We recently published a list of 15 Best Beaten Down Stocks to Invest In. In this article, we are going to take a look at where Polaris Inc. (NYSE:PII) stands against other best beaten down stocks to invest in.
As per Charles Schwab, 2025 might bring hurdles for stocks in the form of uncertain trade policy, tougher fiscal policy, and subdued average growth in the global economy and corporate earnings. Collectively, these factors might result in significant volatility. On the positive side, improving growth and higher stock valuations might support strong returns overall for international stocks in 2025.
Challenges Faced by US Equities in 2024
As per Henry Allen, macro strategist at Deutsche Bank, the biggest sell-off of 2024 was seen at the beginning of August 2024. Between 1st August 2024 and 5th August, the S&P 500 index saw a decline of more than 4%. This was due to weak nonfarm payrolls report amidst worries that the US Fed might decide to keep monetary policy too tight. Furthermore, investors’ sentiments were further impacted by the poor earnings reports from the renowned tech companies. However, the strategist believes that, for equity investors, the U.S. economic data soon demonstrated some improvement and the markets rebounded.
Next, mounting geopolitical tensions have somehow weighed over the broader equity indices in 2024. Henry Allen highlighted that a market sell-off in April was primarily because of escalating tensions in the Middle East, with Brent crude oil seeing an intraday peak for the year of ~$92 a barrel. Between 1st April and 19th April, the S&P 500 index saw a significant decline of more than ~5%. However, Wall Street experts believe that tides are now expected to turn, and 2025 might be a promising year for global equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Structural Trends to Support Growth, Says Firetrail Investments
Firetrail Investments believes that several key structural trends are expected to aid global equity markets in 2025. Technological advancement might act as one of the most significant drivers, with businesses continuing to integrate automation, Al, and cybersecurity into their activities. Companies having innovative solutions in digital transformation will potentially benefit from significant digital adoption across sectors, spanning from finance to healthcare to manufacturing.
As per Firetrail Investments, the outlook for defensive and growth-oriented stocks in 2025 remains positive. This is because investors continue to balance the appeal of continuous income-generating businesses with the potential of high-growth entities. Companies operating in sectors such as technology, communications, and advanced manufacturing are expected to benefit due to favorable valuations and the normalization of interest rates. With capital becoming more accessible, such sectors will be well-placed to invest in further innovation, driving earnings growth.
As per the investment firm, in 2025, lower inflation, favorable labour market, and supportive monetary policy conditions are expected to provide a strong foundation for growth.
Our Methodology
To list the 15 Best Beaten Down Stocks to Invest In, we used a screener and sifted through several online rankings. After getting the list of initial 30-35 stocks, we filtered out the ones that have seen a significant decline on a YTD basis and are trading close to their respective 52-week lows. We also mentioned the hedge fund holdings around each stock. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with 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 motorcyclist enjoying the open road on a sunny day.
Polaris Inc. (NYSE:PII)
% Decline on a YTD Basis: ~30%
Number of Hedge Fund Holders: 20
Polaris Inc. (NYSE:PII) is engaged in designing, engineering, manufacturing, and marketing power sports vehicles in the US, Canada, and internationally.
Polaris Inc. (NYSE:PII)’s stock has seen a decline of ~30% on a YTD basis amidst ongoing inventory management issues. Given the elevated inventory levels, mainly in the ORV segment, it might have to increase promotional activities to clear excess stock. This can result in margin compression and reduced profitability.
However, Polaris Inc. (NYSE:PII) continues to focus on electric vehicle (EV) options, primarily in its off-road and recreational vehicle segments. This aligns with the increased consumer demand for sustainable and environmentally friendly products. Since the roll-out of its all-electric RANGER XP Kinetic utility side-by-side in 2023, the company has been leveraging electric technology to deliver leading performance capabilities and an unparalleled experience for off-road riders.
With the expectation of strong growth in the global EV market, Polaris Inc. (NYSE:PII) can tap a substantial opportunity to expand into the EV space. EVs provide a new product segment that differentiates Polaris Inc. (NYSE:PII) from traditional combustion engine vehicles, strengthening its brand appeal. Industry experts believe current management exhibited operating discipline through divestments of bad businesses acquired under old management. As a result, Polaris Inc. (NYSE:PII) can now focus on its roots in power sports.
Artisan Partners, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We are always on the lookout for companies that are under pressure in some form or fashion as this can create the conditions for an attractive entry price. Though equity markets have made substantial gains over the past year, we have still found select opportunities to put capital to work. Q3 purchases included Warner Music Group, MGM Resorts International and Polaris.
Polaris designs, engineers and manufactures powersports vehicles, operating in three segments: off-road, on-road and marine. The company has had a couple bad quarters, consistent with other industry peers, as demand for recreation is down. Additionally, consumer financing costs and dealer floorplan costs are up due to higher interest rates. The combination is pressuring margins. It’s a discretionary business to be sure, so we have eyes wide open. However, we believe that inventory issues are creating an opportunity to buy a market leader at an absolute cheap price. The stock is the lowest since the first half of 2020 when the pandemic began. The company is well run historically, and current management has demonstrated operating discipline by divesting bad businesses acquired under old management, focusing on the company’s roots in power sports and continuing its history of returning capital to shareholders via dividends and buybacks. Returns for the business are strong with returns on tangible capital most years in the mid-to-high teens. It is well financed with a balance sheet that is well termed out.”
Overall, PII ranks 5th on our list of best beaten down stocks to invest in. While we acknowledge the potential of PII 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than PII 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.