We recently published a list of 10 Best Falling Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Noble Corporation plc (NYSE:NE) stands against other best falling stocks to buy according to hedge funds.
Are The S&P 500 Gains Coming Towards An End?
Analysts at Goldman Sachs on October 21st released a note forecasting that the S&P 500 average annual return of 13% for the past 10 years might come down to just 3% for the next decade. The estimates by Goldman Sachs are far below Wall Street’s estimates as analysts on Wall Street expect the index performance to range from 4.4% to 7.4%, with an average of 6%.
Analysts at Goldman Sachs based their forecast on the concern that market concentration within the S&P 500 has been at a record high in its 100-year history. They mentioned that the top 10 largest stocks of the index currently account for more than 36% of the overall index. These top 10 constituents of the index have increased in size due to exceptional earnings growth over the past 2 years. The Magnificent Seven alone have at least doubled their earnings year-over-year during the first quarter of fiscal 2024.
However, analysts at the firm believe that historical evidence shows it is extremely challenging for companies to sustain high levels of sales growth and profit margins for more than a decade. They also noted that the sales growth of the Magnificent Seven has already started to fall from the accelerated pace of their growth during the past 2 years.
On the bright side, analysts pointed out that growth is expected to pick up for the remaining stocks on the index. They expect double-digit earnings growth for these remaining 493 stocks over the next 5 quarters.
Read Also: 10 Best Depressed Stocks To Buy Heading into 2025 and 8 Best Small-Cap Growth Stocks to Buy According to Analysts.
Sylvia Jablonski, Defiance ETFs CEO and CIO joined CNBC on October 22 for an interview to talk about the earnings season progress and also shared her point of view regarding the recent note from Goldman Sachs. She noted that we have seen around 14% of the S&P 500 that have reported their earnings and, out of those, 79% beat expectations. She thinks this is a solid start to the earnings season. Jablonski also mentioned that the bar for some of the companies has also come down, for instance in July analysts were talking about 6% to 7% year-over-year growth, and now we are looking at around 5% growth and companies have been achieving it for the most part.
While talking about Goldman Sachs’s recent note, she mentioned that the shrink in annual return by the index depends on a few factors. While the valuations are high, the earnings are strong and profits are also growing, thereby the high valuations have started to feel justified. However, it only remains justified until the valuations become lofty again. Jablonski pointed out that while the Magnificent Seven stocks have been the top performers of the last decade, we are going to see a broadening of the market where the performance would come from the remaining stocks in the index. She thinks that this transition of growth from the top constituents of the index to smaller stocks might affect the annual returns. However, AI is going to drive the index for the next 5 to 10 years. Jablonski mentioned utility facilities and energy sector companies having grown in triple digits due to artificial intelligence.
Lastly, Jablonski clarified that she is not bearing on tech or semiconductors but the leaders in the S&P 500 are expected to change with Magnificent Seven slowing down in terms of the stellar growth they have posted in the past.
Our Methodology
To curate the list of the 10 best falling stocks to buy according to hedge funds, we used the Finviz stock screener and Yahoo Finance. We defined falling stocks as those trading within 0% to 3% of their 52-week lows. Using the Finviz stock screener, we got an aggregated list of stocks that fit our criteria. Next, we ranked these stocks based on the number of hedge funds holding each stock during Q2 2024, as per Insider Monkey’s database. All indicators were recorded on October 21st, 2024. Please note that the list is ranked in ascending order of the number of hedge funds.
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).
An aerial view of a Noble Holding Corporation plc drilling facility in Sugar Land,Texas.
Noble Corporation plc (NYSE:NE)
52 Week Range: $32.49 – $52.15
Current Share Price: $32.65
Number of Hedge Fund Holders: 38
Noble Corporation plc (NYSE:NE) is an offshore drilling contractor that serves the oil and gas industry. The company specializes in drilling beneath the ocean with its fleet of ships and rigs designed for the very purpose. Its portfolio includes around 32 offshore drilling units which are divided into 19 units of Floaters and 13 units of Jackups. The company operates in various regions including Africa, Asia, the Middle East, the Gulf of Mexico, and South America.
On September 4, Noble Corporation plc (NYSE:NE) announced the successful acquisition of Diamond Offshore Drilling as a strategic move that significantly improved its position in the drilling industry. The acquisition resulted in one of the largest fleets of 7th-generation dual-BOP drillships, thereby enhancing the company’s capabilities. Moreover, it also added a significant backlog of around $2 billion for the company taking its overall backlog to $6.7 billion as of October 2nd, 2024.
Noble Corporation plc (NYSE:NE) demonstrated its financial strength during the fiscal 2024 second-quarter results. The contract drilling revenue of the company was around $693 million indicating an 8.51% increase year-over-year. Moreover, the company also improved its adjusted EBITDA margins from 29% in Q1 of fiscal 2024 to 39% during Q2.
The growing backlog for the company and year-over-year increase in drilling revenue indicates its ability to effectively land and execute new contracts. Although the stock was trading close to its 52-week low it was still held by 38 hedge funds in Q2 2024 as per Insider Monkey’s database. Thereby making it one of the best falling stocks to buy according to hedge funds.
Carillon Scout Mid Cap Fund made the following comment about Noble Corporation Plc (NYSE:NE) in its Q3 2023 investor letter:
“Noble Corporation Plc (NYSE:NE), an offshore contract driller, benefited from improved sentiment regarding the offshore drilling business as higher day rates, the all-in daily costs of renting a drilling rig, were reported across the industry. The supply and demand for offshore rigs has tightened considerably.”
Overall, NE ranks 6th on our list of best falling stocks to buy according to hedge funds. While we acknowledge the potential of NE to grow, 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.