We recently published a list of 8 Best Low Float Stocks to Invest in Now. In this article, we are going to take a look at where Ubiquiti Inc. (NYSE:UI) stands against other best low float stocks to invest in now.
Stocks with low public float refer to shares of a company that are available for trading by the public, but in relatively small quantities. The public float is the portion of a company’s shares that are not held by insiders, such as company executives, or major institutional shareholders who are usually long-term passive investors. When a stock has a low float, it can be more volatile because the smaller supply of shares means that even small changes in demand can significantly impact the stock price. For investors, this can present both opportunities and risks. While low float stocks may see large price movements, they can also be harder to trade, leading to higher spreads and less liquidity, which may be particularly painful when seeking to liquidate the investment. Consequently, investors need to be cautious with low float stocks and only buy them strategically with very high conviction.
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We believe that low float stocks become particularly attractive during times of heightened volatility, which usually happens amid pronounced geopolitical challenges or regime changes, when investors don’t know how to react to rapidly evolving circumstances. With the US stock market officially in correction territory and the implied volatility index more than 75% above the year-to-date lows, the current times perfectly fit our description of uncertainty. First, the markets have negatively reacted to the realization that tariffs will soon become a reality rather than a negotiation tool used by the new administration; the President further announced 50% tariffs on Canadian steel and aluminum, which caused some havoc among investors. On the positive side, some progress on the tariff-avoiding deal between the US and Canada, as well as the ongoing peace negotiations related to Ukraine in Saudi Arabia, provided some optimism and a boost for the stock market. Still, the picture remains dull for many investors who became accustomed to the high-growth 2023-2024 period, fueled by the AI megatrend.
A key piece of the puzzle to keep in mind when picking the right low float stock to invest in is the near- and mid-term outlook for the sector it operates in. It is well known that macroeconomic headwinds in the end market may mute even the most exceptional growth story, regardless of how strong the company’s moat is. We clearly see sluggish conditions in the construction sector, as new data shows a pronounced slowdown in both residential and commercial starts. With tariffs on construction materials kicking in, as well as the new administration being a headwind for immigration, we see this sector potentially remaining pressured for the near future. The consumer discretionary space could see slow growth as well in the upcoming quarters, as recent layoffs, as well as a tanking stock market, are very likely to make consumers more cautious with their spending. Finally, some niches in the industrial sector could also be pressured due to lower federal spending and the deteriorating Capex outlook reported by business surveys. The outlook on every other sector remains unchanged and could potentially nest some exceptional low float stocks to invest in right now.
Our Methodology
To compile our list of low float stocks, we used a Finviz screener to filter for companies that have less than 10 million shares floating for purchase. We then compare the sample with our proprietary list of hedge fund ownership and include the top 8 stocks with the highest number of hedge funds that own the stock.
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).
An overhead view of a modern networking technology suite in a data center.
Ubiquiti Inc. (NYSE:UI)
Number of Hedge Fund Holders: 23
Ubiquiti Inc. (NYSE:UI) is a technology company that designs and manufactures networking and communication products for enterprises and service providers. Its portfolio includes wireless networking equipment, routers, switches, security cameras, and access points, primarily sold under the UniFi, AmpliFi, and EdgeMax brands. UI focuses on scalable, high-performance solutions for Wi-Fi, broadband access, and enterprise IT infrastructure. The company operates through a direct-to-consumer and distributor-based sales model, serving customers worldwide. Its products are widely used in businesses, homes, and internet service provider networks.
Ubiquiti Inc. (NYSE:UI) delivered significant revenue growth in Q3 2024, with total revenues increasing by 29% to $599.9 million, compared to $465.0 million in the same quarter of the prior year. This growth was fueled by both the Enterprise Technology and Service Provider Technology platforms, with Enterprise Technology revenue rising 32% to $518.2 million and Service Provider Technology revenue increasing 11% to $81.7 million. The company’s gross profit margin improved to 41%, up from 38% in Q3 2023, driven by a favorable product mix, reduced warehouse-related expenses, and lower excess inventory charges. However, these gains were partially offset by higher shipping and tariff costs.
Ubiquiti Inc. (NYSE:UI) posted higher operating expenses, with R&D expenses increasing by 8% to $40.0 million and SG&A expenses surging 45% to $28.5 million. The rise in SG&A was largely attributed to higher bad debt expenses from a customer default and increased fees related to webstore credit card processing. Despite these cost increases, interest and other expenses fell by 37% to $11.4 million due to reduced borrowings and lower interest rates, offset slightly by higher foreign exchange losses. Additionally, the company’s effective tax rate decreased to 18.3% from 20.2% in Q3 2023, reflecting changes in the mix of income earned across tax jurisdictions. With only 4.18 million shares in the public float, UI is one of the best low float stocks to invest in now.
Overall, UI ranks 6th on our list of best low float stocks to invest in now. While we acknowledge the potential of UI 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 time frame. If you are looking for an AI stock that is more promising than UI 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.
