We recently compiled a list of 10 Best Stocks Under $15 To Buy Now. In this article, we will look at where Viatris Inc. (NASDAQ:VTRS) ranks among the best stocks under $15.
While September is usually the toughest month for the stock market, it is delivering solid results this time. Stocks are soaring after the Federal Reserve announced a half-point cut this month to bring interest rates between 4.75% and 5%. This has led to the market racking up records again as investors look to move from riskier investments to stocks, reported CNN.
The broader market marked its 42nd record-high close in 2024 this past Thursday. The index, which has a history of September dips, is on track for a 1.3% gain this month, which will take its quarterly advance close to 5%. The Dow Jones Industrial Average surged 0.4% a day later to reach its 32nd record high for the year after investors received encouraging economic data regarding inflation, which has raised hopes for further interest rate cuts.
According to the Personal Consumption Expenditures Price Index, inflation rose 2.2% in August this year, which marked the lowest inflation rate in the United States since February 2021. Overall inflation in the country is crawling back to the Federal Reserve’s goal of a two percent annual rate. The easing of consumer prices is expected to result in further interest rate cuts to prevent a spike in unemployment rates, say economic experts. This has raised hopes among investors about the American economy returning to solid footing.
However, Fundstrat Global Advisors’ co-founder, Tom Lee, in an interview with CNBC this week cautioned against diving into stocks after interest rate cuts, citing election uncertainty.
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
In the weeks leading to the cuts, Lee, who is generally bullish on the stock market, warned investors that stocks could fall 10% during the coming eight weeks amid nervousness around the presidential elections, and added that the dip should viewed as a buying opportunity.
Liz Young Thomas, the head of investment strategy at SoFi, has also acknowledged the risk of stock market volatility associated with the presidential elections. While talking to the Business Insider, she noted how thinner trading volumes between June and August, when traders are on summer vacations, drive strong market performance, and the market turns volatile when stock activity picks up after traders return to their desks in September. According to Young Thomas, a two percent shift in share prices has become the norm in September. However, during the election year, volatility peaks around mid-October instead of September, and the market returns to normalcy after the results are announced.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks with a share price of under $15 and then picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. In the case where two or more stocks had the same number of hedge fund holders, we used market capitalization as a tie-breaker and placed the stock having a greater market capitalization at a higher ranking.
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).
Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders: 45
Share Price as of the close of September 27: $11.55
Viatris Inc. (NASDAQ:VTRS) is an American pharmaceutical company, headquartered in Canonsburg, Pennsylvania, that specializes in a variety of therapeutic areas, including treatments for anxiety, epilepsy, and arthritis, among other diseases. It was formed after the merger of Upjohn and Mylan in 2020.
The company has made a great start to the year and reported strong financial results during the second quarter of 2024. This was the fifth successive quarter during which operational revenue increased. The company delivered total revenues of $3.8 billion in Q2 and an operational revenue growth of 2%. Adjusted EBITDA also grew 2% from last year to total $1.2 billion for the quarter, resulting in EPS of $0.69, narrowly beating estimates of $0.68 per share. CFO, Doretta Mistras, credited the results to the company’s growing base business, solid financials, and the ability to generate significant cash flow.
Although Viatris Inc. (NASDAQ:VTRS) has a strong cash flow, it carries a significant amount of long-term debt – amounting to around $14.7 billion in the most recent quarter. Street analysts suggest that a major chunk of its free cash flow will go into reducing this debt. For perspective, the company had a free cash flow of $426 million during Q2, while it allocated $800 million to repay its outstanding debt.
However, this remains a minor concern for the company as it anticipates cash flow momentum to continue and expects to have over $3 billion cash in hand to repay debt during the second half of the year. Operational revenue is also expected to grow 2% in the back half of 2024 compared to the same period in 2023. Moreover, the company has strong confidence in its new product revenue, which reached $210 million in Q2 and is forecast to end up in the range of $500 million and $600 million for FY 2024. This has led to a bullish sentiment around the stock.
Experts at Jefferies Group, an investment banking company, resumed coverage of Viatris Inc. (NASDAQ:VTRS) in July and assigned it a Buy rating with a share price target of $15, representing an upside of 30% from its current level. Besides, 45 hedge funds held a stake in the company as of Q2 2024, according to Insider Monkey’s database, making it one of the best stocks under $15 to buy now. We also covered Viatris as the best dividend-paying stock under $15. You can read more on this here.
Overall VTRS ranks 9th on our list of the best stocks under $15. While we acknowledge the potential of VTRS 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 VTRS 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.