13 Best Affordable Stocks Under $40

Published on May 14, 2024 at 7:16 am by Sheryar Siddiq in Hedge Funds, News

In this article, we discuss the 13 best affordable stocks under $40. You can skip our detailed analysis of the current stock market investment trends, and go directly to read 5 Best Affordable Stocks Under $40.

Despite robust signals in the economy, consumer sentiment took a hit as inflation expectations surged, as per a widely observed survey released on May 10. The University of Michigan Survey of Consumers sentiment index for May revealed an initial reading of 67.4 for the month, marking a notable decline from April’s 77.2 and falling short of the Dow Jones consensus forecast of 76. This represented a month-over-month decrease of 12.7%, but a year-over-year increase of 14.2%. Alongside the subdued sentiment measure, there was an uptick in inflation expectations for both the one- and five-year horizons. The one-year outlook climbed to 3.5%, rising by 0.3 percentage points from the previous month to reach its highest level since November. The report came in despite a strong stock market rally and a slight decrease in gasoline prices.

During their meeting on May 1, Federal Reserve officials emphasized the need for “greater confidence” that inflation is gradually returning to their 2% target before considering any interest rate cuts. Policymakers view inflation expectations as crucial in managing inflation, and recent data from the Michigan survey indicates consecutive months of increases, following a significant decline between November and March. Market expectations suggest strong anticipation that the Fed will begin reducing its key borrowing rate in September, having kept it at its highest level in over two decades since July 2023. However, the outlook has been variable, despite Federal Reserve Chair Jerome Powell indicating in his post-meeting press conference that the central bank’s next move is unlikely to be a rate hike. “Inflation is still too high,” he stated. “Further progress in bringing it down is not assured and the path forward is uncertain.” That said, investors reacted positively to Powell’s remarks, with the Dow Jones Industrial Average surging following the comments, climbing by as much as 500 points.

Most economists agree with the Fed’s assessment that inflation indicators will gradually ease throughout the year, bringing the central bank closer to its 2% annual target. However, the key question is how much assurance cautious policymakers will require and how swiftly they’ll act without appearing indecisive about their commitment to price stability. According to Citigroup economist Andrew Hollenhorst, Powell’s remarks align with the expectation that the Fed will move to lower interest rates once either core inflation data softens or labor market conditions weaken. If inflation numbers decline and there’s a significant deterioration in the job market outlook, the Fed is likely to commence rate cuts in July, continuing until it has reduced its benchmark rate by a full percentage point by the year’s end.

In another vein, while most indicators in the labor market remained positive, jobless claims reached their highest level since late August, with the Labor Department reporting that seasonally adjusted initial jobless claims totaled 231,000 for the week ending May 4, marking an increase of 22,000 from the previous period. This figure exceeded the Dow Jones estimate, which had projected 214,000 initial jobless claims for the same week. Speaking on this, Robert Frick, corporate economist at Navy Federal Credit Union, made the following remarks:

“A low number of claims had become almost monotonous, and while this surprising spike could well be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes.

Given the current climate in the market, the smart investor seeks out stocks that offer both profitability and affordability, offering a way to navigate through ever-changing macroeconomic conditions. While these stocks may not provide the same level of stability as mega-cap firms such as Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), they do present an opportunity for decent short-term returns due to their volatility. In this context, some of the best affordable stocks include Verizon Communications Inc. (NYSE:VZ), Pfizer Inc. (NYSE:PFE), and Bank of America Corporation (NYSE:BAC), along with others listed below.

Some of the best affordable stocks hedge funds are buying are:

UiPath Inc. (NYSE:PATH)
Kinder Morgan Inc (NYSE:KMI)
Barrick Gold Corp (NYSE:GOLD)
The Kraft Heinz Company (NASDAQ:KHC)

Read on to find out more affordable stocks and the reasons that make them attractive in the current environment.

Photo by Vitaly Taranov on Unsplash

Our Methodology

We employed stock screeners to narrow down stocks trading at a share price below $40, selecting those favored by the 933 hedge funds tracked by Insider Monkey. The resulting list of 13 best affordable stocks under $40 is arranged in ascending order based on the number of hedge funds holding each stock.

Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

13. Teladoc Health, Inc. (NYSE:TDOC)

Share Price as of May 8: $12.25

Number of Hedge Fund Holders: 27

Teladoc Health, Inc. (NYSE:TDOC) stands as a prominent global telemedicine and virtual healthcare company, with its headquarters based in the United States. The company offers a range of core services, including telehealth, medical opinions, AI and analytics, telehealth devices, and licensable platform services.

