We recently published a list of 10 Worst Affordable Stocks To Buy Right Now. In this article, we are going to take a look at where Aptiv PLC (NYSE:APTV) stands against other worst affordable stocks to buy right now.
How is the Market Performing Entering the Rate Cuts
In one of our recent articles regarding the 10 Hot Penny Stocks On the Move, we discussed how the overall macroeconomic conditions have played a crucial role in building an environment leading to the upcoming Fed rate cut. Here’s an excerpt from the piece:
“The economy of the United States has stabilized, the risks of a recession have been delayed, and inflation continues to cool down. On August 30, Reuters reported that the Federal Reserve received a fresh confirmation regarding inflation continuing to ease. The personal consumption expenditure price index rose 2.5% year-over-year in July and inflation has stayed within the 2% goal set by the Fed. Fed Chairman has indicated that the “time has come to cut rates”.
Moreover, in another report by Reuters on the same day there were reports of the US dollar gaining as another key inflation measure fell in line with the forecasts. The Fed is expected to cut rates by 25 basis points this month. Moving forward markets have forecasted 100 bps of cuts by the end of 2024.
The stock market is already riding the tide of expected interest rate cuts. On August 20, CNBC reported that the stock market was climbing yet again, putting the S&P 500 and NASDAQ on track for their eighth positive session in a row, marking their longest winning streak this year.”
While there has been a debate about a 25-point or a 50-point cut, the market has fluctuated before the announcement. On September 17, CNBC reported that the S&P 500 was lower after reaching a record high on Tuesday. The market reached a new record high of 5,670.81 and was down 0.1% at 5,627. The Nasdaq moved 0.1% higher whereas the Dow Jones fell by 40 points.
The traders have overcome the summer headwinds and moved past the concerns over the health of the US economy on the back of expectations of the Fed cutting interest rates. On the other hand, Wall Street has been on hold. Analysts are hoping the rate cuts will help boost the earnings growth for companies.
Tom Lee, Fundstrat Global Advisors co-founder, joined CNBC to talk about how the market is expected to perform moving into the fed rate cuts and after the announcement. Lee believes that one of the factors leading to confusion among investors is the election period. The market is expected to stay in a fluctuating environment for the next eight weeks until the elections are over. However, fed rate cuts are coming at a crucial time to give some positive for the market.
There are two main reasons leading up to the rate cuts, one being the inflation easing and the other being the slower labor market that needs help from the Federal Reserve. Moreover, Lee thinks that regardless of the Fed deciding on a 25-point or 50-point cut, the result is going to be positive for the market. He thinks that investors should be confident for the next 12 months as whenever the Fed cuts rates, the win ratio for the markets has been almost 100%. Moreover, the markets rally post-elections regardless of who takes the seat.
Our Methodology
For compiling the list of 10 worst affordable stocks to buy right now, we used the Finviz stock screener. We set our filters to get affordable stocks with high short interest i.e. stocks trading below the market average Forward P/E which is 23.79, expecting positive earnings growth this year, and have high short interest. From the list of affordable stocks, we selected 20 stocks that were most widely held by institutional investors. Once we had the aggregated list, we ranked them based on their Short % of Shares Outstanding, sourced from Yahoo Finance. Please note that the list is ranked in ascending order of the short interest.
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).
A closeup of a hand holding a car engine component, highlighting the precision of the company’s engineering.
Aptiv PLC (NYSE:APTV)
Forward P/E Ratio: 11.01
Earnings Growth This Year: 28.40%
Number of Hedge Fund Holders: 38
Short % of Shares Outstanding: 15.22%
Aptiv PLC (NYSE:APTV) is a technology company that provides key technologies for the electric vehicle industry. The company makes vehicle components that are essential for electrical systems such as wiring, connectors, power distribution systems, etc. Moreover, it is also a leading producer of safety technologies that help prevent accidents and enable autonomous driving cars. In addition the company also servers software solutions that enable automakers of next-gen cars to connect and manage their vehicles during after-sale service.
The auto tech supplier has positioned itself to profit from both the internal combustion engine and electric vehicle industries. The growth prospects and market penetration of Aptiv PLC (NYSE:APTV) can be estimated by its substantial year-over-year increase in new business bookings. Over the past 3 years, the company has continued to improve its bookings, in 2022 total bookings stood at $32 billion, which increased to $34 billion in 2023, and management now expects bookings for the current year to be above $35 billion.
The company ranks among the worst affordable stocks to buy right now. It also faced a 3% decline in year-over-year revenue in FQ2 2024. However, there is more to the story. Despite a decrease in revenue, Aptiv PLC (NYSE:APTV) reported substantial net income, which totaled $1.16 billion, with net income margins at 11.6%. Management was able to pull off profitability on the back of strong operational income and lower supply chain costs.
While there are concerns regarding the EV market, Aptiv PLC (NYSE:APTV) remains a viable investment option due to its growing bookings indicating a robust market share and operational profitability. It was held by 38 hedge funds in Q2 2024, with total stakes worth $1.03 billion. Impax Asset Management is the top shareholder with a position worth more than $437 million.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Aptiv PLC (NYSE:APTV) in its first quarter 2024 investor letter:
“At the beginning of the year, we sold our shares in Aptiv PLC (NYSE:APTV), which supplies automotive electronic technology for safety and entertainment systems. The company had expected significant growth from its EV components, though that segment saw much slower growth recently. With no line of sight for a rebound, we exited our position.”
Overall APTV ranks 4th on our list of the worst affordable stocks to buy right now. While we acknowledge the potential of APTV 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 timeframe. If you are looking for an AI stock that is more promising than APTV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.