We recently compiled a list of the 10 Best Affordable Stocks Under $5 to Buy Now. In this article, we are going to take a look at where Borr Drilling Limited (NYSE:BORR) stands against other best affordable stocks under $5 to buy now.
In an interview with CNBC on January 25, Jill Carey Hall, Global Research Head of U.S. Small and Mid-Cap Strategy at BofA, discussed her outlook for the small-cap and mid-cap space. She believes that this year may not be the best for small caps, citing a tough backdrop and disappointing profit growth. According to Hall, the profit growth recovery story that many investors were bullish on last year has continued to get revised down and pushed out further into 2025, resulting in negative year-over-year earnings growth in the small-cap segment.
Hall thinks that mid-caps are a better bet, citing better fundamentals and balance sheets. She notes that if the market broadens out, mid-caps could offer the best risk-reward, especially in an environment where multiple rate cuts have gotten priced out of the market. BofA expects the Fed to stay on hold and not cut rates further, which could pose refinancing risks for small caps. In contrast, mid-caps have better balance sheets and fundamental trends, making them a more attractive option.
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Despite the optimism around the economy and potential policies from the Trump administration, Hall believes that rates still matter more than anything else. She notes that small caps have underperformed for a decade and are due for an outperformance cycle, but this year may not be the best time to jump back in. Hall thinks that investors are nervous about small caps and need to see a more convincing profit turn and stabilizing rates before becoming more bullish. However, she does see opportunities in domestic mid-caps, particularly those with less leverage, less refinancing risk, and economic sensitivity.
Hall advises being selective in the small-cap space, rather than owning a benchmark. She believes that certain pockets of the market, such as financials, are well-positioned to benefit from the current backdrop, and that owning stocks with rising earnings estimates could be a good strategy. She emphasizes the importance of watching rates and profit growth, and being selective in one’s investments, rather than making broad bets on the small-cap space.
While small caps may face headwinds this year, mid-caps appear to present a more favorable opportunity due to stronger fundamentals and reduced refinancing risks.
A modern offshore drilling vessel navigating the seas with equipment mounted on its decks.
Our Methodology
To compile our list of the 10 best affordable stocks under $5 to buy now, we used Finviz and Yahoo stock screeners to identify 25 companies with a forward price-to-earnings (P/E) ratio below 15 as of January 24, and an average analyst-projected earnings growth of at least 8% for the current year. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
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).
Borr Drilling Limited (NYSE:BORR)
Number of Hedge Fund Holdings: 10
Forward P/E Ratio as of January 24: 4.96
Earnings Growth This Year: 100.00%
Stock Price as of January 24: $3.52
Borr Drilling Limited (NYSE:BORR) is an offshore drilling contractor specializing in providing high-quality drilling services to the oil and gas industry. The company owns and operates a fleet of modern jack-up rigs, which are deployed to explore and produce hydrocarbons in shallow waters. Borr Drilling Limited’s (NYSE:BORR) clientele includes major oil companies and national oil corporations.
Borr Drilling Limited (NYSE:BORR) has consistently invested in modernizing and expanding its fleet to maintain a competitive edge in the market. The recent completion of its new build program, with the delivery of the Var, brings the company’s total fleet to 24 premium rigs, the youngest in the industry. This strategic investment not only enhances the company’s operational capabilities but also positions it to meet the evolving needs of its clients, who increasingly demand state-of-the-art technology and high performance. The company’s focus on maintaining a modern fleet is expected to drive long-term contracts and higher day rates, contributing to sustained revenue growth and profitability.
To mitigate the risks associated with regional market fluctuations, Borr Drilling Limited (NYSE:BORR) is diversifying its contract portfolio across multiple regions, including the North Sea, the Middle East, Africa, and Asia. This diversification strategy has been instrumental in securing a strong backlog of contracts. The company is also actively exploring opportunities to reduce its environmental footprint and is upgrading its Prospector 1 rig to operate with 100% green energy, which will enable the rig to achieve near-zero emission levels.
Overall BORR ranks 6th on our list of the best affordable stocks under $5 to buy now. While we acknowledge the potential of BORR 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 BORR 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.