In this article, we discuss the 11 best very cheap stocks to buy according to hedge funds.
On June 13, CNBC reported that the S&P 500 ended more than 21% below its January record high, signaling the formal start of the U.S. bear market. The stock market decline in September added to the year’s significant losses for the major indices. As a result, many equities have seen their prices crash. This suggests that there are more inexpensive equities to consider in the fourth quarter. As always, a low stock price doesn’t guarantee a good deal. Many low-priced companies reach that point due to serious issues with their balance sheets, business strategies, or future economic outlooks. Because of this, applying a stringent filter is crucial while looking for very cheap stocks to buy.
Our Methodology
We scanned the database of 895 hedge funds tracked by Insider Monkey as of the end of the second quarter of 2022 and picked some of the most popular cheap stocks priced under $10 as of October 27.
Best Very Cheap Stocks To Buy According To Hedge Funds
11. Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders as of Q2, 2022: 29
Stock Price as of October 27: $6.66
Coty Inc. (NYSE:COTY) is a French-American multinational beauty company that develops, manufactures, markets, and distributes professional and retail hair care products, alongside several fragrances, cosmetics, and skincare products.
Wall Street analysts are bullish on Coty Inc. (NYSE:COTY). On October 24, analyst Steve Powers with Deutsche Bank lowered his price target for Coty Inc. (NYSE:COTY) from $11 to $10 while maintaining a Buy recommendation for the shares. The analyst anticipates “minimal controversy” with the next earnings announcement, given that Coty Inc. (NYSE:COTY) increased its fiscal Q1 projection during its investor event for the skin care industry in September. On October 21, Jefferies analyst Ashley Helgans began coverage of Coty Inc. (NYSE:COTY) with a Buy rating and a $14 price target. The backdrop for beauty brands is shifting quickly, but so far, beauty has withstood the underlying shift from goods to services “given its connection to socialization, occasions, and self-care regimens,” said Helgans.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Melvin Capital Management is a leading shareholder in Coty Inc. (NYSE:COTY), with 29 million shares worth more than $264 million. Overall, 29 hedge funds reported holding stakes in Coty Inc. (NYSE:COTY) as of Q2 2022.
Here is what Meridian Funds specifically said about Coty Inc. (NYSE:COTY) in its Q2 2022 investor letter:
“Similarly, Coty Inc. (NYSE:COTY) benefited from the market’s rising appetite for more defensive names during the quarter. The beauty products Coty manufactures and distributes saw steady market share gains, especially as core customers expanded their work and leisure activities outside of the home. The company also operates a broad distribution network and holds a deep intellectual property portfolio across key categories within the cosmetic and fragrance industries. Additionally, Coty is building momentum around a business transformation that’s in the early innings but has already seen success in e-commerce and direct-to-consumer gains, as well as a rising presence in China.”
10. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Number of Hedge Fund Holders as of Q2, 2022: 32
Stock Price as of October 27: $1.54
Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) owns, operates, and sells outdoor advertising displays in the United States and worldwide. It works in two segments: the Americas and Europe. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) anticipates that its ongoing investment in digital installations will fuel continuous growth over the course of the next three years. With digitization and RADAR-based programmatic buying changes, Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) can provide its clients with efficiency and value that has never been seen before. Due to the pandemic interruption, CCO is now undervalued but is expected to recover.
Among the hedge funds tracked by Insider Monkey, 32 funds were bullish on Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) at the end of the second quarter of 2022, down from 37 funds in the prior quarter. Kenneth Mario Garschina’s Mason Capital Management is one of the leading shareholders of the company, with 21 million shares worth $22 million. Israel Englander’s Millennium Management also increased its stake in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) during Q2, 2022 by 35% with shares held of 5.5 million worth $5.89 million.
09. Alight, Inc. (NYSE:ALIT)
Number of Hedge Fund Holders as of Q2, 2022: 32
Stock Price as of October 27: $8.15
Alight, Inc. (NYSE:ALIT) provides cloud-based business and human capital solutions, aiming for a high-performance company culture. The company also offers cloud optimization services to platforms like Workday, SAP SuccessFactors, Oracle, and Cornerstone OnDemand.
On September 15, Scott Schoenhaus, an analyst at KeyBanc, began covering Alight, Inc. (NYSE:ALIT) with an Overweight rating and a $15 price target. According to Schoenhaus, who sees the company as “strategically positioned for top and bottom-line growth,” the cloud-based provider of comprehensive digital human capital and business processes solutions aids employers in managing their core HR concerns and empowers employees.
