We recently published a list of 10 Best US Stocks to Buy Under $5. In this article, we are going to take a look at where Uranium Energy Corp. (NYSE:UEC) stands against the other stocks to buy under $5.
Investors are becoming increasingly nervous amid a slowing U.S. economy. Signs of weakness in consumer spending and manufacturing points to an economy that is overheating amid the high interest rate environment
In August, nonfarm payrolls grew by 142,000, an increase from 89,000 in July but short of the 161,000 forecast. The unemployment rate decreased to 4.2%, while the “real” unemployment rate climbed to 7.9%, the highest since October 2021.
According to Dan North, an economist at Allianz Trade, the recent string of economic data has been disappointing, signaling something is wrong. A slowing economy always takes a significant toll on investors sentiments in the equity market.
The slowdown comes when the stock market is at a pivotal level heading into the year-end. The leading market indices are hovering close to all-time highs amid a slowing economy that needs the U.S. Federal Reserve to tweak its monetary policy.
The earnings season has also added another caveat seen by increased volatility. After months of blockbuster gains, significant stock sell-offs linked to artificial intelligence and semiconductors have come into play. Geopolitical worries, the forthcoming presidential race, and shifts in Federal Reserve strategy usher in uncertainty.
Valuations have gotten out of hand as most stocks are trading way above their historical highs. Given that the stock market experiences about four deep pullbacks of more than 5% every year, there is growing concern that one could be on the way heading into the year-end.
Appearing in an interview on CNBC, George Lagarias, the head economist at Forvis Mazars, stated that although it’s impossible to predict the magnitude of the Federal Reserve’s upcoming rate adjustment, he is in favor of a 25-basis point reduction. Analysts do not see the need for a 50 basis point or more reduction as it could confuse the markets and the economy, portraying a sense of urgency.
A more profound interest rate cut would take a significant toll on stocks trading at premium valuations as they would be the hardest hit with heightened volatility. On the other hand, emerging stocks that haven’t caught the Street’s attention yet could offer some good buying opportunities.
Currently, the market appears favorable for the growth of penny stocks and small-cap companies. Chris Retzler, portfolio manager at Needham Small Cap Growth Fund, suggests that while smaller companies are volatile, their long-term outlook is positive. He anticipates a market broadening in the second half of 2024, which could benefit smaller companies that have recently underperformed.
Retzler highlights the liquidity of smaller companies as a key growth factor. As funds shift from larger to smaller companies, many small-cap stocks may see significant price increases. Additionally, the expectation of lower interest rates over the next year is favorable for penny stocks, which require less capital to see price and valuation growth.
Investing in penny stocks or small-cap companies can be risky due to their volatility and limited historical data. However, these high-risk investments can also offer substantial rewards for those with a higher risk tolerance. While many of these companies face significant issues, some are hidden gems.
Our Methodology
We screened for US-listed companies that are trading under $5 and picked the stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
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).
A mining worker in a hard hat and coveralls hammering away at the uranium rich walls of the mine.
Uranium Energy Corp. (NYSE:UEC)
Number of Hedge Fund Holders: 28
Current Share Price: $4.37
Uranium Energy Corp. (NYSE:UEC) is an energy company engaged in the exploration, pre-extraction, extraction, and processing of uranium and titanium concentrates in the United States, Canada, and Paraguay. It operates as a critical supplier of Uranium in the U.S. and Canada. It is one of the best U.S. stocks to buy under $5 as Uranium prices show signs of edging higher.
The stock sentiments received a significant boost early in the year after the spot price of Uranium rose from $49 to $95. While the price has since pulled back to about $68, Uranium Energy Corp. (NYSE:UEC) is one company well positioned to benefit as prices edge higher amid strong Uranium demand.
Uranium Energy Corp. (NYSE:UEC) is currently developing several projects in both North and South America, aiming to establish a reliable supply of nuclear fuel, provided that the demand for Uranium stays high. The use of nuclear energy appears to be attracting new supporters as a consistent source of power that does not release carbon dioxide, positioning it as a sustainable energy option.
Uranium Energy Corp. (NYSE:UEC)’s competitive edge in the industry stems from its inked advantageous deals to buy Uranium when its price was quite low. The firm has created one of the biggest stockpiles of Uranium in the U.S. It obtained a contract from the U.S. Department of Energy to provide 300,000 pounds of U3O8 as part of the nation’s effort to create a local uranium reserve.
Uranium Energy Corp. (NYSE:UEC) has made a smart move by agreeing to purchase Uranium at record-low prices, which enables it to accumulate a cost-effective stockpile of the nuclear energy source. The earnings from selling this stockpile can, in turn, support the company in financing its extensive plans for developing mines, which is an intriguing narrative.
The company is well positioned to benefit from the U.S. government banning Russian uranium imports as the Nuclear Fuel Security Act also supports the growth of the U.S. uranium industry, ensuring a reliable supply of clean energy.
As of Q2 2024 end, 28 out of the 912 hedge funds part of Insider Monkey’s database were Uranium Energy Corp. (NYSE:UEC)’s investors. Richard Driehaus’s Driehaus Capital is the firm’s largest shareholder among these, as it owns 9.15 million shares that are worth $54.98 million.
Overall UEC ranks 7th on our list of best US stocks to buy under $5. While we acknowledge the potential of UEC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UEC 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.
