Charles Schwab Corporation (NYSE:SCHW) continues to operate as a savings and loan holding company, offering wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
The Charles Schwab Corporation (NYSE:SCHW)’s competitive advantages stem from massive scale and industry-leading cost efficiency, which should support its growth trajectory. The company’s strategic initiatives primarily include expansion of lending opportunities, international expansion, capital-light strategy, and workplace financial services. The Charles Schwab Corporation (NYSE:SCHW) remains focused on deepening its relationships with employers and expanding its presence in the workplace financial services market.
The company’s focus on expanding its lending business offers a strong opportunity for earnings growth. The Charles Schwab Corporation (NYSE:SCHW)’s large client base offers a significant untapped market for lending products, such as margin loans, mortgages, and other forms of credit. Wall Street believes that this shift towards lending is a positive, capital-light strategy that can fuel higher NII and improve overall profitability.
Furthermore, The Charles Schwab Corporation (NYSE:SCHW)’s strong capital generation placed the company to potentially resume share buybacks in early 2025. Analysts at JPMorgan Chase & Co. increased their price objective on the company’s shares from $86.00 to $87.00, giving it an “Overweight” rating on 16th October.
The London Company, an investment management company, released third-quarter 2024 investor letter. Here is what the fund said:
“The Charles Schwab Corporation (NYSE:SCHW) – SCHW underperformed the broader market as the company reported an optically bad quarter, though with little implications on company fundamentals. Cash sorting from consumers continued in the latest quarter and has persisted longer than we anticipated. We believe that an end to SCHW’s headwinds are near, especially as the Federal Reserve shifts to cutting rates, and consequently, we expect a strong rebound in earnings power within the next 18 months. Longer term, we believe SCHW is well positioned to continue capturing market share and driving sustainable earnings growth.”
Overall, SCHW ranks 5th on our list of the best stocks under $100 to invest in. While we acknowledge the potential of SCHW as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SCHW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
