We recently compiled a list of the 10 Oversold Growth Stocks to Invest In. In this article, we are going to take a look at where Stellantis N.V. (NYSE:STLA) stands against the other oversold growth stocks.
As investors focus on consumer spending in a bid to assess the broader health of the US economy, current data points demonstrate that the fears of recession are now overdone. UBS believes that the excess savings that were built up during the COVID-19 pandemic are now used up, and elevated levels of interest rates seem to be impacting activity, mainly in the housing market. However, as the US Fed moves further with its policy easing cycle, lower rates are expected to ease some downward pressure on the broader economy.
S&P Global mentioned that a risk-averse mood has been clouding the US stock market investor outlook for 4th straight month. That being said, the overall risk sentiment saw some improvement from September’s 16-month low, as per the latest results from the firm’s Investment Manager Index survey.
Forecasts for Q4 2024
As per JP Morgan, the stocks touched their 44th all-time high recently. Technology (+2.5%) continued to dominate the broader market, with Al roadshows demonstrating improved demand throughout the country. While past performance cannot be relied upon, the seasonality says that Q4 2024 acts as a tailwind for the broader US markets. Overall, consumers increase their spending more on retail at the time of the holiday season and the “Santa Claus” rally. However, the bank believes that 3 global events might affect the Q4 2024 asset returns. These include geopolitical tensions, Chinese policy stimulus, and the U.S. election.
Amidst the geopolitical tensions, gold, which generally produces positive returns in Q4 2024, can act as a safe-haven asset. Since the start of the quarter, oil prices have increased too. Therefore, both oil and gold can hedge portfolios. Next, the large bank believes that if further China’s policy support outpaces the market projections of 2 – 4 trillion renminbi (RMB) supplementary bond issuance, there might be another rally in the offing for onshore and offshore equities and commodities. Talking about the elections, the typical seasonality is likely to persist. There can be increased volatility.
Outlook for Growth Stocks
Market experts opine that when there is a reversal in the global interest rate cycle, the growth stocks are expected to outperform. This is because reduced rates help in fueling liquidity in the growth companies.
As per Comerica Wealth Management, the market environments with declining rates and rising profits support the broader equity prices. Moreover, the expectations of the rate cuts led to a change in the investing appetite as these investors are now focused on public companies that are interest-rate sensitive (including the growth stocks). Therefore, B. Riley Wealth Management believes that dividend stocks, telecoms, and consumer staples are some of the sectors that are likely to benefit.
Our Methodology
To list 10 Oversold Growth Stocks to Invest In, we used a Finviz screener to extract stocks that have fallen significantly on a YTD basis and have a forward P/E of less than 15x. After getting a list of 25-30 stocks, we narrowed it down to the following 10 stocks having high hedge fund holdings, as of Q2 2024. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments.
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 modern automobile with its sleek curves and luxurious body.
Stellantis N.V. (NYSE:STLA)
Forward P/E (As of 14 October): 3.46x
% Decline on a YTD Basis: ~42%
Number of Hedge Fund Holders: 31
Stellantis N.V. (NYSE:STLA) is engaged in manufacturing and marketing automobiles and commercial vehicles.
While the Stellantis N.V. (NYSE:STLA) has been facing challenges, Wall Street remains optimistic about the company’s unique approach to the Chinese market. The company formed a JV with Leapmotor, which is a rising Chinese EV brand. The analysts expect that the strategic partnership targets to leverage China’s cost advantages in EV and battery production and expertise in software and connectivity technologies.
Stellantis N.V. (NYSE:STLA)’s strategy minimizes the direct EBIT exposure in China, which can help in limiting downside risk. It will also enable the company to benefit from the country’s manufacturing efficiencies and technological advancements.
Moreover, Stellantis N.V. (NYSE:STLA)’s product portfolio, mainly its iconic US brands Ram and Jeep, is regarded as a key enabler for long-term growth. These brands offer high-performance and quality interiors, offering a competitive edge in the broader market. As a result, the company sees customer loyalty and can command premium pricing.
Stellantis N.V. (NYSE:STLA) will continue to leverage and expand its competitive differentiators and remains optimistic about its operational and financial performance in 2025 and beyond. As per Wall Street, the shares of the company have an average price target of $22.19.
Ariel Investments, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Finally, multinational automotive manufacturing company, Stellantis N.V. (NYSE:STLA), fell in the quarter as higher interest rates in the U.S. and tapering demand for high-volume combustion engine models resulted in elevated U.S. inventory levels. Nonetheless, pricing outperformed expectations and management reiterated full-year guidance of double-digit adjusted operating profit margin and positive free cash flow. Although we expect discounting to increase as U.S. inventory ages, we maintain a constructive view on the company. We believe STLA’s strong global footprint and unwavering dedication to leading the industry in profitability, operational excellence, and strategic foresight will continue to enhance long-term shareholder value.”
Overall STLA ranks 7th on our list of the oversold growth stocks to invest in. While we acknowledge the potential of STLA 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 STLA 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.