In the first quarter of 2024, Teladoc Health, Inc. (NYSE:TDOC) witnessed a 3% year-over-year growth in revenue, fueled by a 1% rise in access fees revenue and a notable 14% surge in other revenue streams. However, despite this growth, the company experienced an 18% increase in net loss compared to the first quarter of 2023. This widening loss can be attributed primarily to elevated expenses in stock-based compensation and amortization of acquired intangible assets. On a positive note, adjusted EBITDA showed improvement, climbing by 20%, which underscores the company’s focus on operational efficiencies and effective cost management strategies.

According to Insider Monkey’s database of 933 hedge funds, as of the end of 2023, 27 hedge funds reported owning stakes in Teladoc Health Inc (NYSE:TDOC).

Much like Verizon Communications Inc. (NYSE:VZ), Pfizer Inc. (NYSE:PFE), and Bank of America Corporation (NYSE:BAC), Teladoc Health, Inc. (NYSE:TDOC) ranks as one of the best affordable stocks to buy.

12. UiPath Inc. (NYSE:PATH)

Share Price as of May 8: $19.90

Number of Hedge Fund Holders: 38

UiPath Inc. (NYSE:PATH) operates as a global software company specializing in robotic process automation (RPA) software. Founded in Bucharest, Romania by Daniel Dines and Marius Tîrcă, it has evolved into a comprehensive platform for enterprise-level automation.

Scotia Bank initiated coverage of the robotics automation software company in February. Analysts Nick Altmann and Patrick Colville highlighted UiPath Inc. (NYSE:PATH)’s transformation into a full-fledged automation platform for enterprises, expanding its total addressable market and gaining wallet share from existing customers. They assigned a Sector Perform rating and set a $29 price target for UiPath Inc. (NYSE:PATH) shares.

By Q4 2023 end, 38 out of the 933 hedge funds tracked by Insider Monkey had invested in UiPath Inc. (NYSE:PATH). Catherine D. Wood’s ARK Investment Management was the largest shareholder through its $1 billion stake.

11. Kinder Morgan Inc (NYSE:KMI)

Share Price as of May 8: $18.86

Number of Hedge Fund Holders: 42

Kinder Morgan, Inc. (NYSE:KMI) is a leading energy infrastructure company in North America, known for its expertise in owning and operating oil and gas pipelines, as well as terminals. With ownership interests in or management of an extensive network, the company boasts approximately 83,000 miles of pipelines and 143 terminals.

As of May 8, Kinder Morgan, Inc. (NYSE:KMI) pays a quarterly dividend of $0.29 per share, translating to a dividend yield of 6.10%.

Among the 933 hedge funds tracked by Insider Monkey, 42 had stakes in Kinder Morgan Inc (NYSE:KMI). The largest stake is held by Bob Peck and Andy Raab’s FPR Partners, which owns a $186 million stake in Kinder Morgan Inc (NYSE:KMI).

10. Barrick Gold Corp (NYSE:GOLD)

Share Price as of May 8: $16.69

Number of Hedge Fund Holders: 43

Barrick Gold Corp (NYSE:GOLD) is a prominent international gold mining company, headquartered in Toronto, Canada, maintains a significant presence in the global mining sector. Barrick Gold primarily focuses on the exploration, development, and operation of gold mines and currently offers a quarterly dividend of $0.10 per share.

Insider Monkey’s fourth-quarter database reveals that 43 hedge funds held long positions in Barrick Gold Corporation (NYSE:GOLD), marking an increase from 36 funds in the previous quarter. First Eagle Investment Management, under the leadership of Jean-Marie Eveillard, emerged as the largest stakeholder of the company, holding 44.6 million shares valued at $808.2 million.

Old West Management made the following comment about Barrick Gold Corporation (NYSE:GOLD) in its Q4 2022 investor letter:

“Barrick Gold Corporation (NYSE:GOLD) is the second largest gold miner in the world, with operations in the U.S., Canada, Africa, South America and more. Barrick is also a major copper producer. Former Goldman Sachs executive John Thornton took control of the company in 2012 and quickly realized he wanted someone with a mining background to run the company. Mark Bristow, at that time CEO of Randgold, was considered one of the best gold mining executives in the world. Thornton wanted Bristow so badly Barrick bought Randgold in 2018. Bristow, who is South African, had extensive experience operating mines throughout Africa, and in fact would fly his own single engine plane to visit mines. He has his PhD in Geology, and he has flourished running Barrick the past five years.

