We recently published a list of 7 Cheap Small-Cap Stocks To Buy Now. In this article, we are going to take a look at where Scorpio Tankers Inc. (NYSE:STNG) stands against the other cheap small-cap stocks to buy now.
At the September Fed meeting, the Federal Open Market Committee (FOMC) decided to lower its policy interest rate by 50 basis points to support the economy. Chairman Jerome Powell stated that this move is aimed at maintaining labor market strength while reducing inflation.
He also noted that future rate adjustments will depend on incoming economic data. The Fed’s economic projections indicate a federal funds rate of 4.4% by year-end, with further rate cuts expected as inflation falls and unemployment edges up slightly.
The market seems quite happy with the current cut cycle and expects more to come. According to CME’s Fed-watch tool, the market is expecting another 25 to 50 bps cut at the November meeting. As of September 27, 53.3% interest rate traders expect a 50 bps cut while the rest are anticipating a 25 bps cut.
While the market had gotten used to the high rates and was still thriving, the lower fed funds rates have given a much-needed boost as the broader market reached new highs.
Fed Easing Cycle Boosts Optimism for Small Cap Stocks
Greg Tuorto, a portfolio manager at Goldman Sachs Asset Management, recently joined Catalysts on Yahoo Finance and discussed the outlook for small-cap stocks in light of recent Federal Reserve rate cuts and broader economic conditions.
He highlighted several supportive factors for small caps, including a stable U.S. economy and opportunities in sectors like technology, healthcare, and consumer industries. Despite recent underperformance, he believes small caps are positioned for a rebound, driven by strong earnings growth rather than multiple expansions.
Tuorto also emphasized the potential for small caps to outperform large caps in 2025, given that their earnings outlook appears more favorable. He sees the ongoing Fed easing cycle as a tailwind and suggests that businesses have adapted well to the higher rate environment and could benefit significantly from any further rate cuts. While Tuorto isn’t focused on the exact number of cuts, he sees the broader trajectory as a positive catalyst.
The portfolio manager is especially bullish on software stocks and noted that lower rates make this sector more attractive, and he expects more IPO activity in the space in the coming months. For the future, Greg Tuorto also believes that there will be another cut probably in the near future.7 Cheap Small-Cap Stocks To Buy
Our Methodology
For this article, we used the Finviz stock screener to identify nearly 150 small-cap stocks with positive forward price-to-earnings ratios. Our definition for small-cap stocks was stocks between $1 billion to $10 billion. Next, we narrowed our list to stocks whose earnings are expected to grow this year according to analysts, compared to the prior year, and have forward PE ratios below 15. Finally, we chose 7 stocks that were most widely held by institutional investors. The 7 cheap small-cap stocks to buy are listed in ascending order of their hedge fund sentiment, as of Q2 2024.
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).
Is Scorpio Tankers Inc. (NYSE:STNG) A Cheap Small-Cap Stock To Buy Now?
Scorpio Tankers Inc. (NYSE:STNG)
PE Ratio (FWD): 5.39
Number of Hedge Fund Holders: 42
Scorpio Tankers Inc. (NYSE:STNG) is a global leader in the responsible transportation of refined petroleum products, with a fleet of 112 vessels, including LR2, MR, and Handymax tankers. The company utilizes its diverse fleet to transport a range of products, including gasoline, diesel, jet fuel, kerosene, and naphtha from refineries to consumers.
It serves a wide range of clients, including oil corporations and traders, and optimizes its operations by employing both owned and time-chartered vessels.
On September 3, Scorpio Tankers (NYSE:STNG) announced the sale of two MR product tankers, STI San Antonio and STI Texas City, both built in 2014 and equipped with exhaust gas cleaning systems or scrubbers, for $42.5 million each. The tankers are expected to be sold by the end of the year.
Additionally, the company has made a deal to rent out another ship for three years at a daily rate of $29,550. The rental agreement will start in late 2024 and is with a well-known oil company. Overall, these moves show that it is actively managing its fleet to improve finances and generate reliable revenue.
Scorpio Tankers (NYSE:STNG) is a shareholder-friendly company and is committed to improving its shareholder value. It has also recently shared an update about its stock buyback plan. Since July 30, 2024, the company has bought back 2,415,321 of its own shares from the market, paying an average price of $72.45 for each share. From April 1, 2024, the total number of shares repurchased is 3,813,287, with an average price of $74.54 each.
As of September 6, the company has 50,760,778 shares left in circulation. Additionally, the company still has $225 million available to spend from the total $400 million that was set aside for this stock buyback program. Moreover, it is also a dividend-paying company with a yield of 2.23%.
Scorpio Tankers (NYSE:STNG) is ranked at 3 on our list of cheap small-cap stocks to buy now. As of September 27, the company is trading at a forward PE ratio of 5.39, at a significant discount of nearly 53% from its sector median.
Overall, STNG ranks 3rd on our list of cheap small-cap stocks to buy now. While we acknowledge the potential of STNG 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 STNG 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.