We recently published a list of 10 Most Promising Low-Cost Stocks According to Hedge Funds. In this article, we are going to take a look at where Micron Technology, Inc. (NASDAQ:MU) stands against other most promising low-cost stocks.
Inflation Data Hints at a Lower Than 50 bps Cut
The September Consumer Price Index data showed that consumer prices rose way above expectations. On October 10, Omair Sharif, Inflation Insights president, appeared in an interview on Yahoo Finance to discuss his market thesis amid rising consumer prices.
Sharif highlights that while inflation data is higher than expected housing inflation has started to cool down a bit more. He also adds that food prices have come down significantly ever since the outburst after COVID-19, hinting that there are a lot of positives to extract from the current market situation.
Sharif suggests that the market is not up to a point where the Fed will be worried about the status quo, wiping out any hopes for a 50 basis point cut in November. His market thesis is that a 25 basis point cut in November will be the best course of action.
The Bull Market is Turning Two Years Old
As the Street approaches the second anniversary of the bull market, the market is set up for major changes. On October 11, Matthew Palazzolo, Bernstein Private Wealth Management’s senior investment strategist, appeared in an interview on Yahoo Finance to discuss the market outlook.
Palazzolo suggests that the Fed’s monetary policy is probably the biggest risk to the bull market at the moment. He adds that the Fed will continue to cut rates in 2025. While returns are expected to be modest the scenario is expected to be fairly conducive for equity investors.
He adds that the market is expected to broaden out from the magnificent seven and their valuations will increase relatively slowly. Palazzolo highlights that low-cost names will offer greater opportunity. He also suggests that companies beyond the big seven are more in line with their long-term average.
Our Methodology
To find the most promising low-cost stocks according to hedge funds, we used the Finviz stock screener. We set the Forward P/E under 15 to get a list of cheap stocks with a market capitalization of over $2 billion. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024 as a primary metric and their Forward P/E as of October 13, as a secondary metric.
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 close-up view of a computer motherboard with integrated semiconductor chips.
Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 120
Forward P/E Ratio as of October 13, 2024: 11.97
Micron Technology, Inc. (NASDAQ:MU) ranks first on our list of the most promising low-cost stocks according to hedge funds. The semiconductor company is home to intelligent infrastructure enabling the development of artificial intelligence and generative AI applications. Its primary offerings include memory and storage products.
In the fiscal year 2024, Micron Technology, Inc. (NASDAQ:MU) grew its revenue by 62% and gross margins by more than 30 percentage points. The company reported record revenue growth in its data center and automotive segments. During the year, the company invested $8.1 billion in capital expenditures. The company expects capex to be considerably higher in 2025.
For the fiscal first quarter of 2025, Micron Technology, Inc. (NASDAQ:MU) expects revenue to reach $8.7 billion and gross margin at 39.5%. The company is also a market leader in its DRAM and NAND technologies, accounting for 69% and 31% of its revenue respectively.
The company is shifting its entire focus to meeting the demands for artificial intelligence and data center customers, two of the fastest-growing industries. The company’s leadership in process technologies promises strong growth and higher returns.
Baird Chautauqua International and Global Growth Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q3 2024 investor letter:
“After Micron Technology, Inc.’s (NASDAQ:MU) price appreciated 54% in 1H24, investors became anxious about potential memory weakness, less clear cyclical recovery pace, and whether competitor Samsung will act rationally with capacity expansion. We maintain our long-term positive view on the industry’s demand/supply situation. We believe Micron is well positioned in technology capability, and that its margins will continue to improve.”
Overall, MU ranks 1st on our list of most promising low-cost stocks according to hedge funds. While we acknowledge the potential of MU 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 MU 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.
