In this article, we will take a look at the 12 most promising low-cost stocks according to analysts.
Latest data on inflation, employment and retail sales have shown that the Federal Reserve’s battle against inflation is far from over and the financial markets will continue to experience massive shockwaves for several weeks or months to come, if not years. Long-term investors, however, stick to their age-old mantra of “buy when everyone is selling.” Investing in small companies that have strong fundamentals and long-term growth potential seems to have always worked regardless of the short-term market outlook.
Low-cost stocks, often found in the small-cap universe, present an attractive opportunity for investors who can stomach risk and have patience. A report from UBS highlights several reasons why small-cap stocks are worth our attention. The firm says that small-cap stocks have the potential for long-term returns. The report said that the MSCI ACWI Small Cap index outperformed the MSCI ACWI by 2.4% per annum during a period of 20 years. The UBS report says that the small-cap world is a broader universe with higher active share, which provides potential for better active returns. The report also said that small caps trade at a lower price/book (P/B) ratio than large-cap stocks, providing a more attractive entry point.
The UBS report cited several academic researches about the “size effect” which has an impact on the small-cap universe. The size effect prevents major analysts and research firms from spending a lot of resources on small-cap stocks. This, according to UBS, leads to small-cap market inefficiency.
“We believe this relative lack of information is one of the key reasons for the greater level of small cap market inefficiency. It could provide well-resourced portfolio management teams with a substantial information advantage, in turn enabling them to identify strong investment opportunities.”
Photo by Adam Nowakowski on Unsplash
Our Methodology
For this article, we first used the Finviz stock screener to list down stocks trading under $15 on US exchanges with average analyst price targets at least 30% more than their current levels as of February 15. We then sorted the resultant dataset in descending order of market cap and picked the top 12 stocks. With each stock we have mentioned its one-year average price target, taken from Yahoo Finance.
Most Promising Low-Cost Stocks According to Analysts
12. Credit Suisse Group AG (NYSE:CS)
Number of Hedge Fund Holders: 11
One-Year Price Target: $4.18
Swiss financial services firm Credit Suisse Group AG (NYSE:CS) ranks 12th in our list of the most promising low-cost stocks according to analysts. Earlier this month, it was reported that Apollo Global Management (NYSE:APO) was in talks to buy Credit Suisse Group AG (NYSE:CS)’s revamped investment bank CS First Boston. In January, Credit Suisse Group AG (NYSE:CS)’s CEO Ulrich Körner said in an interview with CNBC that the firm was seeing a decline in client funds’ outflows. This comes after Credit Suisse Group AG (NYSE:CS)’s restructuring plans that included a decline in headcount.
A total of 11 hedge funds tracked by Insider Monkey had stakes in Credit Suisse Group AG (NYSE:CS) at the end of the third quarter of 2022, compared to 9 hedge funds in the previous quarter.
Oakmark Funds made the following comment about Credit Suisse Group AG (NYSE:CS) in its Q4 2022 investor letter:
“Swiss Financial services company Credit Suisse Group AG (NYSE:CS) was a top detractor for the quarter. Credit Suisse’s third-quarter headline results of a CHF 4.03 billion net loss for the quarter included a CHF 3.7 billion impairment of deferred tax assets (DTA). The DTA is attributed to the group’s securitized products segment, which is expected to be spun off from the company. Although the DTA impairment is a noncash charge, the company had to raise a larger than expected amount of capital to get back to target ranges. Outside of the DTA write-down, we believe that third-quarter results show that the core franchises continue to perform acceptably despite the negative headlines. We also appreciate that management’s restructuring plan includes increasing the capital allocated toward the company’s higher quality franchises and away from its lower quality investment bank. Although we were disappointed that the company needed to raise more capital than we had expected, given the size of the DTA impairment and the desire for a new investor to come in, we believe this will leave Credit Suisse in a strong capital position. We have lowered our intrinsic value estimate following the announcement
11. Lucid Group, Inc. (NASDAQ:LCID)
Number of Hedge Fund Holders: 15
One-Year Price Target: $14.18
California-based EV company Lucid Group, Inc. (NASDAQ:LCID) is one of the most promising low-cost stocks according to analysts. Year to date Lucid Group, Inc. (NASDAQ:LCID) has gained about 65% through February 15. Lucid Group, Inc. (NASDAQ:LCID) is currently in the limelight after reports of Saudi Arabia’s sovereign Public Investment Fund’s increasing interest in the company. Recently, Reuters reported that Saudi Arabia’s sovereign Public Investment Fund acquired more than 93.75 million shares of Lucid Group, Inc. (NASDAQ:LCID) during the third quarter. Saudi Arabia’s PIF already has a 60% stake in Lucid Group, Inc. (NASDAQ:LCID).
15 out of the 920 elite hedge funds tracked by Insider Monkey had Lucid Group, Inc. (NASDAQ:LCID) shares in their portfolios at the end of the third quarter of 2022.
