We recently published a list of 13 Best Cheap Stocks to Invest in for Beginners. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against other best cheap stocks to invest in for beginners.
Are New Highs Possible for the Stock Market?
The last time the S&P erased a 15% decline in under six weeks was 1982, which tells a lot about the current market dynamics we are currently in. On May 14, Dan Greenhaus, Solus Alternative Asset Management strategist, appeared on CNBC’s ‘Closing Bell’ to talk about the recent market action and what really matters about the recent market rally, amid other things.
Greenhaus was of the view that this trend tells us more about the drop than the rebound because, as many market practitioners know, there is a symmetry here. Often, the speed or rapidity with which you experience declines says something about how fast you can come back.
While there is something to be said about how fast we have come back, the sell-off was 20%, basically top to bottom, on worst-case outcomes that were really unlikely to come to pass and have since proven unlikely to come to pass.
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Investors were really concerned about the likelihood of 150% tariffs on China, $440 billion of imported goods, and so, the market acted according to the headlines in some respects. However, Greenhaus opined that the headlines could have been interpreted more rationally for what they were: “a publicly based negotiating strategy”, which in itself poses a semantic debate.
He said that the biggest issue in the short term, keeping the rapidity of the decline aside, is the importance of how the market is above where it was on Liberation Day and, more importantly, above the 200-day moving average. It would be appropriate, according to him, to put aside the whys and hows, solely focusing on holding that 200-day moving average.
However, this could be more of a debate of fundamentals than semantics, as the fundamentals last week were deemed to be deteriorating at a reasonably quick pace. While the job report was better than expected, recession expectations were looming everywhere, and a tremendously dense fog was looming over corporate America, muddying the situation for what was going to lie ahead. The market now seems to have a wholly different narrative, even when tariffs exist on China.
Talking about these trends, Greenhaus pushed back on the notion that things were deteriorating last week, calling it a sentiment and expectation deterioration only, as people were apprehensive. According to him, companies around the world are thriving, and he supported this statement with the optimistic earnings reports, commentaries, April updates by companies like Mastercard and Visa, and sales by big box retailers. He acknowledged that while investors are still apprehensive about what the future holds, things look “pretty darn good,” at least right now.
Our Methodology
We sifted through stock screeners and financial media reports to compile a list of the best cheap stocks for beginners with forward P/E ratios under 15. We chose the top 13 with the highest number of hedge fund holders as of Q4 2024, sourcing the hedge fund sentiment data from Insider Monkey’s database. The list is ordered in ascending order of hedge fund sentiment.
Note: The data was recorded on May 14.
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 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
An e-commerce platform displaying a wide range of products to customers online.
Alibaba Group Holding Limited (NYSE:BABA)
Forward P/E: 14.62
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) manages and provides technology infrastructure and marketing platforms. It operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others segments. The company ranks fourth on our list of the best cheap stocks to buy now for beginners.
Alibaba Group Holding Limited (NYSE:BABA) will announce its fiscal Q4 2025 results on May 15, and analysts expect EPS of $1.78 on revenues of $33.32 billion. Ahead of the earnings release, Morgan Stanley analyst Gary Yu gave the company a Buy rating, setting a price target of $180 per share that implies a notable 36.7% upside potential from current levels.
The analyst called Alibaba Group Holding Limited (NYSE:BABA) a “Catalyst-Driven Idea,” telling investors that he thinks the company would benefit from “robust” China AI inference demand as both an “adopter” with its applications and an “AI enabler” with its cloud offerings.
The analyst expects AliCloud to be poised for growth due to the surging demand for AI inference, while other hyperscalers focus on internal demand. This signals AliCloud out as “a unique CSP with sizable allocation for external customers.” The analyst also expects Alibaba Group Holding Limited’s (NYSE:BABA) next share price catalyst to be the upcoming cloud revenue growth.
Overall, BABA ranks 4th on our list of the best cheap stocks to invest in for beginners. While we acknowledge the potential for BABA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than BABA but trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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