We recently compiled a list of the 10 Oversold Growth Stocks to Invest In. In this article, we are going to take a look at where Humana Inc. (NYSE:HUM) stands against the other oversold growth stocks.
As investors focus on consumer spending in a bid to assess the broader health of the US economy, current data points demonstrate that the fears of recession are now overdone. UBS believes that the excess savings that were built up during the COVID-19 pandemic are now used up, and elevated levels of interest rates seem to be impacting activity, mainly in the housing market. However, as the US Fed moves further with its policy easing cycle, lower rates are expected to ease some downward pressure on the broader economy.
S&P Global mentioned that a risk-averse mood has been clouding the US stock market investor outlook for 4th straight month. That being said, the overall risk sentiment saw some improvement from September’s 16-month low, as per the latest results from the firm’s Investment Manager Index survey.
Forecasts for Q4 2024
As per JP Morgan, the stocks touched their 44th all-time high recently. Technology (+2.5%) continued to dominate the broader market, with Al roadshows demonstrating improved demand throughout the country. While past performance cannot be relied upon, the seasonality says that Q4 2024 acts as a tailwind for the broader US markets. Overall, consumers increase their spending more on retail at the time of the holiday season and the “Santa Claus” rally. However, the bank believes that 3 global events might affect the Q4 2024 asset returns. These include geopolitical tensions, Chinese policy stimulus, and the U.S. election.
Amidst the geopolitical tensions, gold, which generally produces positive returns in Q4 2024, can act as a safe-haven asset. Since the start of the quarter, oil prices have increased too. Therefore, both oil and gold can hedge portfolios. Next, the large bank believes that if further China’s policy support outpaces the market projections of 2 – 4 trillion renminbi (RMB) supplementary bond issuance, there might be another rally in the offing for onshore and offshore equities and commodities. Talking about the elections, the typical seasonality is likely to persist. There can be increased volatility.
Outlook for Growth Stocks
Market experts opine that when there is a reversal in the global interest rate cycle, the growth stocks are expected to outperform. This is because reduced rates help in fueling liquidity in the growth companies.
As per Comerica Wealth Management, the market environments with declining rates and rising profits support the broader equity prices. Moreover, the expectations of the rate cuts led to a change in the investing appetite as these investors are now focused on public companies that are interest-rate sensitive (including the growth stocks). Therefore, B. Riley Wealth Management believes that dividend stocks, telecoms, and consumer staples are some of the sectors that are likely to benefit.
Our Methodology
To list 10 Oversold Growth Stocks to Invest In, we used a Finviz screener to extract stocks that have fallen significantly on a YTD basis and have a forward P/E of less than 15x. After getting a list of 25-30 stocks, we narrowed it down to the following 10 stocks having high hedge fund holdings, as of Q2 2024. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments.
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).
A closeup of an elderly patient happily receiving a specialty healthcare product.
Humana Inc. (NYSE:HUM)
Forward P/E (As of 14 October): 13.5x
% Decline on a YD Basis: ~43%
Number of Hedge Fund Holders: 71
Humana Inc. (NYSE:HUM) offers medical and specialty insurance products in the US.
Humana Inc. (NYSE:HUM)’s diversified, value-based healthcare delivery and services model continued to be a cornerstone of its success. Wall Street analysts believe that its focus on serving Medicare-eligible and disabled individuals via diversified healthcare delivery and services should continue to act as a primary growth enabler.
Humana Inc. (NYSE:HUM)’s strategy emphasizes leveraging its healthcare delivery and services infrastructure in a bid to improve outcomes and reduce costs. The company’s consistently high Star ratings in Medicare Advantage plans continued to be a key competitive advantage, aiding its market position and attracting beneficiaries. Humana Inc. (NYSE:HUM)’s efforts to enhance its healthcare delivery infrastructure should improve outcomes and cost efficiency over the long term. Wall Street believes that these improvements remain critical as the company plans to differentiate itself in a competitive market and address challenges.
Humana Inc. (NYSE:HUM)’s competitive advantage, stemming from high Star ratings and improving healthcare delivery infrastructure, should aid its future revenue growth. Through leveraging advanced analytics, telemedicine, and integrated care models, Humana Inc. (NYSE:HUM) is expected to improve the efficiency of care delivery. This should result in better health outcomes for members and lower overall healthcare costs.
As per Wall Street, the shares of the company have an average price target of $296.37. Diamond Hill Capital, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Other top Q2 contributors included Humana Inc. (NYSE:HUM) and Boston Scientific Corporation. Shares of health insurance company Humana rebounded from their recent downturn, which was tied to investors’ concerns about weaker-than-expected Medicare Advantage rates for 2025 and was the byproduct of an overall difficult operating environment.”
Overall HUM ranks 1st on our list of the oversold growth stocks to invest in. While we acknowledge the potential of HUM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than HUM 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.
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