10. Ambev S.A. (NYSE:ABEV)
Number of Hedge Fund Holders: 17
One-Year Price Target: $3.49
Ambev S.A. (NYSE:ABEV) is a consumer defensive company that has been gaining investors’ and analysts’ attention as the market continues to pile into consumer defensive names amid recession fears. The beverage company is also a dividend payer. In December, it declared a $0.1457 per share annual dividend. Forward dividend yield at the time came in at 5.11%. The dividend was payable on January 9 to shareholders of record as of December 21.
A total of 17 hedge funds out of the 920 funds tracked by Insider Monkey reported having stakes in the beer maker. The total value of these stakes at the end of the quarter was $199 million. The biggest stakeholder of Ambev S.A. (NYSE:ABEV) during this period was Jean-Marie Eveillard’s First Eagle Investment Management which owns a stake worth about $799 million in the company.
9. Crescent Point Energy Corp. (NYSE:CPG)
Number of Hedge Fund Holders: 23
One-Year Price Target: $11.05
Not only is Crescent Point Energy Corp. (NYSE:CPG) a low-cost stock with upside potential, it is also a promising dividend play. In December, the Canadian energy company upped its quarterly dividend by a whopping 25%. Forward dividend yield at the time came in at over 4%. During the same month, Crescent Point Energy Corp. (NYSE:CPG) announced it will buy assets in Kaybob Duvernay shale play from Paramount Resources (OTCPK:PRMRF) for $375 million.
In October, Crescent Point Energy Corp. (NYSE:CPG) also announced a special dividend of CAD$0.035 per share.
At the end of the third quarter of 2022, 23 hedge funds had stakes in Crescent Point Energy Corp. (NYSE:CPG). The total value of these stakes was $185 million. The biggest stakeholder of Crescent Point Energy Corp. (NYSE:CPG) during this period was Israel Englander’s Millennium Management which had a $44.23 million stake in the company.
8. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Holders: 24
One-Year Price Target: $6.70
Nokia Oyj (NYSE:NOK) remains of the most notable low-cost stocks with upside potential. In January, Nokia Oyj (NYSE:NOK) posted its Q4 results that were better than expectations. During the quarter Nokia Oyj (NYSE:NOK)’s adjusted EPS came in at euro 0.16, beating estimates by euro 0.03. Revenue in the quarter jumped about 12.2% on a YoY basis to total euro 7.45 billion, beating estimates by euro 350 million.
In December, it was reported that Nokia Oyj (NYSE:NOK)’s analytics software Ava Analytics was selected by BT Group in five-year deal to improve the operator’s fixed access customer experience.
At the end of the third quarter of 2022, 24 hedge funds tracked by Insider Monkey reported having stakes in Nokia Oyj (NYSE:NOK). The net worth of these stakes was over $472 million.
7. Kinross Gold Corporation (NYSE:KGC)
Number of Hedge Fund Holders: 24
One-Year Price Target: $5.62
Another Canadian stock in our list, Kinross Gold Corporation (NYSE:KGC) is a decent gold stock for investors who want to invest in the gold industry in a budget. Kinross Gold Corporation (NYSE:KGC) also pays dividends.
In January, National Bank analyst Mike Parkin upped his price target on Kinross Gold Corporation (NYSE:KGC) to C$8.50 from C$8.25 and kept an Outperform rating on the shares.
Gold stocks rallied earlier this year when investors grew hopeful that the Federal Reserve could leave its hawkish stance. But the latest jobs report and inflation data has dashed these hopes. However, gold stocks could rally and outperform in the long term as sooner or later the marker would turn the corner.
6. Alight, Inc. (NYSE:ALIT)
Number of Hedge Fund Holders: 29
One-Year Price Target: $13.00
Alight, Inc. (NYSE:ALIT) is a tech and software company that is on investors’ radar thanks to its growth potential. In December, Dan Ives of Wedbush named Alight, Inc. (NYSE:ALIT) among several other tech plays and called the company one of the “under the radar” stocks that fit the “growth as a reasonable price” mantra.
At the end of the third quarter, 29 hedge funds tracked by Insider Monkey reported owning shares of Alight, Inc. (NYSE:ALIT). The total value of these shares was $574 million.
5. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Fund Holders: 33
One-Year Price Target: $14.09
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is a Brazilian petroleum company. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) ranks 5th in our list of the most promising low-cost stocks according to analysts.
In January, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) reported its oil and gas production data for 2022. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)’s total oil and gas production for FY’2022 was 2.68 million boe/day, surpassing its full-year target of 2.6 million boe/day.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) also said its commercial production came in at 2.36 million boe/day, more than the 2.3 million target.
As of the end of the third quarter of 2022, 33 hedge funds tracked by Insider Monkey reported owning stakes in Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR). The net worth of these stakes was about $4.7 billion.
