We recently compiled a list of the 10 Oversold Global Stocks To Buy Right Now. In this article, we are going to take a look at where XP Inc. (NASDAQ:XP) stands against the other oversold global stocks.
‘There are decades where nothing happens, and there are weeks where decades happen” is apt when starting a piece about global stocks. The four weeks of November and the first two weeks of December have brought seismic shifts that have reworked the way investors expect the world to function for the next couple of years.
Brushing geopolitics aside, for Wall Street, the biggest event over this period was the 2024 US Presidential Election. A hotly contested battle, it saw President-elect Donald Trump emerge victorious. Trump’s effects on the markets were immediate as investors rushed to pile into sectors that they believed would benefit from the incoming administration’s focus on fewer regulations. Across the globe, the Chinese government also wondered about the impacts of the President-elect’s promised tariffs, while closer to home, governments in Europe wondered if they would have to fend off a glut of Chinese goods that might head their way if America constrained China’s ability to export it with cheap products.
Starting from the stock market, two sectors were notable for their performance once the election’s outcome was certain. These two sectors are the banking sector and energy. The S&P’s bank stock index surged by a whopping 13.8% after the election while energy stocks added 4%. In contrast, the benchmark index jumped by 3.8% to confirm that investors were bullish about certain sectors of the economy.
Since this is a piece about oversold global stocks, it’s important to discuss in detail how the world has responded to Trump’s win instead of analyzing its effects on domestic US stock markets. One of the President-elect’s biggest campaign promises is to enact tariffs against China. In a statement made on his social media platform after he won the election, Trump linked the Chinese tariffs with the deadly drug fentanyl making its way to America’s streets. He outlined that “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States.” Trump added that the tariff would remain in place until “Drugs, in particular Fentanyl” stopped entering the US.
In response, Chinese leaders, who are already struggling with a weak economy are considering whether to increase economic stimulus to battle potential American tariffs. In a meeting top Communist Party officials indicated that they would undertake China’s first monetary policy loosening in 14 years, as they shared that a “more proactive fiscal policy and an appropriately loose monetary policy should be implemented, enhancing and refining the policy toolkit, strengthening extraordinary counter-cyclical adjustments.” The key concern for policymakers in China surrounds their aim of growing the Chinese economy by 5% in 2025. Should President-elect Trump’s tariffs materialize, then America’s imports from China will fall and lead to either lower Chinese economic output or a diversion of its exports to alternate countries. The latter option will be tricky due to the US’ status as the world’s largest economy.
While Trump’s victory was a boon for US stocks, European stocks displayed mixed performance. Tariffs also drove investor sentiment for European equities, whether they were from the EU or from the UK. The Euro 600 stock index added as much as 1.2% after Trump’s victory was announced, but ended up being down 1.26% by the end of the week following the election. European investors were jittery about the President-elect’s promise of 10% tariffs for all imports.
The British FTSE 100 also gained 1% after Trump’s victory but ended up losing momentum and ended in the red soon afterward. Economists believe that as the tariffs could potentially increase US prices, the Federal Reserve can keep rates higher and lead to global currencies falling. Since the election, the Euro and the Pound have lost 3.96% and 2.3% to the US dollar on the back of investor expectations of a stronger dollar in the near-term future.
Before we get to our list of the best oversold global stocks to buy, a brief look at some global stocks that surged following Trump’s win is also important. One stock that surged by 27% is a Swiss mining company with a significant presence in Ukraine. Investors bet on the shares with the hope that a Trump victory would end the conflict in Ukraine. Britain’s largest defense contractor, BAE, surged by 8% as investors tried to get an upper hand on potentially larger defense orders for the firm if the US cuts down NATO funding and asks Europe to contribute more.
Our Methodology
To make our list of the most oversold global stocks to buy, we ranked the 40 most valuable ex-US stocks with a 14-day RSI reading of 30 or lower by the number of hedge funds that had bought the shares during Q3 2024. Out of these, we picked the stocks with the highest number of hedge fund investors.
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 financial professional examining price changes on a stock broker’s trading floor.
XP Inc. (NASDAQ:XP)
14-day RSI Score: 23.24
Number of Hedge Fund Investors In Q3 2024: 25
XP Inc. (NASDAQ:XP) is a Brazilian financial technology company that caters to the needs of retail, institutional, and other investors. While it has a diversified customer base, most of the firm’s revenue is dependent on retail investors. This is evidenced by XP Inc. (NASDAQ:XP)’s income statement for the third quarter which saw retail investors account for 77% of the firm’s gross revenue for the quarter. Within its retail revenue, 30% came through equities while an additional 27% was from fixed income. This is an important factor when analyzing XP Inc. (NASDAQ:XP)’s hypothesis as equities and fixed income tend to thrive in diametrically opposed economic environments. To wit, the firm’s third quarter fixed income retail business grew by 31% annually to touch R$938 million while the equity component dropped by 6%. However, the sizable nature of its equities revenue means that XP Inc. (NASDAQ:XP) depends on the strength of the Brazilian consumer and the economy to spur equities trading.
Despite its reliance on the retail sector, XP Inc. (NASDAQ:XP) is also focusing on other investors. Here’s what the firm had to say about one such segment during the Q3 2024 earnings call:
“Lastly, transitioning from a product distribution firm to a service provider is key to differentiate ourselves from other players for the next decade. While competitors render financial planning to ultra-high private bank clients, we are offering to clients with 300K and above, which is only possible because of our tech-enabled platform. No other player in Brazil can do it on the same scale we are doing. We continuously keep improving our service and product offerings. And the combination of these levers are translating to a consistent retail net inflow, higher productivity, higher quality from a client perspective, and more profitability for the Company. Noteworthy that we received many questions regarding retail take rate direction. As we said recently, for the mid-term, we do not expect big change, and this quarter, it increased 4 bps marking 1.33%.”
Overall XP ranks 4th on our list of the oversold global stocks to buy now. While we acknowledge the potential of XP as an investment, our conviction lies in the belief that 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 XP 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.