We recently compiled a list of 10 Stocks Under $10 With High Potential. In this article, we will look at where Veren Inc. (NYSE:VRN) ranks among the best stocks under $10 with high potential.
How Does the Market Look Like in the Current Geopolitical Environment
There has been ongoing geopolitical in the Middle East, which escalated recently when Iran launched a series of missiles toward Israel. These tensions are no longer restricted to just the Middle East but are having impacts globally. On October 1st Reuters reported that the Iraqi armed groups have threatened to attack US bases in Iraq and the region if it joins forces in response to its strike on Israel.
Tom Lee, managing partner and head of research at Fundstrat Global Advisors, appeared on CNBC to discuss what the stock market looks like in the current geopolitically tense environment. Lee has been bullish on small caps for a long time however, he has also remained cautious regarding some bumps in the start before the market for small caps starts to rise. He maintained a bullish stance, projecting a year-end target of 6,000 for the S&P 500, despite acknowledging potential short-term volatility due to upcoming events like the election and geopolitical tensions in the Middle East.
He emphasized that current market conditions are tricky, with headline risks stemming from a potential port strike that could impact the economy. Lee suggested that if a significant dip occurs, it would be a good opportunity to buy, as he believes the long-term outlook remains positive despite temporary setbacks.
Talking about how the market has performed during wars in the past. Lee noted that historically, market reactions to geopolitical conflicts have often been more positive than anticipated. He cited past conflicts where buying during initial downturns proved beneficial, except for the recent Russia-Ukraine war which went otherwise due to concurrent Federal Reserve tightening.
He also discussed the implications of the ongoing longshoremen strike, indicating that each week of disruption could reduce GDP by approximately 0.3%. Lee believes that if this leads to a weakening labor market, the Fed might adopt a more dovish stance, meaning more interest cuts and money supply by the Fed.
China is one of the silver linings in the current market environment, Lee thinks China is currently one of the best-performing markets this year. He believes there is significant room for improvement in the Chinese market due to its historical underperformance when compared to the United States Market.
In one of our recent articles about the 8 Most Active US Stocks To Buy Now, we talked about how the market is expected to remain resilient moving into the elections. Here’s a piece from the article:
Liz Young Thomas, SoFi head of investment strategy, joined ‘Squawk Box’ at CNBC on September 30 and shared her insights regarding the market’s trajectory as it approaches an easing cycle. She acknowledged that while there has been a significant run-up leading to this cycle, much of the substantial gains may have already been realized.
However, she noted that this does not necessarily mean the market will slow down immediately. Historically, after the first rate cut, markets tend to remain flat or slightly up in the following 30 to 60 days. 3 months post-cut, the market evaluates whether these cuts were necessary due to cooling economic conditions or if they were merely opportunistic adjustments.
Young highlighted several positive factors contributing to the current market rally. Despite a slight pullback in technology stocks, she observed that many other stocks are performing well, with 80% of the S&P 500 trading above their 200-day moving averages. This indicates a strong internal market dynamic. Additionally, optimism surrounding potential stimulus measures from China adds further support to market sentiment.
When discussing valuation concerns, Young agreed that while US market multiples are relatively high, hovering around 21 to 22, this is not unprecedented when compared to historical standards. She pointed out that current valuations are above both the 5-year and 10-year averages but not at overbought levels. Young referenced Warren Buffett’s long-term investment philosophy, emphasizing that he does not focus on timing market multiples but rather on fundamental growth.
Young expressed a desire for the market to shift towards trading based on fundamentals rather than multiple expansions. She noted that while earnings stability is crucial, there are signs of strength in sectors outside of technology, particularly in industrial stocks. However, financials have shown mixed signals.
Our Methodology
To compile a list of 10 stocks under $10 with high potential, we used the Finviz stock screener. Using Finviz we screened stocks trading below the share price of $10 with analyst price target above 50%. Once we had an aggregated list we ranked these stocks based on the analyst upside potential sourced from CNN. Please note that the share price is accurate as of October 1st, 2024.
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).
Veren Inc. (NYSE:VRN)
Share Price: $6.15
Analyst Upside Potential: 76.23%
Veren Inc. (NYSE:VRN) is a leading oil and natural gas exploration company that operates in the United States and Canada. It focuses on exploring and producing Crude Oil, Tight Oil, Natural gas, and other related products. The three main sites namely Alberta Monteny, Kaybob Duvernay, and Saskatchewan contributed around 50%, 25%, and 25% respectively to the overall production of the company.
Veren Inc. (NYSE:VRN) has significantly improved its production during the current fiscal year and is on the road to meeting its targets. The second quarter 2024 earnings release revealed that the company is producing 192,500 barrels of oil per day. This production rate is in line with its production guidance for the year which stands at 191,000 to 199,000 barrels of oil per day.
As a result of a strong production rate, the company was able to generate significant income from its operations. Adjusted funds flow from operations was recorded at $611.7 million. One of the more significant milestones for Veren Inc. (NYSE:VRN) came in the form of debt reduction. It was able to reduce $620.2 million during the quarter and ended the quarter with $2.96 billion in debt.
Recently, management announced entering into a long-term strategic partnership with Pembina Gas Infrastructure (“PGI”) for certain infrastructure assets in the Alberta Montney location. It is said to make $400 million from the proceedings which will be used to reduce the debt further. Moreover, the partnership will also grant operational access to additional battery sites, thereby further enhancing its production efficiency and would help reduce operating costs.
Veren Inc. (NYSE:VRN) has grown its top line by 23% during the past 3 years and its current growth trajectory points towards continued growth momentum.
Overall VRN ranks 5th on our list of best stocks under $10 with high potential. While we acknowledge the potential of VRN 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 on Insider Monkey.