We recently compiled a list of 10 Best Stocks Under $15 To Buy Now. In this article, we will look at where Warner Bros. Discovery, Inc. (NASDAQ:WBD) 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).
Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 48
Share Price as of the close of September 27: $8.38
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is an American entertainment and mass media conglomerate headquartered in New York City. The company was formed in 2022 through a merger of WarnerMedia and Discovery, Inc., and is considered one of the world’s top distributors of content across film, television, gaming, and streaming.
Two years since its launch, the company has made steady progress during its transition phase but also faces several pressing challenges that are impeding its financial progress. During Q2 2024, the company reported a revenue of $9.7 billion, which was down 5% compared to the same period last year. Net loss for the quarter amounted to $9.9 billion, of which $9.1 billion was the result of a write-down in the value of its cable network.
According to Warner Bros. Discovery, Inc. (NASDAQ:WBD), the difference between market capitalization and book value, along with softness in the advertising market, and uncertainty around sports rights renewals, triggered the goodwill impairment. Distribution and network ad revenues also decreased during the quarter, by 8% and 9%, respectively, and were driven by a 9% decline in pay-TV subscribers as domestic affiliate rates increased.
However, there were also numerous positives during the quarter. Warner Bros. Discovery, Inc. (NASDAQ:WBD) noted substantial growth in its direct-to-consumer (D2C) business, fueled by the Olympic Games’ viewership in Europe. The segment added 3.6 million new subscribers in Q2, following the addition of 2 million subscribers during the first quarter of FY24. The company also witnessed double-digit growth in demand for sports coverage, most notably the NBA, NHL, March Madness, Major League Baseball, and the French Open.
TV series Hard Knocks and House of the Dragon also did incredibly well during the quarter. The company expects the momentum to continue with the premiere of the highly anticipated HBO series, The Penguin, in September. These factors coupled with encouraging trends in sports coverage have put Warner Bros. Discovery, Inc. (NASDAQ:WBD) on track to meet its target of generating $1 billion in EBITDA in 2025.
As a result, Street analysts have maintained a consensus Buy rating on the stock and anticipate a 34% upside in its share price. According to Insider Monkey’s database, 48 hedge funds held a stake in the company, as of Q2 2024, making Warner Bros. Discovery, Inc. (NASDAQ:WBD) one of the best stocks under $15 to buy now.
Overall WBD ranks 7th on our list of the best stocks under $15. While we acknowledge the potential of WBD 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 WBD 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.