Barrick is estimated to have $1.6 billion of net income this year on $11.5 billion of revenue. Net Income has been growing 15% per year. The stock trades at $19.00 per share which is 16 times forward earnings, and the stock has a 3.15% dividend yield. Barrick has a fortress balance sheet with $5.7 billion in cash and $5 billion of long term debt, which is only one time EBITDA.”

9. Palantir Technologies Inc. (NYSE:PLTR)

Share Price as of May 8: $21.41

Number of Hedge Fund Holders: 44

Palantir Technologies Inc. (NYSE:PLTR) operates as a software enterprise specializing in data fusion platforms, serving both machine-assisted and human-driven data analysis. The company’s product portfolio includes Palantir Gotham, Palantir Apollo, and Palantir Foundry.

Insider Monkey’s analysis of 933 hedge fund portfolios for the December quarter of 2023 revealed that 44 of them held stakes in Palantir Technologies Inc. (NYSE:PLTR). Leading the pack, D. E. Shaw emerged as the foremost investor, with ownership of 20.75 million shares valued at $356.39 million.

Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its fourth quarter 2023 investor letter:

“Second was another technology stock, Palantir Technologies Inc. (NYSE:PLTR), which rallied earlier in the quarter before pulling back. Sentiment remains positive on Palantir as it has successfully rolled out a new marketing effort called “boot camps” where customers can demo the company’s new artificial intelligence platform (AIP) product. These events have been popular with potential clients, and in many cases it has been reported that customers can develop an artificial intelligence use case in just a few hours. The stock rallied as some expected this successful marketing effort could translate into faster revenue growth. Palantir also landed the coveted National Health Services account in the UK, long rumored, but the delay in the award had weighed on investor sentiment.”

8. The Kraft Heinz Company (NASDAQ:KHC)

Share Price as of May 8: $35.91

Number of Hedge Fund Holders: 44

The Kraft Heinz Company (NASDAQ:KHC), commonly known as Kraft Heinz, is an American multinational food corporation formed through the merger of Kraft Foods and H.J. Heinz Company. With dual headquarters in Chicago and Pittsburgh, the company is involved in the production and distribution of a wide range of products, including cheese, prepared meals, meats, dairy products, condiments, and coffee. As of May 8, it offers a quarterly dividend of $0.40 per share, with a dividend yield of 4.46%.

As of the end of December 2023, Insider Monkey’s database reported that 44 hedge funds held stakes in The Kraft Heinz Company (NASDAQ:KHC), up from 40 in the previous quarter. These stakes amounted to over $13.5 billion in total. Warren Buffett’s Berkshire Hathaway emerged as the company’s largest stakeholder in Q4.

7. Hewlett Packard Enterprise Company (NYSE:HPE)

Share Price as of May 8: $17.13

Number of Hedge Fund Holders: 50

Hewlett Packard Enterprise Company (NYSE:HPE) provides data solutions globally through segments including Compute, HPC & AI, Storage, Intelligent Edge, Financial Services, and Corporate Investments. Its offerings include servers, storage products, edge systems, networking solutions, and related services.

According to Insider Monkey’s fourth-quarter data, 50 hedge funds showed optimism towards Hewlett Packard Enterprise Company (NYSE:HPE), up from 47 funds in the previous quarter. AQR Capital Management, led by Cliff Asness, holds the largest stake in the company, with 14.6 million shares valued at $248 million.

6. JD.com, Inc. (NASDAQ:JD)

Share Price as of May 8: $31.95

Number of Hedge Fund Holders: 56

JD.com, Inc. (NASDAQ:JD), known as Jingdong domestically and as Joybuy internationally, is a Chinese e-commerce giant headquartered in Beijing. Its core focus is on electronics products and general merchandise, spanning from audio and video items to books.

In its fourth-quarter earnings report released on March 6, 2023, JD.com, Inc. (NASDAQ:JD) exceeded expectations. The company posted a non-GAAP earnings per American depositary share of $0.75, surpassing market estimates by $0.12. Additionally, JD.com reported robust revenue growth, with a year-over-year increase of 3.6%, reaching $43.1 billion, which exceeded estimates by $1.49 billion.

Insider Monkey’s fourth-quarter database indicated continued bullish sentiment towards JD.com, Inc. (NASDAQ:JD), with 56 hedge funds expressing positive views, up from 53 funds in the previous quarter. Notably, Chase Coleman’s Tiger Global Management held a significant stake in the company, with 8.8 million shares valued at $254.35 million.

JD.com, Inc. (NASDAQ:JD) joins the ranks of Verizon Communications Inc. (NYSE:VZ), Pfizer Inc. (NYSE:PFE), and Bank of America Corporation (NYSE:BAC) as one of the best affordable stocks under $40.

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