We recently compiled a list of the 10 High Growth Non-Tech Stocks That Are Profitable in 2024. In this article, we are going to take a look at where Cenovus Energy Inc. (NYSE:CVE) stands against the other high growth non-tech stocks that are profitable in 2024.
How Much Fuel Is Left for the Bull Market?
Analysts and investment strategists have been pointing towards caution factoring in seasonality, election volatility, and even a pullback. However, regardless of the caution call the market has demonstrated resilience against all challenges. Anastasia Amoroso, iCapital chief investment strategist, recently appeared on a CNBC interview to talk about the current market conditions.
She mentioned that investors had many reasons for caution to start October. Several outside moves had to be digested including yields spiking, the price of oil spiking, and some resurgence for the dollar. However, the market has been able to absorb all these moves quite impressively. She mentioned that the Fed is not likely going to cut rates by 50 basis points in the consecutive meetings and the markets have now repriced it to 25 basis points cut, which is now reflected in the yield prices.
Amoroso thinks that what could have been a bumpy start to the month has now paved the way for a soft landing momentum. While talking about how the rate cut is now a moving target for the Fed, she mentioned that it has always been known that the Fed reacts to data and it is not bad news that data is pointing towards an upside. Moreover, what’s more interesting is that not only is the Fed talking about the economy being on a strong footing but corporations including banks are calling it a soft landing, which is breathing new life into the market.
Amoroso also mentioned that the Citi surprise index was negative for some time and the earnings revisions were negative because of earlier data. However, now we have flipped to the positive side in terms of economic surprises. She showed optimism that earnings revisions will start to pick back up, given the solid economy.
She suggests that artificial intelligence remains one of the attractive sectors to look for growth. Amoroso explained that if we look at the AI theme performance there was not much outperformance in Q3. She thinks that due to this earnings growth expectations have stayed where they were, however, the multiple has declined as a result. She mentioned that price-to-earnings adjusted for growth in the AI/semiconductor sector is below 1, which is one of the cheapest levels in years.
Moreover, she also finds financials to be attractive as the earnings season has been solid for the sector. Amoroso pointed out that the financial sector is expecting higher net income margins in 2025 and the loan growth and fees for banks have been higher, which indicates good progress by the sector as a whole.
In addition to this we have also talked about how the mega caps are expected to lead the market in 10 High Growth NASDAQ Stocks That Are Profitable in 2024. Here’s a piece from the article:
Ethridge thinks otherwise, he believes that mega-cap stocks will continue to lead market growth, although not at the same pace as in recent years but still at a steady pace. He attributes this to the ongoing influence of artificial intelligence (AI) on various sectors, including real estate and manufacturing, which are becoming increasingly vital due to rising demands on infrastructure.
Moreover, while explaining why the mega caps will lead the growth, Ethridge pointed out that for the big tech stocks, Fed rate cuts were not necessary as they had significant cash on their balance sheets to reinvest into newer AI ventures. We have already seen Magnificent Seven invest heavily in AI despite the high rate of borrowing thereby leading the bull market in difficult times.
The rate cuts have now made it easy for other companies that didn’t have enough cash to borrow and invest in technology. However, he also pointed out that the pace of rate cuts might slow down moving forward, thereby making it hard for small caps to keep up the technology investment race. Ethridge suggests that investors may need to adjust their expectations regarding future Federal Reserve rate cuts.
Moreover, we are also entering earnings season, will the earnings derail the momentum or continue to boost the market? Drew Pettit, Citi Research Director of US Equity Strategy joined CNBC in another interview. He thinks that we are in for a decent quarter, although we are in an expensive market.
Our Methodology
To compile the list of 10 high growth non-tech stocks that are profitable in 2024, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. First, using the screener we got an initial list of stocks, sorted by their market capitalization with 5 years of sales growth of more than 15%. Next, using Yahoo Finance and Seeking Alpha we sourced the 5 year net income and revenue growth rates along with the TTN net income to ensure profitability in 2024. Lastly, we ranked our stocks based on the number of hedge fund holders in Q2 2024 as per the Insider Monkey’s database. The list is ranked in ascending order of the number of institutional 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).
A fleet of oil tankers at sea, representing the global reach of a crude oil supplier.
Cenovus Energy Inc. (NYSE:CVE)
5-Year Net Income Growth: 74.34%
5-Year Revenue Growth: 21.66%
TTM Net Income: $4.75 Billion
Number of Hedge Fund Holders: 46
Cenovus Energy Inc. (NYSE:CVE) is an integrated oil and natural gas company with operations in Canada and the Asia Pacific Region. Its key operations include extracting oil and gas from oil sands in Alberta, conventional wells in Western Canada, and offshore sites in Newfoundland, China, and Indonesia. It also engages in refining the extracted sources to sell them in the Canadian and US markets.
Cenovus Energy Inc. (NYSE:CVE) has been achieving significant milestones. It recently completed the largest turnaround in the history of its Lloydminster Upgrader, which involved around 1 million man-hours and a peak workforce of 3,200 contractors, all without safety incidents.
Moreover, in July the company reached its net debt target of $4 billion and plans to return 100% of excess free funds flow to shareholders, marking a substantial increase in shareholder returns.
This all becomes more impressive with the fact that management is achieving this while maintaining strong production levels.
During the second quarter of 2024, Cenovus Energy Inc. (NYSE:CVE) achieved a production level of over 800,000 barrels of oil equivalent per day (BOE/d), with oil sand production at approximately 610,000 barrels per day.
Looking ahead, the company is preparing for a turnaround at Christina Lake in September, which will temporarily reduce production. However, they are on track with growth projects like the Narrows Lake tie-back pipeline, expected to deliver the first oil by mid-2025.
Cenovus Energy Inc. (NYSE:CVE) ranks as the 6th high-growth non-tech stock that is profitable in 2024.
L1 Long Short Fund stated the following regarding Cenovus Energy Inc. (NYSE:CVE) in its first quarter 2024 investor letter:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
Overall CVE ranks 5th on our list of the high growth non-tech stocks that are profitable in 2024. While we acknowledge the potential of CVE 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.