We recently compiled a list of the 7 dirt cheap stocks to invest in now. In this article, we are going to take a look at where Prudential Financial, Inc. (NYSE:PRU) stands against the other the Dirt cheap stocks to invest in now.
The stock market is at a turning point after one of the longest bull runs in recent history. With major market indices close to all-time highs, valuations are getting out of hand. Likewise, the earnings season has seen increased volatility, though, with some significant selling of semiconductor and artificial intelligence stocks that used to draw investors.
Soaring geopolitical tensions in the Middle East are complicating the situation and triggering risk aversions in the market. Investors are becoming increasingly cautious and resorting to safe-haven assets due to concerns about a full-blown war in the Middle East that could seriously impact the global economy.
READ ALSO: 10 Stocks That Will Make You Rich in 5-10 Years and Bill Ackman Stock Portfolio: 8 Top Stock Picks.
Growing geopolitical tensions have been a factor in the stock market’s erratic start to October. According to Barbara Doran, founder of BD8 Capital Partners, things getting out of hand in the Middle East could cause stocks to decline.
Surveys of public opinion already indicate that jitters are rising in the market. A gauge of consumer confidence saw its most significant one-month drop in over three years last week. Furthermore, the National Federation of Independent Business reports that a recent survey of confidence among small-business owners dropped more than anticipated in early September, maintaining the gauge below its 50-year average for 32 straight months.
“We’re in a Goldilocks moment for the U.S. economy,” said Rich Nuzum, chief investment strategist at Mercer. “But Goldilocks moments are rare, and they tend not to last long. So when does something go bump in the night?”
Bargain Hunting in an Overvalued Market
While the market is priced at a premium due to the artificial intelligence frenzy, it does not mean there are no bargains. There are dozens of dirt cheap stocks to invest in now that are trading at discounted valuations depicted by low price-to-earnings multiple and solid underlying fundamentals.
Interest rate reduction was expected to benefit small-cap stocks. That isn’t happening. The Federal Reserve’s dramatic interest rate cut two weeks ago has caused the small-cap-focused Russell 2000 index to fall by 0.5%, lagging behind the S&P 500’s 1.3% gain.
According to Bank of America, investors should be aware of a few important US stocks while navigating the current market climate. In a note to clients, strategist Nigel Tupper stated that a combination of improving global earnings cycle, easier monetary policy in the US as inflation returns to the target level, and China’s recent multifaceted stimulus appears supportive of equity markets and cyclicals.
It is important to note that not all investments will yield significant returns, considering valuations have gotten out of hand with the S&P 500 at an all-time high. Nevertheless, long-term investors can make substantial gains by selecting solid growth stocks trading at discounted valuations. An undervalued company backed by excellent financial fundamentals, such as robust revenue and earnings growth, will always elicit strong interest from professional investors. Therefore, it is likely to enjoy significant share price appreciations down the line.
The Organization for Economic Cooperation and Development predicts that declining interest rates and rising real wages will contribute to a modest increase in global economic growth this year and next year, which is one of the reasons to be bullish about dirt-cheap stocks.
Source:Pixabay
Our Methodology
To compile the list of dirt cheap stocks to invest in now, we sifted through screeners and reports, scanning for high-quality stocks trading at discounted valuations. From an initial list of 20 stocks, we settled on the top seven stocks that were trading under a forward P/E of 10, as of October 7, and were the most widely held by hedge funds. The stocks are ranked in ascending order based on the number of hedge funds that hold them, as of Q2 2024.
At Insider Monkey, we are obsessed with 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).
Prudential Financial, Inc. (NYSE:PRU)
Forward Price-to-Earnings Ratio: 8.36
Number of Hedge Fund holders as of Q2: 40
Prudential Financial, Inc. (NYSE:PRU) is a financial services company that provides insurance investment management and other financial products and services. With over $320 billion in bonds and over $28 billion in total net equity, it is in a strong financial position.
Prudential’s allure as one of the best dirt-cheap stocks to invest in now stems from its strong position in developing markets, where demand for its products may rise quickly. A portion of those markets still need to be explored.
However, the performance of Asian economies has been uneven over the last few years, raising serious questions about Prudential Financial, Inc. (NYSE:PRU)’s increased focus. This has raised some questions about the wisdom of Prudential’s plan. Though only by 1%, revenues in the year’s first half decreased from the same period last year, in the interim, profits after tax fell by more than four-fifths compared to the previous year’s first half.
The interim dividend increased by 9%, and since this is normally a very cash-generative business, there is room for future income growth in the long run. Prudential Financial, Inc. (NYSE:PRU) has recognized the financial services sectors where its reputation is strong. It targets markets with large numbers of potential customers that sometimes continue to offer limited competition.
The company has the foundation for an excellent long-term growth story. Nevertheless, its share price does not reflect that fully, given that the stock trades at a discount with a price-to-earnings multiple of 8.36 while yielding 4.37% on dividends.
As per Insider Monkey’s database, 40 hedge funds owned stakes in Prudential Financial, Inc. (NYSE:PRU) at the end of June, up from 33 in the previous quarter. These funds own around $512.88 million worth of stock.
Overall PRU ranks 7th on our list of 7 dirt cheap stocks to invest in now. While we acknowledge the potential of PRU 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 PRU, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