Since the business went public through a SPAC merger last July, Alight Inc. (NYSE:ALIT) shares have fallen by 21%. Alight Inc. (NYSE:ALIT) provides clients with a range of solutions for employee and company engagement, had $2.9 billion in sales last year and is forecasting $3.09 billion to $3.12 billion in 2022. The company anticipates accelerating revenue growth in 2023, with a 10% growth target. Alight Inc. (NYSE:ALIT), with a market cap of around $4 billion, does have a sizable amount of net debt on its balance sheet, totaling $3.04 billion, though most of which doesn’t mature until 2028.
At the end of the second quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $532.4 million in Alight, Inc. (NYSE:ALIT), compared to 38 in the preceding quarter worth $779.1 million.
08. Marqeta, Inc. (NASDAQ:MQ)
Number of Hedge Fund Holders as of Q2, 2022: 33
Stock Price as of October 27: $7.80
Marqeta, Inc. (NASDAQ:MQ) is an Oakland, California-based open API card issuing platform provider. The company has over 800 employees and a presence in over 39 countries. Marqeta, Inc. (NASDAQ:MQ) services digital banking, buy now pay later (BNPL), and on-demand delivery platforms through its solutions. The company heavily relies on Block, Inc. (NYSE:SQ), as most of the business comes from the San Francisco, California-based mobile payment solutions provider. Experts believe that Marqeta, Inc. (NASDAQ:MQ) could see limited growth potential during the second half of the year as clients of fintech companies have started to take a cautious approach due to the deterioration of the macroeconomic circumstances. However, the company’s fundamentals are expected to improve during the second half of 2023 as consumer discretionary spending has started to bounce back.
Among the hedge funds tracked by Insider Monkey, 33 funds were bullish on Marqeta, Inc. (NASDAQ:MQ) at the end of Q2 2022, with combined stakes worth $788.9 million, compared to 39 funds in the earlier quarter, holding stakes in the company valued at $958.8 million. Mick Hellman’s HMI Capital is the company’s biggest stakeholder, with 28.4 million shares amounting to $231 million.
Here is what Alger Spectra Fund had to say about Marqeta, Inc. (NASDAQ:MQ) in its Q4 2021 investor letter:
“Margeta facilitates the implementation of digital payment technologies. It is a Positive Dynamic Change beneficiary in the digital payments industry. We believe as more commerce is conducted digitally, the digitization and transformation of the payments ecosystem is needed, which Margeta seeks to address through its modern payment card issuing platform, providing infrastructure and tools for building configurable payment cards. Margeta offers issuer processor services and acts as a card program manager. Its platform creates customized payment cards that provide innovative payment experiences for their clients’ customers and end users.
Marqeta has emerged as a card issuing platform category leader in many disruptive verticals, including on-demand delivery, alternative lending, expense management, disbursement, digital remittances, and digital banks. Margeta’s solutions are even sought out by large financial institutions to improve their existing offerings and stay competitive with technology-focused new market entrants. Margeta detracted from performance despite achieving strong revenue growth with higher gross profitability and an expanded customer base in the third quarter. We believe the expiration of a lock up period and the company facing tough comparisons resulting from COVID-19 stimulus payments having boosted consumer spending contributed to the underperformance of Marqeta shares. Additionally, the still small footprints within the Margeta revenue base of crypto, truck brokerage and business-to-business clients may take time to scale.”
07. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA)
Number of Hedge Fund Holders as of Q2, 2022: 33
Stock Price as of October 27: $9.71
Founded in 2007, Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is a clinical-stage biotechnology company that focuses on developing and commercializing cancer immunotherapy products to harness the power of a patient’s immune system to eradicate cancer cells. It has six ongoing phase 2 clinical studies. On October 10, Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) announced dosing the first patient with IOV-4001 which the company considers an important first step in providing proof-of-concept for delivering genetically modified TIL therapy to solid tumor patients.
Experts believe that Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) has a strong financial foundation to meet its short-term needs, but there is limited room for error. On August 18, Wells Fargo analyst Nick Abbott assumed coverage of Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) with an Equal Weight rating and a price target of $14.
Out of the hedge funds being tracked by Insider Monkey, Perceptive Advisors is the leading investor in Iovance Biotherapeutics, Inc. (NASDAQ: IOVA) with a stake worth $130.5 million, representing 4.08% of the portfolio. Ken Griffin’s Citadel Investment Group is also a prominent shareholder of Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), with 2.5 million shares held, worth roughly $27.8 million.
