We recently compiled a list of the 10 Best Robinhood Stocks Under $20. In this article, we are going to take a look at where Blue Owl Capital Inc. (NYSE:OWL) stands against the other Robinhood stocks.
The market reacted favorably after the Federal Reserve’s June 11-12 meeting. The broader market marked record closes. At the June 12 press conference, Fed Chairman Jerome Powell emphasized the Fed’s focus on its dual mandate of achieving maximum employment and stable prices. While the labor market remains strong with continued job gains and low unemployment, inflation has decreased significantly from its peak but remains above the 2% target, currently at 2.7% and the Federal Open Market Committee (FOMC) believes it’s still high.
Key Developments
The Fed Chairman reported that GDP growth slowed from 3.4% in Q4 of 2023 to 1.3% in Q1 of 2024. However, underlying demand indicated by private domestic final purchases grew at 2.8%. Consumer spending has moderated but remains solid, and investment in equipment and intangibles has improved. Moreover, the labor market is balanced, with job gains averaging 218,000 per month in April and May, and the unemployment rate was at 4%. Inflation, as measured by PCE prices, rose 2.7% over the past year, while core PCE rose 2.8% and the CPI rose 3.3% in May, with the core CPI at 3.4%. Finally, the FOMC decided to keep the federal funds rate unchanged at 5.25% to 5.5% and to continue reducing securities holdings to manage inflation.
Powell emphasized a cautious approach to policy adjustments. The Chairman said that while some progress has been made toward the inflation target, more data is needed to ensure inflation is sustainably moving toward 2%. The Fed will continue to assess economic data and adjust policies as needed to support their dual mandate. He reiterated the commitment to restoring price stability to ensure long-term economic health. The Fed chair noted that the median projection for the federal funds rate by FOMC participants is 5.1% by the end of 2024 if the “economy evolves as expected.” Nevertheless, Jerome Powell highlighted that the projections are not a guarantee and will depend upon the data in the coming months.
The CME’s FedWatch tool reveals that 35.8% of the market expects the interest rates to remain the same in September, 59.2% expect a 25 basis points (bps) reduction, and 5% believe in a 50 bps rate cut. These numbers have risen significantly in favor of rate cuts since we reported them on May 31 in our article about the best up-and-coming stocks.
After a long wait, the Fed has finally hinted at potential rate cuts in September, which brings tons of opportunities in the market. Let’s take a look at some now.
Our Methodology
For this article, we used the app to identify over 100 stocks with a $2 billion market cap that were trading under $20, as of June 12. We narrowed down our list to the stocks with positive hedge fund sentiment, analyst ratings, and optimistic prospects and chose the 10 stocks with the highest number of institutional investors.
Why do we care about what hedge funds do? 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).
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Blue Owl Capital Inc. (NYSE:OWL)
Number of Hedge Fund Holders: 40
Share Price as of June 12: $17.64
Blue Owl Capital Inc. (NYSE:OWL) is a New York-based asset manager that provides permanent capital base solutions, direct lending products, liquid credit, and GP strategic capital products, among others. Blue Owl Capital Inc. (NYSE:OWL) was held by 40 hedge funds in the first quarter and the stakes amounted to $443.136 million. Kinetic Partners Management is the top investor of the company and has a position worth $69.600 million, as of March 31.
Blue Owl Capital Inc. (NYSE:OWL) is one of the best Robinhood stocks under $20 as its assets under management (AUM) and revenues have consistently grown since it went public. In the first quarter of 2024, the company’s AUM grew by 21% year-over-year to $174.3 billion and its revenue was up over 31% at $513.34 million. Over the last three years, the company’s revenue has recorded a compound annual growth rate of 81.76%.
Blue Owl Capital Inc. (NYSE:OWL) has also shown strong fundraising capabilities recently. The firm successfully raised $5.2 billion for its latest triple net lease fund, which was the largest U.S.-focused real estate fund in 2023. The gross flows into perpetually distributed products In the wealth channel totaled $2.1 billion in Q1, up 16% year-over-year. On top of that, the firm closed $1.4 billion of institutional capital in its direct lending business, and its new mid-cap GP strategic capital strategy raised over $0.5 billion during the first quarter.
Blue Owl’s recent strategic acquisitions also provide a bull case for the firm. The firm acquired Kuvare Insurance Services for $750 million on April 3, 2024, adding $20 billion in AUM for Blue Owl Capital. The acquisition positions the firm to capitalize on the $20 trillion global life and annuity market by providing comprehensive insurance asset management solutions. On June 7, the firm made another acquisition to strengthen its capabilities in real estate lending. It acquired Prima Capital Advisers, adding another $10 billion to Blue Owl’s AUM.
Even though Blue Owl Capital Inc.’s (NYSE:OWL) seems very high (145x compared to the 20x industry average), the company is expected to grow its earnings significantly over the next couple of years. The company’s earnings are expected to grow by 575% in 2024 compared to the prior year and a further 26% in 2025.
Blue Owl Capital Inc. (NYSE:OWL) has a consensus buy rating among 12 analysts, and its average price target of $21.45 represents an upside of 21.6% from current levels, as of June 12.
Overall OWL ranks 9th on our list of the best Robinhood stocks to buy. You can visit 10 Best Robinhood Stocks Under $20 to see the other Robinhood stocks that are on hedge funds’ radar. While we acknowledge the potential of OWL 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 timeframe. If you are looking for an AI stock that is more promising than OWL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.