We recently compiled a list of the 10 Best One-Dollar Stocks To Buy Now. In this article, we are going to take a look at where Gossamer Bio, Inc. (NASDAQ:GOSS) stands against the other one-dollar stocks.
The upward trend in the stock market has resumed, supported by strong first-quarter and second-quarter results that have relieved investor concerns about inflation. The US economy had a very strong year in 2023. Economic activity increased steadily, job creation was high, unemployment was low, real earnings rose, and inflation declined. Furthermore, the Federal Reserve maintained high interest rates throughout this time in an attempt to control inflation. June recorded a market increase of more than 10%. The large-cap market of the 500 biggest companies has already surged over 17% so far this year as analysts look forward to reduced interest rates in the second half of 2024, along with higher earnings growth and lower inflation.
Historically, since 1928, July has been the strongest month of the year for stocks in terms of performance. The market rose by 1.7% in July. Given that the market posted gains in May and June despite notable economic uncertainty, investors remain bullish that the market can sustain its positive trend.
In a May speech to the Foreign Bankers’ Association, Federal Reserve Chair Jerome Powell recognized the difficulty of bringing inflation down to the desired level. Powell stated that it could be essential to keep interest rates at their present levels for a longer period of time. Interest rates have been fluctuating between 5.25% and 5.5% since July 2023.
Amid concerns over an impending recession brought on by higher interest rates, the US labor market still remains stable. According to the Labor Department, the US economy created 175,000 new jobs in April, although this was less than the 240,000 jobs that economists had predicted. The US labor market maintains a low unemployment rate of 3.9%, while US wages have risen 3.9% YoY. Nonetheless, recession fears are maintained by the historical recession predictor, the inverted U.S. Treasury yield curve, and the New York Fed’s model, which projects a 50% chance of a recession within the next 12 months.
The second quarter of 2024 saw a gain of more than 3% in the US stock market. Under the hood, tech companies continued to lead the artificial intelligence trade, which showed no signs of slowing down throughout the quarter. One striking trend in the stock market this year has been the outperformance of the biggest companies. The large-cap market of the 500 biggest companies gained 4.4% in Q2, bringing its 2024 return to more than 15%. By comparison, the small-cap market had a decline of 3.3%, resulting in a reduced 2024 return of 1.6%.
With over half of 2024 already gone, the US stock market is expected to see significant increases for the second year in a row.
According to DataTrek Research co-founder Nicholas Colas, the 2024 stock market surge is about more than just this year; it also includes the outlook for 2025 and 2026. Colas stated:
“Markets are convinced that U.S. large cap companies will see many years (not just one) of improving earnings. Earnings for 2024 only have to come through slightly better than last year, and nothing occurs on the macro side (economic growth, geopolitics) to derail further earnings growth in 2025 and 2026.”
Investor confidence is supported by historical trends and recent earnings performance. The stock market does well in election years, according to historical statistics, especially when the president is serving his first term, as is the case with Joe Biden.
Methodology:
In this article, we first used a stock screener, Finviz, to list down all stocks trading under $1.5 and above $0.85 (as of the writing of this article) with over 40% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested. We only considered stocks that received “buy” or “strong buy” recommendations from analysts.
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 hand holding up a glass vial containing a biopharmaceutical therapy.
Gossamer Bio, Inc. (NASDAQ:GOSS)
Number of Hedge Fund Investors: 38
Gossamer Bio is a biopharmaceutical company in the clinical stage that is primarily concerned with the development and marketing of seralutinib as a therapy for pulmonary hypertension. Its objectives are to lead the industry in pulmonary hypertension and improve the quality of life for those who suffer from it in the US.
Analysts are bullish on the stock and rate it as a “strong buy,” with an average target price of $9.20 and an upside potential of 793.20% from the current stock price of $1.06. In Q1 2024, the company saw an increase in popularity among hedge funds tracked by Insider Monkey, as the number of bullish investors increased from the last quarter from 31 to 38. Steve Zhengis’s Deepcurrents Investment Group is the largest stakeholder in the company, with 29,860,000 shares worth $11.71 million.
Recent Phase 2 research results show that their medicine has the potential to treat pulmonary arterial hypertension (PAH). Working together with Chiesi, GOSS hopes to boost seralutinib’s reputation and get it closer to crucial Phase 3 trials.
Gossamer Bio Inc. (NASDAQ:GOSS) is trading at $1.03 per share. The company’s SG&A costs have continuously decreased over the preceding four years, demonstrating better cost control and operational efficiency. In 2023, SG&A costs declined by 19.22% YoY, from 47.61 to 38.46.
Gossamer Bio Inc (NASDAQ:GOSS) announced $0.19 EPS in the first quarter of fiscal year 2024, which met the average analyst estimate. The GOSS increased its financial runway for future growth this quarter by reporting $396 million in cash and an extra $160 million in reimbursement payments.
Gossamer Bio (NASDAQ:GOSS) has made significant strides with its seralutinib product, as seen by Chiesi’s $160 million development reimbursement and the anticipated start of a Phase 3 trial in mid-2025. As of March 31, 2024, the company reported having $244.4 million in cash and equivalents, 21.07% cash growth since 2023. The pro forma total post-reimbursement was $396 million, which is more than enough to sustain operations until H1 2027. While G&A spending saw a minor reduction to $9.6 million in Q1 2024 from the same quarter last year, R&D expenses fell to $32.4 million from $37.8 million. Over the previous year, the net loss decreased to $41.9 million ($0.19 per share) from $49.2 million ($0.52 per share). Positive recent developments from partnerships and clinical studies put the business in a good position for future expansion.
Key concerns for Gossamer Bio include finance requirements, regulatory obstacles, competition, and clinical trial results. In spite of this, investors maintain a buy rating for Gossamer Bio because of its favorable valuation (below cash value) and the possibility that seralutinib will be approved. With Chiesi’s assistance, the business should be able to finish Phase 3 with its $244 million cash balance. Seralutinib’s inhaled formulation’s ease of use and the unique mechanisms separating it from Sotatercept give it a strong market position.
Overall GOSS ranks 1st on our list of the best one-dollar stocks to buy. You can visit 10 Best One-Dollar Stocks To Buy Now to see the other one-dollar stocks that are on hedge funds’ radar. While we acknowledge the potential of GOSS 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 time frame. If you are looking for an AI stock that is more promising than GOSS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.