We recently compiled a list of 13 Best Growth Stocks Under $10 to Buy. In this article we will look at where Kosmos Energy Ltd. (NYSE:KOS) ranks among the best growth stocks under $10 to buy.
After a summer dip, stocks recovered in Q3 2024, setting new records after the quarter. More than 60% of the 500 largest companies’ components outperformed the overall index that covers these stocks in the quarter. The index that tracks the 500 largest companies traded in the US is up more than 20% year-to-date, at record-high levels. Bonds also fared well, helped by declining inflation and the Federal Reserve’s aggressive half-percentage-point drop, which indicated a move away from combating inflation and toward promoting growth. Fed rate reductions boost small-cap companies, industries, and regional banks.
Value and small-cap companies overtook large tech in the major rotation that occurred during the general stock market rally. Subsequently, expensive large-cap growth names lost investor attention, while previously underperforming markets saw strong gains. The consolidation of technology is a positive development, according to King Lip, chief strategist at BakerAvenue Wealth Management. He states that ” “We’re not in a bear market for tech by any means. But you’ve definitely seen some evidence of rotation.”
Nonetheless, in Q3 2024, eight of the 500 largest companies’ eleven sectors outperformed the broader index of these 500 companies. According to Tajinder Dhillon, senior research analyst at LSEG, the Magnificent Seven companies are predicted to raise earnings by almost 20% in the third quarter of 2024, compared with a profit rise of 2.5% for the rest of the 500 largest companies. That disparity is predicted to diminish in 2025, with the remainder of the index expected to raise earnings by 14% for the full year against a 19% rise for the mega-cap group.
The Magnificent Seven “should not have to carry the profit rebound alone,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in recent research, providing a soft landing scenario. ” “For the soft landing, we are in the ‘show me’ stage.”
Moreover, soft employment figures helped allay concerns about a recession and modest inflation. Even though the unemployment rate has increased, the overall economic trend points to strong, albeit sluggish, growth. The market is now even more optimistic due to the Fed’s aggressive rate decrease and the likelihood of future rate reductions.
It is anticipated by Morningstar analysts that the “great rotation” away from large-cap tech stocks would continue as Q4 approaches, presenting opportunities in undervalued industries. The financial services, real estate, energy, and healthcare industries are expected to grow as per Morningstar analysts, particularly with the current decline in interest rates.
According to Morningstar analysts, going ahead, the possibility of additional rate cuts and higher government expenditure in this election year should boost markets, but prudence is still advised because lower-income people are still being negatively impacted by continued inflationary pressures. Value stocks and industries with strong prospects for future recovery should be the main focus of investors.
Methodology:
We sifted through holdings of iShares Morningstar Small-Cap Growth ETF to form an initial list of 20 highest-weighted Growth Stocks Under $10 in the ETF. Then we selected the 13 stocks that were the most popular among hedge funds as of Q2, 2024. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stocks’ current market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
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)
Kosmos Energy Ltd. (NYSE:KOS)
Number of Hedge Fund Investors: 25
Kosmos Energy Ltd. (NYSE:KOS) is an independent oil and gas production and exploration firm that specializes in developing and frontier regions around the Atlantic Margin. The firm specializes in field innovations meant to boost output. The exploration conducted by Kosmos is linked to a geologically based strategy intended to identify petroleum systems. The technique used begins with geology studies that evaluate the subsurface of a region, but it also includes basin modeling, techniques for determining reservoir/seal pair development, and trap definition. Additionally, to find potential traps of interest, a 3D seismic analysis is carried out. Before focusing on particular licenses, a country-specific analysis is conducted in conjunction with the subsurface investigation to gain a better knowledge of above-ground dynamics.
It is among the businesses that will profit most from rising oil and gas prices when the world economy recovers from a period of modest expansion. The company’s revenue growth has been excellent, with an incredible 64.99% YoY increase in revenue in Q2 2024 due to strong production growth amid operational challenges. The figure shows that while KOS’s stock value has been declining, its basic company activities are significantly growing.
Kosmos Energy Ltd. (NYSE:KOS) has made significant progress toward attaining its goal of increasing production by 50%, with output already at 62,000 barrels of oil equivalent per day, a 7% increase over the previous year. The company is committed to producing 90,000 barrels of oil per day by the end of the year, despite project delays and lower production from Ghana’s Jubilee field.
Prioritizing debt repayment and growth finance, the company seeks to produce $100 million to $150 million in free cash flow per quarter. Moreover, a significant turning point for Kosmos is the initiation of production at Winterfell, where Kosmos owns a 25.04% interest.
Samantha Mclemore’s Patient Capital Management is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 9,084,879 shares worth $50.33 million as of Q2.
Overall KOS ranks 10th on our list of Best Growth Stocks Under $10 to Buy. While we acknowledge the potential of KOS 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 KOS 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 on Insider Monkey.