We recently published a list of 10 Oversold Value Stocks To Buy Right Now. In this article, we are going to take a look at where The AES Corporation (NYSE:AES) stands against the other oversold value stocks.
After Trump’s victory in the presidential election, US stocks surged to record highs. Much of the stock market’s history reveals that value stocks have outperformed their growthier counterparts but the trend has reversed over the last decade. With mega-sized technology stocks especially those driven by AI dominating, the reverse trend intensified. It is important to consider that the Morningstar US Large Growth Index has returned 258% and the Morningstar US Large Value Index has returned 148% in the last decade, reflecting a significant difference.
Growth stocks looked unstoppable until a week in July when the Morningstar growth index fell 3.97% while the value index climbed 3.39%. This was when the investors were confident about the interest rate cuts that were to be executed in the later part of the year. Thus, it looked like they shifted their focus from big tech to more underperforming sectors.
Over the next year, the outlook for value stocks looks bright as concluded by Bankrate’s quarterly Market Mavens Survey. The survey revealed that experts see value-priced equities outperforming over the next four quarters. 42% of respondents preferred value stocks to growth stock over the next year while 33% think returns will be about the same.
When leading investing professionals were asked whether value stocks or growth stocks would offer greater returns over the next year, they put forward different reasons for their preferences. While the view regarding value outperforming growth at the start of a rate-cutting cycle was noticed in the responses, one of the experts inclined towards value stocks by stating:
“If the Fed is cutting rates because the economy is faltering, market participants are apt to seek out the best growth opportunities in a weakening growth environment. However, if economic growth holds up and rates come down, value would be the place to be for the best return prospects.”
Others were of the opinion that falling inflation and interest rates would benefit both classes equally.
An executive in a power plant control booth overseeing the efficient energy production.
Our Methodology
In order to compile a list of the 10 oversold value stocks to buy right now, we first used a stock screener to identify value stocks that have fallen by at least 30% year-to-date and are trading at a forward P/E ratio under 15, as of November 22. We focused on companies trading in industries including consumer staples, financials, legacy healthcare, industrials, and materials. Finally, we ranked the stocks in ascending order of their hedge fund holders, as of Q3 data.
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).
The AES Corporation (NYSE:AES)
Year-to-Date Decline: 31.49%
Forward PE: 6.46
Number of Hedge Fund Holders: 47
The AES Corporation (NYSE:AES) serves as the next-generation energy company delivering green and smart energy solutions. The firm has more than four decades of experience helping the world transition to clean, renewable energy.
AES boasts a leading position in the energy transition. The firm has the privilege of being one of the top sellers of renewable power to corporate customers. It drives competitive advantage and growth through its diverse operating portfolio and development pipeline serving customers across geographies and technologies as well as a focus on innovation. Additionally, the consistent delivery of projects on time and on budget builds a solid reputation for the firm as a trusted partner of choice.
The financial performance track record for AES is solid with an annual growth in EPS, cash flow, and dividends from 2018 to 2023. During the third quarter, the firm marked certain strategic accomplishments as it completed 1.2 GW of construction and added 2.2 GW of renewables PPAs and data center load growth at US utilities. Net income attributable to The AES Corporation (NYSE:AES) grew from $231 million in Q3 2023 to $502 million.
With a massive scale, emphasis on innovation, and a solid reputation, The AES Corporation (NYSE:AES) serves as a Fortune 500 energy leader supporting a sustainable future through green solutions. With 8.1 GW signed directly with technology customers, AES remains best positioned to serve growing demand from data centers as big companies such as Google, Microsoft, and Amazon transition to renewable energy by 2030. As of Q3, the stock is held by 47 hedge funds.
Overall, AES ranks 2nd on our list of oversold value stocks to buy right now. While we acknowledge the potential of AES 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than AES but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
