We recently compiled a list of the 8 Best Stocks Under $50 To Invest In Now. In this article, we are going to take a look at where Schlumberger Limited (NYSE:SLB) stands against the other stocks under $50.
As we navigate through 2024, the economic landscape presents a mix of challenges and opportunities for investors. Recent economic indicators suggest a cautious yet resilient consumer base, even as the Federal Reserve has issued its first interest rate cut since 2020. The current financial environment reflects a deliberate balancing act by the Fed, aimed at achieving a “soft landing” for the economy—taming inflation without triggering a recession. This approach has significant implications for the stock market, particularly for stocks priced under $50, which often represent a combination of risk and reward for discerning investors.
According to Gregory Daco, Chief Economist at EY-Parthenon, the U.S. economy is showing signs of gradual downshift. Both consumers and businesses are displaying a more prudent approach to spending, influenced by a tightening labor market and rising costs. The latest data revealed a moderate job growth of 142,000 in August, but this was overshadowed by significant downward revisions in payroll figures, indicating a potential softening of employment conditions. Despite these headwinds, Daco remains optimistic, projecting that real GDP growth will average 2.7% in 2024, easing to 1.8% in 2025.
In terms of consumer behavior, the retail sector has shown resilience, with spending continuing, albeit at a more cautious pace. Daco notes that while consumers are not significantly retracting their expenditures, slower growth in disposable income could lead to more restrained spending patterns moving into 2025. He forecasts consumer spending growth to decelerate, averaging 2.5% in the fourth quarter of 2024 before dipping to 2% in 2025.
Inflation is another key factor influencing the economic outlook. The August Consumer Price Index (CPI) report indicated a noticeable acceleration in disinflation, with the headline CPI inflation decreasing to 2.5% year-over-year—the lowest rate since February 2021. This trend, however, must be interpreted cautiously, as core CPI inflation remained stable at 3.2%, signaling persistent inflationary pressures in certain sectors, notably housing. Nevertheless, Daco anticipates a continuing decline in both headline and core inflation, projecting rates of 2.2% and 2.9%, respectively, by the fourth quarter of 2024.
The Fed’s recent decision to cut interest rates by 50 basis points reflects its commitment to recalibrating monetary policy without resorting to drastic measures that could harm growth. Powell’s remarks underscore a careful approach to policy adjustments, with expectations of additional rate cuts in November and December. Overall, this easing cycle is expected to facilitate a more sustainable economic trajectory heading into 2025.
As the broader economic picture unfolds, the S&P 500 index has performed remarkably well, currently up approximately 20% year-to-date and approaching record highs. This surge is indicative of market sentiment that is cautiously optimistic about the potential for a soft landing. However, analysts have expressed concerns that current stock valuations might be overestimating economic stability, particularly in light of recent weaker-than-expected jobs reports.
Looking ahead, investors are particularly focused on upcoming labor market data, which will play a crucial role in shaping perceptions of the economy’s trajectory. The forthcoming employment report is critical, as it could either bolster confidence in the market’s current valuation or prompt a reevaluation of growth expectations. With a significant portion of the market priced for a “Goldilocks scenario”—where growth continues without significant inflation—the stakes are high for upcoming economic indicators.
Investors looking for value must consider a range of factors, including company fundamentals, market positioning, and broader economic trends. The careful selection of stocks in this category could not only mitigate risks associated with volatility but also capitalize on potential growth as the economic landscape stabilizes.
In summary, as we delve into the best stocks under $50 to invest in now, it is essential to keep an eye on the evolving economic indicators and consumer behavior. These elements will play a crucial role in determining which stocks can deliver value in an environment characterized by cautious spending, shifting monetary policy, and varying inflation rates.
Our Methodology
For this article, we identified 20 stocks trading on the NYSE and NASDAQ for under $50 per share as of September 27. Next, we examined Insider Monkey’s data on 912 hedge funds as of Q2 2024. We narrowed down our list to 8 stocks most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q2 of 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).
An aerial view of a well site, depicting the scale of oil and gas operations.
Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 67
Share Price as of September 27: $42.29
Schlumberger Limited (NYSE:SLB) is a leading provider of technology for reservoir characterization, drilling, production, and processing in the oil and gas industry. The company recently reported its strong Q2 2024 results, surpassing earnings expectations. Schlumberger Limited (NYSE:SLB) reported an adjusted earnings per share (EPS) of $0.85, exceeding analyst estimates of $0.826. This growth was supported by a robust performance across its international markets, particularly in the Middle East and Asia, and a consistent recovery in offshore developments globally.
In the second quarter, Schlumberger Limited (NYSE:SLB) total revenue increased by 5% sequentially to reach $9.1 billion. The company’s adjusted EBITDA margin expanded by 142 basis points to 25%, translating to an 11% sequential and 17% year-on-year increase in adjusted EBITDA. The firm generated $776 million in free cash flow, showcasing its ability to leverage operational efficiencies and drive strong cash generation.
Schlumberger Limited (NYSE:SLB) core divisions continue to perform well, with revenue from Production Systems and Reservoir Performance growing by 7% and 5% respectively. This growth was primarily driven by increased activity in the international markets and enhanced profitability in subsea production systems and artificial lift solutions. Furthermore, the company’s Well Construction division saw a 1% revenue increase, driven by strong international demand for its measurement and fluid activities, with margins increasing 125 basis points sequentially.
The company’s digital segment also saw impressive results, with revenue increasing by 10% sequentially and margins expanding by 435 basis points to 31%. This growth was due to robust digital sales and increased adoption of its digital solutions, which continues to support margin expansion.
Looking ahead, Schlumberger Limited (NYSE:SLB) is optimistic about the market dynamics, particularly in long-cycle gas and deepwater projects in key international markets such as the Middle East, Asia, and Latin America. This optimism is reinforced by the growing demand for its digital and AI solutions to drive efficiency and returns for customers.
Additionally, hedge fund interest in Schlumberger Limited (NYSE:SLB) increased slightly, with 67 hedge funds holding the stock as of Q2 2024, compared to 66 in the previous quarter, reflecting increased institutional confidence in the company’s growth prospects. Overall, with its strong balance sheet, continued focus on margin expansion, and commitment to returning value to shareholders, Schlumberger Limited (NYSE:SLB) remains well-positioned for further growth in 2024 and beyond.
Overall SLB ranks 8th on our list of the best stocks to buy under $50. While we acknowledge the potential of SLB as an investment, our conviction lies in the belief that some 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 SLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
