We recently compiled a list of the 7 Cheap New Stocks To Invest In Now. In this article, we are going to take a look at where Atmus Filtration Technologies Inc. (NYSE:ATMU) stands against the other cheap new stocks.
Capital Markets Buzz Amid Fed Rate Cuts
In light of the recent Fed decision, there is growing optimism regarding increased capital markets activity. Analysts have expressed growing confidence in a soft landing for the economy despite ongoing market volatility. This perspective suggests that supportive monetary policies could create favorable conditions to enhance valuations and drive investment, making it an opportune time for firms to pursue IPOs and M&A. As borrowing costs decrease, investor interest in tech startups and growth-oriented companies is likely to rise. This trend is particularly relevant given the recent performance of the S&P 500, which has rebounded from earlier declines, indicating resilience in the market.
As we approach the end of the year, the combination of lower interest rates and positive economic data sets the stage for a potential surge in IPOs and increased market engagement. Investors may look to diversify their portfolios by exploring new opportunities in, let’s say, emerging tech firms, which could lead to heightened activity in capital markets as these companies capitalize on the favorable economic backdrop. As the current landscape presents an encouraging scenario for both established and young companies looking to enter the public market or expand through strategic partnerships, we covered Stephanie Link’s sentiments on this scenario in our article about the 10 Best Young Stocks To Buy Now. Link, Chief Investment Strategist and Portfolio Manager at Hightower, highlighted a contrasting perspective amidst market volatility and uncertainty. Here’s an excerpt from the article:
“…She believes that the Fed is skillfully guiding the economy towards a soft landing, even amidst the expected market fluctuations before the elections.
Just 3 weeks ago, the S&P 500 had dropped by 4%. Still, it rebounded by 4% the following week. It rose another 1% last week, reaching new highs, and expressed optimism about buying opportunities during any market weakness, citing better-than-expected economic growth driven by recent data, including improved retail sales and manufacturing figures, as well as a decline in weekly jobless claims to a 4-month low. This positive economic backdrop supports an estimated growth rate of 2.9%, which is expected to benefit corporate earnings.
…Link noted a broadening market trend over the past couple of months, indicating that while tech has taken the lead, other sectors such as financials, industrials, materials, and discretionary stocks are also showing strength. She advised investors to remain selective in their choices amidst ongoing volatility…”
On October 3, Tiffany McGhee, CEO and CIO at Pivotal Advisors highlighted the convergence of macro events that may spark market volatility, emphasizing the concept of “convergence” as her word of the day. She noted that this week is marked by a convergence of significant events that could lead to increased volatility in the short term. With macroeconomic factors at play, including a potential port strike and major job reports scheduled for release, Tiffany highlighted that these elements are creating what she described as a “perfect storm.”
Tiffany pointed out that the ongoing conflict in the Middle East and the recent vice presidential debate are critical factors influencing market reactions. She observed that bond prices experienced a sell-off earlier in the week but stabilized as investors sought safety amid rising geopolitical tensions. As the election approaches, she anticipates further short-term volatility due to these developments.
In terms of strategy, Tiffany encouraged investors to reassess their portfolios, particularly those with a heavy concentration in equities. With the S&P 500 up 20% year-to-date and sectors like technology and consumer discretionary having performed well, she suggested that now is an opportune time to take some profits off the table and consider reallocating those funds into different areas of the market.
Tiffany also discussed her investment pick, the mutual fund with ticker AISGS, which is currently outperforming small-cap companies. She expressed a preference for focusing on size and style rather than specific sectors at this moment. By investing in small and mid-cap stocks through active management, such as with the Aerial Fund (ARGFX), investors can capitalize on opportunities created by lower analyst coverage in these segments. This lack of information allows skilled managers to identify undervalued stocks and consistently outperform indices.
Tiffany’s insights underscore the importance of strategic asset allocation and proactive portfolio management during periods of heightened market volatility. By recognizing the convergence of macroeconomic events and adjusting investment strategies accordingly, investors can better navigate potential market fluctuations while positioning themselves for future opportunities.
Methodology
We used the Finviz stock screener to compile a list of 20 new stocks that went public recently in the past 2 years and have a forward P/E ratio under 20. We then selected the 7 cheap new stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, 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).
A technician in a protective suit testing a variety of different lubricants and filters.
Atmus Filtration Technologies Inc. (NYSE:ATMU)
Forward Price-to-Earnings Ratio: 17.97
Market Cap as of October 1: $3.13 billion
Number of Hedge Fund Holders: 44
Atmus Filtration Technologies Inc. (NYSE:ATMU) designs, manufactures and sells filtration products under the Fleetguard brand name in North America, Europe, South America, Asia, Australia, Africa, and internationally. The company offers fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters, coolants, and fuel additives, as well as other chemicals; fuel water separators, and other filtration systems.
To enhance product availability, the company is expanding its distribution network. Over 80% of its products are now handled through Atmus warehouses, and management anticipates that its entire product line will be distributed through this network by year’s end. However, Freight demand remains sluggish, but strong performance in other segments is mitigating market weakness. While US demand is decelerating, India continues to show strength, and China remains slow.
Despite challenges, Q2 2024 revenue increased by 4.59% year-over-year, primarily driven by a 3% increase in sales volume and pricing adjustments of ~2%. Lower commodity costs and strong operational execution contributed to improved sales, gross margin, and adjusted EBITDA.
On August 7, Stephen Macadam, director at the company, bought 8,250 shares of Atmus Filtration Technologies Inc. (NYSE:ATMU), now owning a total of 32,083 shares. Later, on August 23, director Gretchen Haggerty also bought 5,849 shares, now owning a total of 19,881,803 shares.
Atmus Filtration Technologies Inc. (NYSE:ATMU) is capitalizing on partnerships with industry leaders, securing new vehicle platforms that meet the 2027 US EPA emission standards. The company’s leadership in fuel filtration and crankcase ventilation, coupled with its focus on aftermarket expansion, sets it up for ongoing success.
Overall ATMU ranks 3rd on our list of the cheap new stocks to invest in. While we acknowledge the potential of ATMU as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ATMU 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.