In this piece, we will take a look at the ten growth stocks that are too cheap to ignore. For more stocks, head on over to 5 Growth Stocks To Buy That Are Too Cheap To Ignore.
The 2022 stock market crash wiped out billions from market capitalization and shattered investor confidence just as the market and the economy as a whole were starting to recover from the coronavirus pandemic. The ongoing Russian invasion of Ukraine has shocked the global energy markets, which has driven up the price of commodities such as oil and natural gas and contributed to inflation. This contribution in itself has come at a time when central bank balance sheets are at historic high levels as the aftermath of the 2008 financial crisis and the coronavirus pandemic led the banks to provide easy access to money. These high levels, which themselves contribute to inflation by increasing the money supply in the market, can only be controlled through high interest rates. The rates end up making it harder for companies to manage their working capital and raise funding, which saps investor confidence already rattled by inflation.
In the midst of all this, a host of companies see their share prices drop simply because capital allocation is being readjusted in hedge fund portfolios. The allocation depresses their share price without a due cause being present in the fundamental performance. Additionally, the market entering bear territory does not mean that all stocks will see their share prices drop. Some of these, as you will find out throughout this list, have in fact seen their share prices rise year to date.
Some sectors that will continue to grow and have grown this year include energy and fertilizers. For instance, a research report from Allied Markets Research estimates that the fertilizer industry was worth $184 billion last year and it will grow at a compounded annual growth rate (CAGR) of 3.55% from then until 2030 to stand at a value of $252 billion by the end of the forecast period. Additionally, the natural gas market is an investor favorite these days, and The Business Research Company wagers that this segment, which was worth $840 billion last year, will grow at a whopping CAGR of 12% to sit at $940 billion this year and from then until 2030 will go on to grow at a CAGR of 6.9% to be worth $1.23 trillion.
This piece will focus on growth companies too, and the top picks are PayPal Holdings, Inc. (NASDAQ:PYPL), Pfizer Inc. (NYSE:PFE), and United Parcel Service, Inc. (NYSE:UPS).
Photo by Chris Liverani on Unsplash
Our Methodology
We analyzed countless stocks present on the stock market to sift out those that have either performed well this year or those that have become cheap in terms of either share price or valuation ratios due to the wider stock market downturn. The firms are ranked according to hedge fund sentiment gathered from Insider Monkey’s 895 hedge fund survey for this year’s second quarter.
Growth Stocks To Buy That Are Too Cheap To Ignore
10. CVR Partners, LP (NYSE:UAN)
Number of Hedge Fund Holders: 4
CVR Partners, LP (NYSE:UAN) is a nitrogen fertilizer company that sells ammonia based fertilizers to farmers, industrial customers, retailers and distributors. The firm is headquartered in Sugar Land, Texas, the United States.
CVR Partners, LP (NYSE:UAN) is massively undervalued if we compare its current enterprise value to the operating income (EV/EBITDA) ratio of 3.6x with the peak ratio of 16x. The firm’s fertilizer plants have been running at full capacity lately, and after they were down for scheduled maintenance this year, the output will fall in the third quarter but pick up in the next. Additionally, ammonia prices have recovered this year, and food shortages in the wake of the Russian invasion of Ukraine and the Indian and the Chinese economy’s slowdown will bode well for the firm.
CVR Partners, LP (NYSE:UAN)’s shares have also appreciated by 45% year to date and the firm pays a solid dividend of $5.23 per share for a 17% yield. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that four had held a stake in the company.
Out of these, CVR Partners, LP (NYSE:UAN)’s largest investor is Ken Griffin’s Citadel Investment Group which owns 43,651 shares that are worth $4.3 million.
CVR Partners, LP (NYSE:UAN), Pfizer Inc. (NYSE:PFE), PayPal Holdings, Inc. (NASDAQ:PYPL), and United Parcel Service, Inc. (NYSE:UPS) are some of the hottest and cheapest growth stocks that you are likely to come across.
9. Core Laboratories N.V. (NYSE:CLB)
Number of Hedge Fund Holders: 11
Core Laboratories N.V. (NYSE:CLB) is an upstream oil and gas supplier that lets firms extracting the resources map out their sites and manage their wells. These include taking reservoir fluid, rock, and gas samples to determine whether a site is suitable to place a well for drilling and extracting oil and gas. It is headquartered in Amstelveen, the Netherlands.
Core Laboratories N.V. (NYSE:CLB) is heavily slated to grow its revenues according to analysts, which are forecasting that it will grow the revenue by 9% annually this year, and by 16% and 11% in 2023 and 2024, respectively. More importantly, the firm’s earnings per share is forecast to hit $1.47 next year, to mark for a whopping 98% increase over this year’s forecast value of $0.74. Core Laboratories N.V. (NYSE:CLB)’s latest quarter saw its revenue grow by 7% annually and 4% sequentially, even as it battled with currency devaluation.
