We recently compiled a list of the 7 dirt cheap stocks 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 the Dirt cheap stocks to invest in now.
The stock market is at a turning point after one of the longest bull runs in recent history. With major market indices close to all-time highs, valuations are getting out of hand. Likewise, the earnings season has seen increased volatility, though, with some significant selling of semiconductor and artificial intelligence stocks that used to draw investors.
Soaring geopolitical tensions in the Middle East are complicating the situation and triggering risk aversions in the market. Investors are becoming increasingly cautious and resorting to safe-haven assets due to concerns about a full-blown war in the Middle East that could seriously impact the global economy.
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Growing geopolitical tensions have been a factor in the stock market’s erratic start to October. According to Barbara Doran, founder of BD8 Capital Partners, things getting out of hand in the Middle East could cause stocks to decline.
Surveys of public opinion already indicate that jitters are rising in the market. A gauge of consumer confidence saw its most significant one-month drop in over three years last week. Furthermore, the National Federation of Independent Business reports that a recent survey of confidence among small-business owners dropped more than anticipated in early September, maintaining the gauge below its 50-year average for 32 straight months.
“We’re in a Goldilocks moment for the U.S. economy,” said Rich Nuzum, chief investment strategist at Mercer. “But Goldilocks moments are rare, and they tend not to last long. So when does something go bump in the night?”
Bargain Hunting in an Overvalued Market
While the market is priced at a premium due to the artificial intelligence frenzy, it does not mean there are no bargains. There are dozens of dirt cheap stocks to invest in now that are trading at discounted valuations depicted by low price-to-earnings multiple and solid underlying fundamentals.
Interest rate reduction was expected to benefit small-cap stocks. That isn’t happening. The Federal Reserve’s dramatic interest rate cut two weeks ago has caused the small-cap-focused Russell 2000 index to fall by 0.5%, lagging behind the S&P 500’s 1.3% gain.
According to Bank of America, investors should be aware of a few important US stocks while navigating the current market climate. In a note to clients, strategist Nigel Tupper stated that a combination of improving global earnings cycle, easier monetary policy in the US as inflation returns to the target level, and China’s recent multifaceted stimulus appears supportive of equity markets and cyclicals.
It is important to note that not all investments will yield significant returns, considering valuations have gotten out of hand with the S&P 500 at an all-time high. Nevertheless, long-term investors can make substantial gains by selecting solid growth stocks trading at discounted valuations. An undervalued company backed by excellent financial fundamentals, such as robust revenue and earnings growth, will always elicit strong interest from professional investors. Therefore, it is likely to enjoy significant share price appreciations down the line.
The Organization for Economic Cooperation and Development predicts that declining interest rates and rising real wages will contribute to a modest increase in global economic growth this year and next year, which is one of the reasons to be bullish about dirt-cheap stocks.
Our Methodology
To compile the list of dirt cheap stocks to invest in now, we sifted through screeners and reports, scanning for high-quality stocks trading at discounted valuations. From an initial list of 20 stocks, we settled on the top seven stocks that were trading under a forward P/E of 10, as of October 7, and were the most widely held by hedge funds. The stocks are ranked in ascending order based on the number of hedge funds that hold them, as of Q2 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).
General Motors Company (NYSE:GM)
Forward P/E Ratio: 4.67
Number of Hedge Fund holders as of Q2: 72
General Motors Company (NYSE:GM) is a dirt cheap stock to invest in now to diversify an investment portfolio in the auto industry. While the company designs, builds and sells trucks, crossovers, cars, and automobile parts, it also provides software-enabled services and subscriptions worldwide.
Even though GM’s internal combustion engine (ICE) pickups and SUVs remain the most profitable models, the company is pursuing growth opportunities around electric vehicles. The progress has been remarkable thus far.
General Motors Company (NYSE:GM) delivered 22,000 electric cars overall in the second quarter, up 40% from the previous year and giving it a 2.2 percentage point larger market share than it had a year earlier. Later this year, several new models will be introduced in dealerships, which might give the company a sustained boost.
The automaker is trading at a discount with a price-to-earnings multiple of 4.59, considering it is profitable, and management has been buying stock as one of the ways of returning value to shareholders.
Due to those share repurchases, the number of shares outstanding has decreased by 18% annually, providing shareholders with a larger stake in the business. A new $6 billion share repurchase authorization was also recently announced by General Motors Company (NYSE:GM).
In the second quarter, the company delivered earnings of $2.55 a share, up from $1.83 a year ago, as adjusted earnings increased 37.2% to $4.44 billion. Revenue came at a record high of $44.75 billion following a 7.2 % increase.
The Detroit automaker raised its earlier guidance of $12.5 billion to $14.5 billion, or $9 and $10, to between $13 billion and $15 billion, or $9.50 and $10.50, for full-year signaling strong growth metrics While trading at a discount General Motors (NYSE:GM) still yields 1.07% in dividends having paid $2.93 billion in dividends in the second quarter.
Based on our Q2 database of over 900 hedge funds, 72 held stakes in General Motors Company (NYSE:GM), totaling $4.07 billion. As of June 30, Harris Associates was the largest shareholder, with 34.36 million shares valued at nearly $1.6 billion.
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 3rd on our list of 7 dirt cheap stocks to invest in now. While we acknowledge the potential of GM 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 GM, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.