We recently compiled a list of the 10 Stocks with Biggest Upside Potential According to Hedge Funds. In this article, we are going to take a look at where Weatherford International plc (NASDAQ:WFRD) stands against the other stocks with biggest upside potential.
The US equities saw a strong move after the September jobs report exceeded the economists’ estimates. As per the report, the US economy added 254,000 jobs last month, exceeding the economists’ estimates of 150,000 jobs. As a result of strong job gains, the unemployment rate was pushed lower to 4.1% from 4.2%. The strong jobs report puts rest to the rumors that the US Fed might aggressively lower the rates in a bid to keep the labor market afloat. The apex bank lowered its key benchmark rate last month for the first time in over 4 years by 50 basis points. This led to the current range of 4.75% – 5% from the 23-year high of 5.25% – 5.5%.
Several renowned economists believe that the US Fed will decrease the pace of rate cuts. They expect a 25-basis points reduction instead of another half point at its next meeting on 6 -7 November. The September jobs report hints at the underlying health of the labor market, which is healthier than initially expected. This means that the private job creation remains robust.
U.S. Equities September 2024- Commentary
As per S&P Global, the S&P 500 saw an increase of ~2.02% in September, resulting in a YTD return of ~20.81%. The September month was dominated by the news about inflation remaining under control, and the US Fed delivering a 0.50% rate decrease, with the expectations of two 0.25% decreases expected later in the year. Additionally, Q2 2024 earnings were able to set a record, with more earnings records expected for Q3 2024 and Q4 2024. Notably, even China also contributed at the end of the month, ensuring low-cost U.S. supplies. China needs to continue to do so to achieve its goal of supporting real estate and encouraging consumer spending.
Market experts believe that while the September month saw decent momentum in the US equities, October kicked off on a strong note. The release of the strong jobs report was enough to erase the losses on the nervousness over Middle East tensions and port strikes. The Chief Investment Officer at Independent Advisor Alliance believes that the current economic environment is an excellent time to own equities. This optimism stems from the fact that the economy has been expanding, the job market remains solid (if not strong) and the US Fed has not only stopped raising rates but is focused on cutting them.
After Strong Jobs Report, What Lies Ahead?
Market experts opine that the US Federal Reserve decided to go for a soft landing by increasing the interest rates to slow inflation without negatively impacting the labor market to the point of a recession. Charles Schwab believes that investors should not expect a uniform economic recovery. The strength in services hiring continues to offset the weakness in manufacturing. The company highlighted that healthcare and government are the areas that have had strong hiring trends over the past few months. Manufacturing has been witnessing a recession, as hinted by the continued contraction of the ISM manufacturing index. The company believes that rate-sensitive areas, like utilities, financials, and real estate investment trusts (REITs), are expected to deliver strong performance moving forward.
Morgan Stanley Wealth Management believes that the US Fed doesn’t have to cut rates aggressively in the upcoming meetings. The investment firm expects that investors should look for value across the whole market, and emphasize quality companies as the market continues to broaden. While the economy has not strengthened for the small-caps, the firm expects that mid-caps provide a good investment opportunity as a soft landing becomes more visible.
Our methodology
To list 10 Stocks with Biggest Upside Potential According to Hedge Funds, we did extensive research and sifted through online rankings. After compiling a list of 25-30 stocks, we narrowed the list to the ones having the biggest upside potential, as of October 4. Finally, the selected stocks have been ranked in the ascending order of their hedge fund sentiment, 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 team of engineers in hardhats drilling for oil, clouds of smoke in the air.
Weatherford International plc (NASDAQ:WFRD)
Average Upside Potential: 64.30%
Number of Hedge Fund Holders: 43
Weatherford International plc (NASDAQ:WFRD) is an energy services company, which offers equipment and services for the drilling, evaluation, completion, and natural gas wells worldwide.
Despite facing challenges, Weatherford International plc (NASDAQ:WFRD) introduced a shareholder return program, including a $1 per share annual dividend and a $500 million share buyback over 3 years.
Wall Street analysts remain optimistic about its strategic acquisition of Datagration Solutions Inc. They believe that this acquisition should enhance Weatherford International plc (NASDAQ:WFRD)’s digital offerings and amplify the capabilities of existing platforms. The move is focused on improving decision-making throughout the well lifecycle and streamlining operating efficiencies across the Weatherford International plc (NASDAQ:WFRD)’s enterprise. The company is expected to continue to maintain a strong focus on margin and cash flow growth.
Weatherford International plc (NASDAQ:WFRD) continues to target a 30% return on invested capital and is focusing on net working capital efficiency and on reducing interest costs. The company is optimistic about the international and offshore market outlook. Also, it sees significant potential for organic growth and value creation. The company’s overall long-term growth is expected to be aided by successful pricing and market share strategies.
Weatherford International plc (NASDAQ:WFRD)’s top management anticipates improved free cash flow conversion with the help of efficiencies and lower interest costs. Barclays increased its price objective from $160.00 to $165.00, giving an “Overweight” rating on 25th July. Notably, 43 hedge funds held stakes in Weatherford International plc (NASDAQ:WFRD) at the end of Q2 2024, as per Insider Monkey’s database of 912 hedge funds.
Overall WFRD ranks 3rd on our list of the top stocks with biggest upside potential according to hedge funds. While we acknowledge the potential of WFRD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than WFRD 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.