We recently compiled a list of the 8 Best Stocks Under $50 To Invest In Now. In this article, we are going to take a look at where General Motors Company (NYSE:GM) stands against the other stocks under $50.
As we navigate through 2024, the economic landscape presents a mix of challenges and opportunities for investors. Recent economic indicators suggest a cautious yet resilient consumer base, even as the Federal Reserve has issued its first interest rate cut since 2020. The current financial environment reflects a deliberate balancing act by the Fed, aimed at achieving a “soft landing” for the economy—taming inflation without triggering a recession. This approach has significant implications for the stock market, particularly for stocks priced under $50, which often represent a combination of risk and reward for discerning investors.
According to Gregory Daco, Chief Economist at EY-Parthenon, the U.S. economy is showing signs of gradual downshift. Both consumers and businesses are displaying a more prudent approach to spending, influenced by a tightening labor market and rising costs. The latest data revealed a moderate job growth of 142,000 in August, but this was overshadowed by significant downward revisions in payroll figures, indicating a potential softening of employment conditions. Despite these headwinds, Daco remains optimistic, projecting that real GDP growth will average 2.7% in 2024, easing to 1.8% in 2025.
In terms of consumer behavior, the retail sector has shown resilience, with spending continuing, albeit at a more cautious pace. Daco notes that while consumers are not significantly retracting their expenditures, slower growth in disposable income could lead to more restrained spending patterns moving into 2025. He forecasts consumer spending growth to decelerate, averaging 2.5% in the fourth quarter of 2024 before dipping to 2% in 2025.
Inflation is another key factor influencing the economic outlook. The August Consumer Price Index (CPI) report indicated a noticeable acceleration in disinflation, with the headline CPI inflation decreasing to 2.5% year-over-year—the lowest rate since February 2021. This trend, however, must be interpreted cautiously, as core CPI inflation remained stable at 3.2%, signaling persistent inflationary pressures in certain sectors, notably housing. Nevertheless, Daco anticipates a continuing decline in both headline and core inflation, projecting rates of 2.2% and 2.9%, respectively, by the fourth quarter of 2024.
The Fed’s recent decision to cut interest rates by 50 basis points reflects its commitment to recalibrating monetary policy without resorting to drastic measures that could harm growth. Powell’s remarks underscore a careful approach to policy adjustments, with expectations of additional rate cuts in November and December. Overall, this easing cycle is expected to facilitate a more sustainable economic trajectory heading into 2025.
As the broader economic picture unfolds, the S&P 500 index has performed remarkably well, currently up approximately 20% year-to-date and approaching record highs. This surge is indicative of market sentiment that is cautiously optimistic about the potential for a soft landing. However, analysts have expressed concerns that current stock valuations might be overestimating economic stability, particularly in light of recent weaker-than-expected jobs reports.
Looking ahead, investors are particularly focused on upcoming labor market data, which will play a crucial role in shaping perceptions of the economy’s trajectory. The forthcoming employment report is critical, as it could either bolster confidence in the market’s current valuation or prompt a reevaluation of growth expectations. With a significant portion of the market priced for a “Goldilocks scenario”—where growth continues without significant inflation—the stakes are high for upcoming economic indicators.
Investors looking for value must consider a range of factors, including company fundamentals, market positioning, and broader economic trends. The careful selection of stocks in this category could not only mitigate risks associated with volatility but also capitalize on potential growth as the economic landscape stabilizes.
In summary, as we delve into the best stocks under $50 to invest in now, it is essential to keep an eye on the evolving economic indicators and consumer behavior. These elements will play a crucial role in determining which stocks can deliver value in an environment characterized by cautious spending, shifting monetary policy, and varying inflation rates.
Our Methodology
For this article, we identified 20 stocks trading on the NYSE and NASDAQ for under $50 per share as of September 27. Next, we examined Insider Monkey’s data on 912 hedge funds as of Q2 2024. We narrowed down our list to 8 stocks most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q2 of 2024.
At Insider Monkey we are obsessed with 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).
A group of technicians in a garage, inspecting car parts and ensuring safety compliance.
General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 72
Share Price as of September 27: $46.48
General Motors Company (NYSE:GM) is a leading American automotive manufacturer known for its robust lineup of vehicles under the Chevrolet, Buick, GMC, and Cadillac brands. The company reported strong financial results for the second quarter of 2024, with earnings per share (EPS) of $3.06, surpassing analyst expectations of $2.7. This performance was driven by increased demand for its vehicles, especially in the electric vehicle (EV) segment, and strategic cost management initiatives.
General Motors Company (NYSE:GM) has shown impressive growth in its EV portfolio, with U.S. EV deliveries increasing by 40% year-over-year, well above the industry growth rate of 11%. The launch of new models, such as the Chevrolet Equinox EV and the Cadillac LYRIQ, has contributed significantly to this growth. The company’s EV strategy aims to capture more market share by introducing models that cater to a broad spectrum of customers, including affordable EVs like the Chevrolet Bolt EV. Furthermore, General Motors Company (NYSE:GM) efforts to secure a partnership with Tesla for access to its charging network and the continued rollout of the IONNA fast charging venture are likely to strengthen its position in the EV market.
On the financial front, General Motors Company (NYSE:GM) reported revenues of $48 billion for Q2 2024, a 7% increase from the previous year, driven by stable pricing and higher wholesale volumes in North America. The company’s EBIT-adjusted margin stood at 9.3%, showcasing strong operational efficiency. Additionally, General Motors Company (NYSE:GM) adjusted automotive free cash flow was $5.3 billion, reflecting robust core performance and disciplined capital allocation. The company has also been actively repurchasing shares, retiring 22 million shares in the second quarter and projecting a total retirement of around 250 million shares under its ongoing stock buyback programs.
General Motors Company (NYSE:GM) strong financial position and its commitment to shareholder returns are evident, with a significant reduction in its outstanding share count. The number of hedge funds holding GM’s stock also increased to 78 in Q2 2024, compared to 72 in the previous quarter, indicating growing investor confidence. With continued focus on EV growth, strategic cost-cutting measures, and share buybacks, GM remains an attractive investment under $50 for those seeking exposure to the automotive sector’s transformation.
Diamond Hill Large Cap Concentrated Strategy stated the following regarding General Motors Company (NYSE:GM) in its Q2 2024 investor letter:
“Other top Q2 contributors included Extra Space Storage and General Motors Company (NYSE:GM). Shares of automobile manufacturer General Motors (GM) rose as its internal combustion engine business has also received a boost from the recent slowdown in electric vehicle adoption among consumers. GM also announced additional share repurchases in Q2, reinforcing its commitment to returning cash to shareholders.”
Overall GM ranks 4th on our list of the best stocks to buy under $50. While we acknowledge the potential of GM 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 GM 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 at Insider Monkey.