06. Teva Pharmaceutical Industries Limited (NYSE:TEVA)
Number of Hedge Fund Holders as of Q2, 2022: 35
Stock Price as of October 27: $8.77
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is an Israel-based pharmaceutical company that develops, manufactures, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, and internationally. On October 7, Teva Pharmaceutical Industries Limited (NYSE:TEVA), the biggest supplier of the generic version of Adderall, announced that it expects medication shortages to continue for another two to three months. Teva Pharmaceutical Industries Limited (NYSE:TEVA) is one of the leading low-price pharma stocks.
On October 21, Jefferies analyst Glen Santangelo assumed Teva Pharmaceutical Industries Limited (NYSE:TEVA) at Buy with a $10 price target. The firm previously had a Hold rating.
According to Insider Monkey’s data, 35 hedge funds were long Teva Pharmaceutical Industries Limited (NYSE:TEVA) at the end of Q2 2022, up from 26 funds in the prior quarter. David Abrams’ Abrams Capital Management is the company’s largest stakeholder, with more than 24 million shares worth nearly $181 million.
05. Under Armour, Inc. (NYSE:UA)
Number of Hedge Fund Holders as of Q2, 2022: 38
Stock Price as of October 27: $6.42
Under Armour, Inc. (NYSE:UA) is a Baltimore, Maryland-based manufacturer and seller of sports apparel, athletic shirts, and other products. On October 26, Citi analyst Paul Lejuez lowered his price target on Under Armour, Inc. (NYSE:UA) to $8 from $10 and kept a Neutral rating on the shares.
Under Armour, Inc. (NYSE:UA) anticipates its annual topline growth to be around 6% during FY23. The company has undergone restructuring to improve its sales and gross profit margins. Experts believe the stock is cheap, with a forward EV/Sales multiple below 0.6. On October 20, Williams Trading analyst Sam Poser upgraded Under Armour, Inc. (NYSE:UA) to Hold from Sell with a $6.50 price target.
According to Insider Monkey’s Q2 data, Under Armour, Inc. (NYSE:UA) was found in the public stock portfolios of 38 hedge funds, with collective stakes in the company worth $486.74 million. Adage Capital Management was the top shareholder of Under Armour Inc (NYSE:UA) in the second quarter, with a $96.69 million stake consisting of 12.75 million shares. Moreover, Renaissance Technologies increased its investment in Under Armour, Inc. (NYSE:UA) by 96% during Q2 2022.
04. Sabre Corporation (NASDAQ:SABR)
Number of Hedge Fund Holders as of Q2, 2022: 38
Stock Price as of October 27: $5.61
Sabre Corporation (NASDAQ:SABR) is a software and technology services solutions provider for the global travel industry. The firm is based in Southlake, Texas, the United States. Sabre Corporation (NASDAQ:SABR) is one of the three key players in the global distribution system (GDS) market that connects wholesale travel suppliers and buyers.
According to experts, the multi-year agreement with Avianca to provide GDS services will bring long-term expansion for the company. Moreover, despite the risk of a heavy debt load, Sabre Corporation (NASDAQ:SABR)’s present value offers a positive risk-reward profile for the business. On October 17, Mizuho analyst Matthew Broome lowered his price target on Sabre Corporation (NASDAQ:SABR) to $6 from $7 and kept a Neutral rating on the shares. The analyst cut the price target but says a lot of risk is now priced into the stock.
According to Insider Monkey’s Q2 data, 38 hedge funds were bullish on Sabre Corporation (NASDAQ:SABR), with combined stakes amounting to $435 million. Terry Smith’s Fundsmith LLP is the leading stakeholder of the company, with 22.4 million shares worth $131 million.
03. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders as of Q2, 2022: 39
Stock Price as of October 27: $7.87
Peloton Interactive, Inc. (NASDAQ:PTON) is a wellness company that provides an interactive fitness platform. This allows its users to exercise from home while engaging with friends and exercise groups over the Internet. The company is based in New York, United States.
Peloton Interactive, Inc. (NASDAQ:PTON) rode the coronavirus wave to touch record highs. During the pandemic, its shares appreciated by a whopping 726% as lockdowns forced consumers to use its products. However, since then, they have dropped below their pre-pandemic levels. The current difficulties facing Peloton Interactive, Inc. (NASDAQ:PTON) may be passing, according to experts, and there is a good probability that things will turn around. Its user base is substantial enough to produce an annual gross profit of almost $1 billion.
