We recently published a list of 10 Cheap New Stocks To Buy Right Now. In this article, we are going to take a look at where Amentum Holdings, Inc. (NYSE:AMTM) stands against other cheap new stocks to buy right now.
The US IPO market experienced a rebound in 2024, with proceeds and deal volume increasing as compared to the previous two years. However, activity remained below historical levels due to economic uncertainty. A resurgence is expected in 2025, mainly driven by potential interest rate cuts, pent-up investor demand, and a large pipeline of well-prepared companies, including many unicorns. This was discussed in detail earlier in our 12 Best New Stocks to Buy According to Hedge Funds article. Here’s an excerpt from it:
“…IPO activity saw a strong increase in 2024, with 61 traditional IPOs garnering more than $26.4 billion YTD, which was in line with the combined total number of IPOs in 2022 and 2023, which witnessed 28 and 35 IPOs, respectively. Despite this improvement, IPO activity remained short of early anticipations and historical levels of activity. This is because several IPO candidates decided to stay on the sidelines as they waited for a clearer economic picture after the U.S. presidential elections.”
General Atlantic CEO Bill Ford recently joined CNBC’s ‘Squawk Box’ to discuss the state of the private equity landscape, the IPO market, and the M&A outlook for 2025. Speaking on January 21, Ford highlighted that the IPO market has faced challenges over the past three years due to regulatory hurdles and a difficult exit environment. Despite this, there’s optimism about a renaissance in IPO activity, with 28 companies in General Atlantic’s pipeline ready to go public. This resurgence is anticipated to benefit private equity investors seeking liquidity, companies looking to raise capital, and public investors eager to access high-growth opportunities.
Ford noted that the regulatory overhang from the previous administration had discouraged many companies from pursuing public listings despite favorable equity markets and a strong economy. However, as these barriers begin to ease, he expects a wave of IPOs that will reinvigorate the public markets. He described this development as a triple win, enabling private equity firms to achieve liquidity, providing growth-stage companies with much-needed capital, and offering public investors access to innovative businesses. The discussion also touched on the broader implications for private equity. Ford explained that while strategic buyers had been sidelined in recent years due to regulatory constraints, their return to the market could create a more balanced environment. Historically, about 50% of exits occurred through IPOs and 50% through M&A transactions, and Ford anticipates a return to this equilibrium.
Ford’s comments align with broader trends in the IPO landscape for 2025. A lot of companies have signaled intentions to go public this year, reflecting renewed confidence in public markets. This revival is expected to reshape the investment landscape.
Methodology
We used the Finviz stock screener to look for companies that went public in the past 2 years. We sorted our screen by IPO date and market cap and looked through the top stocks that recently went public and are trading at a valuation of over $1 billion. We then selected 10 stocks with a forward P/E ratio under 15, that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
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).
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Amentum Holdings, Inc. (NYSE:AMTM)
Number of Hedge Fund Holders: 28
Forward P/E ratio as of January 25: 10.28
Market Capitalization: $5.25 billion
Amentum Holdings, Inc. (NYSE:AMTM) provides engineering and technology solutions and serves critical sectors like energy, space, and defense. It addresses challenges in science, security, and sustainability across diverse markets.
Its Digital Solutions segment uses AI, data analytics, and cybersecurity to fulfill the demand for digital transformation across different sectors. The company’s continued R&D investments, expansion into new markets like AI/ML/IoT, and partnerships with other firms will drive further growth. For instance, the company has been awarded a contract by the Satellite Applications Catapult to design and deliver a gravity offload system for simulating space conditions in the UK, as of January 21. This system will enable satellite manufacturers to test and develop in-space servicing and assembly technologies, which will enhance mission safety and contribute to the growth of the UK’s space sector.
The company focuses on developing customer-centric solutions to capitalize on growing demand driven by factors like remote work, e-commerce, and the increasing need for enhanced cybersecurity. Amentum Holdings, Inc.’s (NYSE:AMTM) $45 billion backlog also provides a solid foundation for future growth in the Digital Solutions segment. The company received a Hold rating and a $24 price target from RBC Capital analyst Kenneth Herbert on January 10.
Aristotle Small Cap Equity Strategy maintains its position in the company believing that it is positioned to capitalize on government spending in key areas and also achieve significant through its recent merger. The firm stated the following in its Q4 2024 investor letter:
“Amentum Holdings, Inc. (NYSE:AMTM), is a global engineering and technology solutions provider serving the US government agencies as well as international government agencies from allied nations. The company was formed by spin-off and merger of Jacobs Solutions’ (J) Critical Mission Solutions (CMS) and Cyber & Intelligence (CI) businesses with Amentum Holdings (private). As a result, existing J shareholders received shares of the newly formed combined company (AMTM). We maintained our position in AMTM as we believe the company is well positioned to benefit from government spending on digital modernization, cybersecurity and next generation technologies. The combination of the two companies exposes AMTM to new end market and geographic opportunities as well as operating scale efficiencies to drive incremental shareholder value.”
Overall, AMTM ranks 5th on our list of cheap new stocks to buy right now. While we acknowledge the growth potential of AMTM, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMTM 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.