We recently published a list of 10 Best Extremely Profitable Stocks to Buy Now. In this article, we are going to take a look at where XP Inc. (NASDAQ:XP) stands against other best extremely profitable stocks to buy now.
Can the S&P Hit 7,000 By the End of 2025?
Ed Yardeni, president of Yardeni Research, appeared on CNBC on November 27 to share insights on the market’s anticipated performance in 2025. He emphasized the significance of staying invested despite existing risks and high valuations, noting that the economy has shown resilience and interest rates have stabilized.
Yardeni pointed out that many new investors are gravitating toward small and mid-cap sectors, which he considers a sound strategy due to their relative affordability. He also highlighted the S&P 493 stocks as being undervalued compared to the Magnificent Seven, asserting that the overall market outlook remains positive despite potential tariff fluctuations. He believes that tax cuts and deregulation could enhance corporate earnings.
Yardeni attributed much of the market’s potential growth to an ongoing productivity boom, which he described as still being in its early stages. He noted that productivity levels have improved significantly from nearly zero in 2015 to around 2% currently, with historical precedents suggesting that such booms can reach as high as 4%. This improvement is driven by advancements in technology, which he argues will continue to drive productivity gains.
READ ALSO: 10 Most Promising New Technology Stocks According to Hedge Funds and 10 Best Tech Stocks to Invest In On the Dip.
When discussing whether this boom is primarily driven by artificial intelligence (AI), Yardeni acknowledged AI’s importance but also pointed to other technological advancements in cloud computing, robotics, and automation as contributing factors.
He identified a shortage of skilled labor as a key driver of productivity growth and explained that technology has enhanced efficiency, allowing wages to rise faster than prices, thus stimulating economic activity. In his concluding remarks, Yardeni projected that the S&P 500 could reach 7,000 by the end of 2025 and potentially hit 10,000 by the end of the decade, reflecting his bullish outlook on market performance fueled by these economic dynamics.
A financial professional examining price changes on a stock broker’s trading floor.
Our Methodology
To compile the list of the 10 best extremely profitable stocks to buy now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener, we shortlisted stocks that have grown their revenue and net income by at least 25% over the past 5 years. After sorting our initial list by market cap, we cross-checked the revenue and net income growth rates from Seeking Alpha. We also considered the trailing twelve-month net income and selected stocks that had a trailing twelve-month net income of more than $500 million. Lastly, we ranked the stocks in ascending order based on the number of hedge fund holders in Q3 2024, sourced from Insider Monkey’s database.
Why do we care about what hedge funds do? 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).
XP Inc. (NASDAQ:XP)
5 Year Revenue Growth: 30.20%
5 Year Net Income Growth: 40.36%
TTM Net Income: $741.06 Million
Number of Hedge Fund Holders: 25
XP Inc. (NASDAQ:XP) offers technology-driven financial services platforms. The company provides various investment products, including stocks, bonds, mutual funds, and pension plans. They provide access to over 800 different financial products, allowing customers to choose from a wide range of investment options.
XP Inc. (NASDAQ:XP) has been focused on becoming a leader in retail investments, emphasizing the importance of net new money consistency and enhancing its product offerings across various segments. It also continues to leverage technology to improve its service delivery and product offerings. During the third quarter results for fiscal 2024, the company indicated that it aims to maintain a BIS (Bank for International Settlements ratio) ratio between 16% and 19% by 2026 and distribute over 50% of profits as dividends during this period.
Financially speaking, XP Inc. (NASDAQ:XP) posted strong results. Its total client assets reached BRL 1.21 trillion ($210 billion), representing a 12% increase year-over-year, indicating robust growth in client investment. Moreover, the company reported BRL 31 billion ($5.36 billion) in net new money for the quarter, which is a remarkable 124% growth compared to the previous year. Notably, BRL 25 billion ($4.32 billion) of this amount came from retail clients, highlighting a stride towards its goal of becoming a leader in retail investment.
HL International Equity Strategy made the following comment about XP Inc. (NASDAQ:XP) in its first quarter 2023 investor letter:
“Our Financial Services holdings lagged the sector index, with SE Banken, the Swedish lender, and AIA Group, the Asian life insurer, dragging down returns in a sector made nervous by the troubles of Credit Suisse and the bank failures in the US. XP Inc. (NASDAQ:XP), a Brazilian broker-dealer and financial services company, reported weak quarterly results due to the negative effects of higher interest rates on revenue growth.”
Overall, XP ranks 10th on our list of best extremely profitable stocks to buy now. While we acknowledge the potential of XP to grow, our conviction lies in the belief that 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 XP 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.
