We recently compiled a list of the 8 Best Bargain Stocks To Buy in October. In this article, we are going to take a look at where Block, Inc. (NYSE:SQ) stands against the other bargain stocks.
The Aftermath of an Easing Cycle
September has historically been sluggish for stocks. However, with an easing cycle and an upcoming election in store, the results this year may be untypical. On September 26, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared in an interview on CNBC to discuss the market outlook ahead of the easing cycle.
Lee suggests that an easing cycle indefinitely improves the performance of markets, especially from a historical standpoint, hinting that with 40 days to the election, the market may change its course of action accordingly. While stocks reposition themselves positively after an easing cycle, the markets may see delays, especially because investors are more likely to wait until after the results are out.
Lee added that rallies in November and December will be significantly high, especially when markets have been up more than 10% in the first half of the fiscal year 2024. While the economy is not officially in a recession, the number of investors and analysts who believe the economy is going down is immense. Therefore, to get investors on the move evidence has to be better than expected.
What do the Elections Mean for Markets?
The 50 basis point cut may have redeemed positive results for the market. On September 28, Matt Powers, Powers Advisory Group managing partner, appeared in an interview on Yahoo Finance to discuss the plausible sectors to target as elections approach.
Powers shared that inflation numbers validated the 50 basis point cut, showing positive economic signs. However, he does reiterate that there will be some short-term volatility, especially in October.
According to him, investors must focus more on stocks in the defensive sectors, including utilities, consumer staples, and financials. Powers advises investors to spare some short-term equity but focus on long-term and medium-term results. Overall, he believes that the market is more balanced and a reallocation to the dividend stocks and dividend ETFs is highly probable.
Now that we have studied the aftermath of the easing cycle and the market outlook before an impending election, let’s take a look at the 8 best bargain stocks to buy in October according to analysts.
Our Methodology
To come up with the best bargain stocks in October, we used the Finviz screener to find stocks trading at a forward P/E of less than 20. We sorted our screen by market cap and went through the 30 biggest stocks. We then shortlisted the stocks that were the most popular among hedge funds, as of Q2 2024, and that analysts saw the most upside to. The stocks are ranked in ascending order of analysts’ upside potential.
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).
People using the Cash App paying for goods and services, highlighting the impact the of the company’s payment tools.
Block, Inc. (NYSE:SQ)
Forward P/E as of September 28, 2024: 18.81
Analyst Upside Potential as of September 28, 2024: 34%
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ) is a financial services technology company that ranks fifth on our list of the best bargain stocks to buy now. The digital payment services provider offers its services to consumers and small to medium-sized businesses.
Founded in 2009, the company now owns several proprietary services including Square, Cash App, Spiral, TIDAL, and TBD. For the year ended 2023, more than 4 million sellers used Block’s (NYSE:SQ) Square ecosystem to make over 4 billion transactions.
The company also delivered strong financial results in the second quarter of 2024. Block, Inc. (NYSE:SQ) saw its gross profit grow by 20% year-over-year. For the full fiscal year 2024, the company expects gross profit to reach at least $8.89 billion, logging 18% growth year-over-year.
Gen Z and millennials back the demand for Block’s Cash App, allowing the company to exploit the segment further. As of now, this age group makes up 75% of the active customer base. While this is huge, the company has only penetrated 34% of the Gen Z market and 25% of the millennial market.
Overall, 59 hedge funds held the stock at the end of Q2 2024. Analysts are also bullish on the stock and their median price target represents an upside of 34% from current levels.
Overall SQ ranks 5th among the 8 best bargain stocks to buy in October. While we acknowledge the potential of SQ 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 time frame. If you are looking for an AI stock that is more promising than SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center