4. DISH Network Corporation (NASDAQ:DISH)
Number of Hedge Fund Holders: 40
One-Year Price Target: $32.25
Telecom and media company DISH Network Corporation (NASDAQ:DISH) has significant upside potential from the current levels, based on its average price target.
In November, DISH Network Corporation (NASDAQ:DISH) posted its third quarter earnings. DISH Network Corporation (NASDAQ:DISH)’s GAAP EPS came in at $0.65, beating estimates by $0.09. Revenue in the quarter fell by 7.9% to total $4.1 billion, missing estimates by $50 million. DISH Network Corporation (NASDAQ:DISH) said it closed the third quarter with 10.02 million pay-TV subscribers, including 7.61 million DISH TV subscribers and 2.41 million SLING TV subscribers.
At the end of the third quarter of 2022, 40 hedge funds had stakes in DISH Network Corporation (NASDAQ:DISH). The total value of these stakes was $776 million.
3. Elanco Animal Health Incorporated (NYSE:ELAN)
Number of Hedge Fund Holders: 42
One-Year Price Target: $17.00
Animal health products company Elanco Animal Health Incorporated (NYSE:ELAN) is one of the promising low-cost stocks according to analysts. The Indiana-based company in December received an approval from the FDA for its Bexacat tablets for diabetes mellitus in cats. The product will be indicated to improve glycemic control “in otherwise healthy cats with diabetes mellitus not previously treated with insulin,” according to the FDA.
For the third quarter, Elanco Animal Health Incorporated (NYSE:ELAN) reported an adjusted EPS of $0.20, which beat estimates by $0.04. Revenue in the quarter fell 8.8% on a YoY basis but met analysts’ estimates. For the full-year 2022, Elanco Animal Health Incorporated (NYSE:ELAN) said it expects revenue to come between $4.385 billion to $4.43 billion, versus the consensus of $4.49 billion.
2. Southwestern Energy Company (NYSE:SWN)
Number of Hedge Fund Holders: 51
One-Year Price Target: $8.84
Energy company Southwestern Energy Company (NYSE:SWN)’s shares have gained about 12% over the past 12 months. Southwestern Energy Company (NYSE:SWN) is under pressure as natural gas prices decline. However, Southwestern Energy Company (NYSE:SWN)’s bulls believe natural gas prices will come out of this decline as demand will shoot in the coming months. In January, Wells Fargo analyst Roger Read started covering Southwestern Energy Company (NYSE:SWN) with an Equal Weight rating and a $6.50 price target. The analyst praised Southwestern Energy Company (NYSE:SWN)’s efforts to build gas resources and its related acquisitions. However, oversupply in the natural gas market caused the analyst to take a “neutral stance.”
Hedge funds are bullish on Southwestern Energy Company (NYSE:SWN). A total of 51 hedge funds tracked by Insider Monkey reported having stakes in the natural gas company, up from 47 hedge funds in the previous quarter.
1. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 61
One-Year Price Target: $20.36
Warner Bros. Discovery, Inc. (NASDAQ:WBD) ranks 1st in our list of the most promising low-cost stocks according to analysts. In January, Warner Bros. Discovery, Inc. (NASDAQ:WBD) jumped after investment firm Guggenheim analyst Mike Morris upped the stock’s rating to Buy from Neutral with a price target of $16.50. The analyst mentioned in his note that Warner Bros. Discovery, Inc. (NASDAQ:WBD) has an “attractive narrative” for the first half of 2023. The analyst likes Warner Bros. Discovery, Inc. (NASDAQ:WBD) after the recently announced domestic affiliate renewals, cost controls and the upcoming launch of restructured Max products.
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is also one of the most popular stocks among the elite hedge funds tracked by Insider Monkey. At the end of the third quarter of 2022, 61 hedge funds in Insider Monkey’s database reported having stakes in the media and entertainment giant.
Longleaf Partners Fund made the following comment about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q4 2022 investor letter:
“Warner Bros. Discovery, Inc. (NASDAQ:WBD) – Media conglomerate Warner Bros Discovery (WBD) was another top detractor in the quarter and for the year. As has been documented in almost every form of media over the last several months, while we and WBD’s board/management knew there were things wrong at Warner Brothers under AT&T, it turned out to be even worse than expected. The aforementioned advertising market is not helping WBD either. While the brand and library values remain intact, the realization of this value has been deferred. With leverage closer to 5x than the sub-4x we thought we would be looking at in 2023, the market’s judgment has been harsh. We remain confident in management and growing free cash flow from here, with eight different insiders buying shares personally this year. We encourage you to listen to Partners Fund PM Ross Glotzbach interviewing WBD CEO and President David Zaslav in the latest episode of the Price-to-Value Podcast.”
You can also take a peek at 10 Hot Tech Stocks To Buy Now and 10 Hot Healthcare Stocks To Buy Now.
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Disclosure: None. 12 Most Promising Low-Cost Stocks According to Analysts is originally published on Insider Monkey.