By the end of this year’s second quarter, 39 out of the 895 hedge funds polled by Insider Monkey had held Peloton Interactive, Inc. (NASDAQ:PTON)’s shares. Peloton Interactive, Inc. (NASDAQ:PTON)’s largest investor in our database is Anand Desai’s Darsana Capital Partners, which owns 7.5 million shares that are worth $68 million.
Merion Road Capital mentioned the company in its Q3 2022 investor letter. Here is what the fund said:
“Peloton Interactive, Inc. (NASDAQ:PTON) is quite a different story. You may recall from my Q1 letter that I initiated a position in the stock given the potential for a new CEO to leverage the company’s passionate and engaged userbase. The investment had meaningful upside potential (multiples of the then trading price), but also presented real downside risk; as such, I kept our exposure to just a few percentage points of the portfolio. Fast forward six months and underlying trends like churn, engagement, and new users weakened dramatically. I sold our shares as the likelihood for the company to achieve financial success has become increasingly remote.”
02. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders as of Q2, 2022: 42
Stock Price as of October 27: $7.05
Lumen Technologies, Inc. (NYSE:LUMN) is a leading American telecommunications company that provides communications, network services, security solutions, and cloud solutions among other services.
Shares of Lumen Technologies, Inc. (NYSE:LUMN) have pulled back in 2022 and are now presenting an attractive buying opportunity for investors. As of October 26, the stock has a trailing twelve-month PE ratio of 3.49 and is awarding shareholders a forward dividend yield of 14.45%. Lumen Technologies, Inc. (NYSE:LUMN) has free cash flows of over $3 billion and is one of the best cheap stocks to buy now. On October 20, RBC Capital analyst Bora Lee lowered his price target on Lumen Technologies, Inc. (NYSE:LUMN) to $6 from $11 and kept a Sector Perform rating on the shares.
At the end of Q2 2022, 42 hedge funds were long Lumen Technologies, Inc. (NYSE:LUMN) and held stakes worth $1.02 billion in the company. This is compared to 30 positions in the previous quarter with stakes worth $904.85 million. The hedge fund sentiment for the stock is positive.
01. Southwestern Energy Company (NYSE:SWN)
Number of Hedge Fund Holders as of Q2, 2022: 47
Stock Price as of October 27: $6.68
Topping our list of the best very cheap stocks is Southwestern Energy Company (NYSE:SWN). Southwestern Energy Company (NYSE:SWN) is a Texas-based corporation involved in the exploration and production (E&P) of natural gas. Southwestern Energy Company (NYSE:SWN)’s share price has grown by a strong 41% year to date, compared to indexes such as the New York Stock Exchange, which has seen its value drop by 16%. On October 19, Jefferies analyst Lloyd Byrne initiated coverage of Southwestern Energy with a Buy rating and $11 price target.
For Q2, a total of 47 hedge funds are bullish on Southwestern Energy Company (NYSE:SWN) as compared to 35 in the previous quarter. Jim Simons’s Renaissance Technologies is Southwestern Energy Company (NYSE:SWN)’s largest investor. It owns 33 million shares that are worth $210 million.
Greenlight Capital discussed its outlook on Southwestern Energy Company (NYSE:SWN) in its Q1 2022 investor letter. Here’s what the firm said:
“SWN is the second largest producer of natural gas in the U.S. The company is well-situated to satisfy growing domestic and export demand. Over the short, medium and long term, Europe now intends to reduce its reliance on Russian energy and increase its use of U.S. LNG. Based on its 2021 year-end reserves – which assumed a $3.60/MMBtu long-term natural gas price – SWN has a PV-104 value of $13.83 per share. By the end of the first quarter, the U.S. natural gas 5-year forward curve averaged $4.28/MMBtu, while international seaborne LNG was close to $20/MMBtu. Over the intermediate term, with the benefit of substantial global investment in infrastructure, we expect prices for U.S. and international natural gas to converge. We acquired our shares at an average price of $6.58. SWN shares ended the quarter at $7.17.”
You can also take a look at the 10 Best Dividend Stocks on Robinhood and 11 Best Metal Stocks To Buy Now.
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Disclosure: None. 11 Best Very Cheap Stocks To Buy Now According To Hedge Funds is originally published on Insider Monkey.
