We recently compiled a list of the 8 Best Cheap Growth Stocks To Invest In Now. In this article, we are going to take a look at where Dell Technologies Inc. (NYSE:DELL) stands against the other cheap growth stocks.
What Should Your Portfolio Look Like in the Current Bull Market
The current market data shows that the economy of the United States is normalizing, especially with an active Federal Reserve, global stimulus from China, and higher consumption rates. In one of our recent articles, 7 Best Low Cost Stocks To Buy Under $50, we talked about the areas that could potentially benefit the most in the current bull market. We also discussed points of view from different analysts. Here is a piece from the article:
“The Fed rate cut and the Chinese stimulus are expected to affect the market positively. Adam Parker, Trivariate Research founder and CEO; Lauren Goodwin, New York Life Investments chief market strategist; and Kristina Hooper, Invesco chief global market strategist joined CNBC recently to talk about the best opportunities in the current bull market.
Adam Parker expressed that the market is outpacing the Federal Reserve’s action. He highlighted a sense of optimism surrounding AI deployment over the next few years, but he also raised concerns about market valuations exceeding economic realities. Parker likes the healthcare sector as it is driven by AI and believes that this will put the industry in a leading market position. He also believes that the Chinese Stimulus is a positive sign for the energy and industrial sectors.
On the other hand, Lauren Goodwin talked about how the rate cuts are supposed to affect the market. She thinks growth is the key indicator while analyzing the market. When the Fed is cutting rates, profit, and earnings margins typically stay where they are until growth starts to slow down. Moreover, she also pointed out that it is difficult to see the real economic catalyst that gives growth an upstart, without inflation. She also thinks that the upcoming period is going to be volatile between growth kicking up and then slowing down. Goodwin mentioned that she is going to be the buyer of the rally until unemployment starts rising and growth becomes a problem.”
Gabriela Santos, JPMorgan Asset Management’s chief market strategist, joined CNBC recently to talk about how investors’ portfolios might not be adequately adjusted to align with the current economic normalization, particularly in fixed-income allocations.
Santos emphasized that a proactive Federal Reserve, ongoing U.S. economic expansion, and stimulus from China create a favorable environment for risk assets to perform well. Santos highlighted that portfolios typically hold only about 36% in core fixed income, while she believes a more appropriate range is 65% to 75%. She suggested reallocating cash into credit rather than equities, focusing on investment-grade bonds and securitized debt.
Moreover, she thinks that within equity as well portfolios are overly emphasized on growth and technology stocks, whereas there lies significant potential outside of these industries. Gabriela Santos also pointed out that consumer spending remains robust, tracking around 3% to 3.5%. This resilience supports the notion of a “soft landing” for the economy. She also noted that it is a good sign that the market is less concerned about inflation, and instead, the focus is now more on consumer spending data, which has been tracking around 3% to 3.5% during the current quarter.
Our Methodology
To compile the list of 8 best cheap growth stocks to invest in now, we used our previous articles and Finviz screener. Using these two sources we shortlisted 20 growth stocks from industries including Technology, Biotech, Healthcare, and Renewable energies among others. We made sure that we only selected stocks that were trading below the forward price-to-earnings ratio of 23.98 (the market’s forward P/E as per the Wall Street Journal) with earnings expected to grow during the year. Next, we ranked these stocks based on the number of hedge fund holders in Q2 2024. The list is ranked in ascending order of the number of hedge fund holders.
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).
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Dell Technologies Inc. (NYSE:DELL)
Forward P/E Ratio: 15.29
Earnings Growth This Year: 10.20%
Number of Hedge Fund Holders: 88
Dell Technologies Inc. (NYSE:DELL) is a leading technology company that develops and sells computer technologies and software. Its technologies are being used in high-growth industries such as artificial intelligence, data analytics, and cloud computing. This transformation has put the company on the list of emerging AI companies.
The company has been doing great in terms of generating revenue. During the second quarter of 2024, Dell Technologies Inc. (NYSE:DELL) was able to improve its revenue by 9% mainly due to the increase in demand for its AI servers.
In addition, the Infrastructure Solutions Group (ISG), which deals with the AI servers was the top story for the company. The segment revenue of ISG improved 38% year-over-year to reach a record high of $11.6 billion. The revenue growth was all because of an 80% increase in server revenue indicating how big the server segment is for the company.
Dell Technologies Inc. (NYSE:DELL) is also cheap at current levels. It is trading at only 15 times its forward earnings making it one of the best cheap growth stocks to invest in now.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
Overall DELL ranks 2nd on our list of the cheap growth stocks to invest in. While we acknowledge the potential of DELL 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 a promising AI stock 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.