We recently compiled a list of the 10 Best Mid Cap Value Stocks To Invest In. In this article, we are going to take a look at where American Airlines Group Inc. (NASDAQ:AAL) stands against the other best mid cap value stocks to invest in.
Mid-Cap Stocks are Better in the Near Term
An easing cycle coupled with an upcoming election creates quite the environment for differing opinions to co-exist. On October 9, Jill Carey Hall, Bank of America Global Research head of U.S. small and mid-cap strategy and senior U.S. equity strategist, joined ‘Squawk Box’ on CNBC to discuss her bullish stance on mid-cap stocks, especially in the near term.
Hall stresses that small-cap stocks have been underperforming since the 50 basis point rate cut, going against historical expectations of small-caps performing well in such cases. She emphasized that investors are focused on stocks with stronger fundamentals and small-cap stocks are currently stuck in an earnings recession. We have yet to see a recovery season for small caps, the way we have been seeing it for slightly larger stocks, Carey adds.
READ ALSO: 10 Most Profitable Value Stocks To Invest In and 10 Most Promising Mid-Cap Stocks According to Hedge Funds.
Carey shares that mid-cap stocks are likely to be a “better hedge” in the near term, as they boast stronger fundamentals and have better earnings trends. Overall, she believes that mid-cap stocks have historically performed better than small-caps and are, therefore, a better area to target. She also emphasized that one rate cut is not going to solve the re-financing risk that small-caps, especially companies in real estate and tech, inherently come with.
She adds that investors must focus more on themes rather than specific sectors. However, with the current economic backdrop and a soft landing in sight, she advises investors to remain inclined towards stocks with positive revisions, higher quality, and stronger dividend yields, given that as the Fed continues to cut rates, money is expected to be driven more into equity income.
Carey also shares that the current economic environment has been weak but we may see acceleration after this quarter, keeping in mind that current GDP and jobs data have been “encouraging.” While she upholds an element of uncertainty, she remains focused on less risky and high-quality stocks. As investors look to the Fed as a catalyst for the market, high-quality stocks trading at discounted valuations are likely to reap greater benefits.
Our Methodology
To come up with the 10 best mid-cap value stocks to invest in, we used the Finviz stock screener. We set the market capitalization filter to range between $2 billion and $10 billion and the Forward P/E filter to under 15. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted primarily in ascending order of the number of hedge fund holders as of Q2 2024 picked from our database and secondarily in order of their forward P/E and market capitalization.
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).
An aerial view of a cargo plane taking off from a commercial airport, reflecting the company’s overnight air cargo services.
American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders: 38
Market Capitalization as of October 28, 2024: $9.04 Billion
Forward P/E as of October 28, 2024: 8.72
American Airlines Group Inc. (NASDAQ:AAL) is one of the major airline companies in the United States, headquartered in Texas. The company offers a thousand flights every day to over 350 destinations in more than 60 countries. The company was founded 95 years ago and now has over 130,000 employees from across the globe.
In the third quarter of 2024, American Airlines Group Inc. (NASDAQ:AAL) logged $13.6 billion in revenue and ended the quarter with $11.8 billion in total available liquidity, comprising cash and short-term investments. The company’s financial results stem from its reliable operations and effective cost management structures. In addition to that, the company worked to improve its balance sheet during Q3 2024. American Airlines Group reduced its total debt by almost $360 million, an incredible feat towards its goal of reducing total debt by $15 billion by the end of 2025.
AAL’s integrated operations center (IOC) provides customer support every second of the day and facilitates almost 6,000 mainline and regional flights every day, and over 1 million mainline flights annually. In addition to that, its IOC serves as the backbone of the business, where team members work together to ensure safety and service for nearly 200 million annual customers.
Overall, American Airlines Group Inc. (NASDAQ:AAL) is one of the best mid-cap value stocks to invest in because of its popularity among customers. Its commercial strategy and immense focus on customer feedback makes it easier for AAL to capture a wider market. The company is also engaged in improving its sales and distribution strategy which is expected to promise significant revenue growth.
Overall, AAL ranks 4th among the 10 best mid cap value stocks to invest in. While we acknowledge the potential of AAL 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 time frame. If you are looking for an AI stock that is more promising than AAL 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.