Core Laboratories N.V. (NYSE:CLB) pays a 1 cent dividend for a 0.21% yield. By the end of this year’s second quarter, 11 out of the 895 hedge funds polled by Insider Monkey had bought its shares.
Core Laboratories N.V. (NYSE:CLB)’s largest investor is John W. Rogers’ Ariel Investments which owns nine million shares that are worth $181 million.
8. Compass Minerals International, Inc. (NYSE:CMP)
Number of Hedge Fund Holders: 17
Compass Minerals International, Inc. (NYSE:CMP) is a minerals company that mines and sells items such as salt and its derivatives, fertilizers, potassium products, and plant nutrients. The company is headquartered in Overland Park, Kansas, the United States.
Using Compass Minerals International, Inc. (NYSE:CMP)’s management forecast of $220 million to $250 million for this year, and using it to forecast a net income of $42 million, leads to an enterprise value to operating income ratio ranging between 3.3 to 22.1. Compared to the industry range of 4.5 to 86.9, this makes the stock quite undervalued. Compass Minerals International, Inc. (NYSE:CMP) also received $252 million in funding from the Koch Group in September 2022, which will boost the company’s lithium carbonate production.
Compass Minerals International, Inc. (NYSE:CMP) pays a 15 cent dividend for a 1.5% yield. Insider Monkey studied 895 hedge fund portfolios for their June quarter of 2022 investments to discover that 17 had held a stake in the company.
Compass Minerals International, Inc. (NYSE:CMP)’s largest investor is Jeffery Bronchick’s Cove Street Capital which owns 535,692 shares that are worth $18 million.
Bernzott Capital Advisors mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Compass Minerals International, Inc. (NYSE:CMP): Despite a strong winter season in which salt volumes came in higher than expectations buoyed by a more normalized snowfall year, higher logistics and freight costs negatively impacted the bottom line. Within their plant nutrient segment, margins remained strong driven by strong potash pricing, however drought conditions negatively impacted overall volumes. Looking ahead, CMP should benefit from improved pricing during the upcoming salt selling season while actions taken within their plant segment to improve efficiencies should help improve overall results. Finally, the company is making progress in the development of its Lithium assets, supported by a recent offtake agreement with a leading global manufacturer of lithium-ion batteries which we believe is not reflected in the current stock price.”
7. Fastly, Inc. (NYSE:FSLY)
Number of Hedge Fund Holders: 22
Fastly, Inc. (NYSE:FSLY) is a cloud services platform provider that operates right at the ‘edge’ of cloud computing. In the technology industry, edge refers to the portion of the cloud that is closest to the customer, and the company’s platform lets developers conduct a variety of tasks such as securing their applications
Fastly, Inc. (NYSE:FSLY) is significantly undervalued when its enterprise value is estimated. Accounting for $767 million in cash and $703 million in debt, the firm’s enterprise value sits at $937 million, while at an $8 share price (current share price is $8.24), its market capitalization is $1 billion. The firm also increased its annual revenue guidance to $415 million – $425 million this year, over the previous guidance of $405 million – $415 million, to mark a remarkable 17% to 19% growth in an environment that has not seen technology companies perform well.
Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 22 had held a stake in Fastly, Inc. (NYSE:FSLY).
Out of these, Fastly, Inc. (NYSE:FSLY)’s largest investor is D.E Shaw’s D E Shaw which owns 2.8 million shares that are worth $32 million.
6. Confluent, Inc. (NASDAQ:CFLT)
Number of Hedge Fund Holders: 26
Confluent, Inc. (NASDAQ:CFLT) provides a cloud platform that lets companies speed up their data communications with each other. The platform lets companies stream their data easily without having to navigate through risk management and regulatory compliance regulations. It is headquartered in Mountain View, California.
Confluent, Inc. (NASDAQ:CFLT) is one of the strongest growing companies in the technology industry, and over the past five quarters, the firm has consistently grown its revenue from a starting value of $77 million to $122 million for a strong 56% growth. During the same time period, its gross profit has also grown from roughly $55 million to a little over $75 million.
By the end of this year’s second quarter, 26 out of the 895 hedge funds polled by Insider Monkey had bought Confluent, Inc. (NASDAQ:CFLT)’s shares.
Confluent, Inc. (NASDAQ:CFLT)’s largest investor in our database is Brad Gerstner’s Altimeter Capital Management which owns 14 million shares that are worth $335 million.
Along with PayPal Holdings, Inc. (NASDAQ:PYPL), Pfizer Inc. (NYSE:PFE), and United Parcel Service, Inc. (NYSE:UPS), Confluent, Inc. (NASDAQ:CFLT) is one of the cheapest growth stocks in the market right now.
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Disclosure: None. 10 Growth Stocks To Buy That Are Too Cheap To Ignore is originally published on Insider Monkey.
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